TIME TO VISIT THE BUREAU OF PUBLIC DEBT

Another bank, this one operating as the spigot for credit card operations and loan PURCHASES has been closed by the OCC.  The OCC has to clean up the many messes created by the Federal Reserve, you see.  Also, China is canceling our once-open ended credit line.  The article about the strange doings in the bond markets talks about lawmakers taking a first-time [!] tour of the Bureau of Public Debt.  I didn’t know there was this thing so I thought, time to visit their website and explore this matter further!

 
 Silverton Bank in Georgia shut down by regulators – Forbes.com

The federal Office of the Comptroller of the Currency closed Silverton Bank, based in Atlanta, on Friday and appointed the Federal Deposit Insurance Corp. as receiver. Silverton Bank had about $4.1 billion in assets and $3.3 billion in deposits as of May 1.

It was a type of institution known as a correspondent bank and did not take deposits directly from the public or make loans to consumers. It provided services to around 1,400 client banks, such as credit-card operations, investments and loan purchases.

Not only is our national debt in a total mess, so are all the lenders.  The credit card industry is a branch of usury surpassed only by the fly-by-night incarnations of the old Mafia ‘paycheck’ loans which means, you pay 100+ interest on a one week loan!  The Silverton Bank also processed loan purchases.  I suppose, it is in the same derivatives business as the top 5 big banks that hold 95% of all these OTC bets.

The Silverton Bank website is still up and has the usual oddities.  One thing I noticed over the years is how so many businesses that go into bankruptcy often garner many awards right before falling into the deep pits.

Silverton Bank

FDIC Information for Silverton Bank, National Association, Atlanta, Georgia 

On Friday, May 1, 2009, Silverton Bank, National Association, Atlanta, Georgia was closed by the Office of the Comptroller of the Currency (OCC). Subsequently, the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed. 

Silverton Bridge Bank, N.A. has been chartered as a new national bank by the OCC and controlled by the FDIC in accordance with section 11(n) of the Federal Deposit Insurance Act. A bridge bank allows a failed bank to be liquidated in an orderly fashion. 

Here is their previous press release talking optimistically about being rescued.  Everything is ‘strategic’.  This is one reason why I want a debate about ‘strategy versus tactics’.  Many bankers mix up these two things.  This is because aggressively going for the loot is great tactics like rushing towards Moscow.  But surviving afterwards is impossible which means, this rush was a bad strategy.  Our entire economic system is based on going for the easiest money-making deals which is a bad strategy even as it is a great temporary tactic.  

http://www.silvertonbank.com/images/Users/1/pdfs/Press%20Releases/Press%20Release%20Private%20Equity%2004-21-09.pdf

(Atlanta, Georgia – April 21, 2009)  Silverton Bank, N.A., a leading national 

correspondent bank, announced today that it has received a number of equity investment 

proposals for a recapitalization of the bank from several prominent private equity firms.  

The Board of Directors of Silverton Bank has engaged Silverton Capital Corp. and FBR 

Capital Markets & Co. to assist in evaluating the proposals as well as other strategic 

alternatives.  There can be no assurances that a transaction will be consummated and all 

proposals remain subject to both bank and regulatory approval. 

Chris Maddox, acting CEO of Silverton Bank said, “Silverton plays a vital role in the 

community banking landscape and continues to provide valuable correspondent banking 

services to over 1,400 community banks across 39 states.

Below is a story from only six months ago.  Right when the entire US financial banking system finally went over the Niagara Falls, this bankrupt bank was given a tech award for creating ‘innovative’ computer web systems which enabled the bankers to do stupid things, very fast and very easily.  This award stands as a monument to the dangers of technology when it comes to banking. Banks should be conservative, not radical.

http://silvertonbank.com/images/Users/5/TAG%20Award%20Nomination%20Release.pdf

(Atlanta, Georgia – October 27, 2008)  Silverton Bank, a leading national correspondent bank 

based in Atlanta, was recently honored as a finalist in the Mid-Sized Company category at the 

fourth annual Excalibur Awards, presented by the Technology Association of Georgia (TAG).  

Silverton Bank was nominated by Abel Solutions, Inc. for their TBBConnect product, an innovative 

Web-based communications solution and the main transaction processing system for over 600 

community financial institutions nationwide. 

Silverton Bank’s proprietary TBBConnect product offers financial organizations a highly secure 

system for managing their account information and conducting financial transactions such as ACH 

originations, FRB services, domestic wire transfers, and OFAC / SDN scanning, as well as 

international services, including funds transfers and foreign drafts. 

The Raw Story | China has ‘canceled US credit card’: lawmaker

Representative Mark Kirk, a member of the House Appropriations Committee and co-chair of a group of lawmakers promoting relations with Beijing, said China had “very legitimate” concerns about its investments….No kidding. I think the Chinese have telegraphed this pretty stridently, at this point.

The Republican lawmaker said that China was justified in concerns about returns from finance giants Fannie Mae and Freddie Mac, which were bailed out by the US government due to the financial crisis.

The US took on over $2 trillion in dubious debt instruments.

Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors.

I try to collect as many government and central bank monetary web sites as possible.  This is one I have overlooked.  Of course, the article mentions that people are unaware of this organization within the government!  Of course, this is due to no one wanting us to think about our debts getting worse and worse.

Bureau of the Public Debt: Homepage

You haven’t heard of the Bureau of the Public Debt before? We’re a small agency within the Department of the Treasury. Our customers are your neighbors, co-workers, and most likely you, too. You’re our customer if you’ve ever bought any type of Treasury security for yourself or, as millions have done in the case of savings bonds, as a gift for someone else.

Our job is to borrow the money needed to operate the federal government and to account for the resulting debt. In a nutshell, we borrow by selling Treasury bills, notes, and bonds, as well as U.S. Savings Bonds; we pay interest to investors; and, when the time comes to pay back the loans, we redeem investors’ securities. Every time we borrow or pay back money, it affects the outstanding debt of the United States.

We also provide reimbursable administrative, financial management and information technology services to a variety of Federal government entities through our Administrative Resource Center (ARC).

Here is the current debt at this government web site:I find it rather amusing that the debt included $0.64 this afternoon at 1 pm. Now, at 8 pm, it is still at that point.  The intergovernmental holdings are now over $4 trillion.  In January, 1993, the national debt was $4,167,872,986,583.67.   This is slightly less than today’s intragovernmental holdings!

•  What are Intragovernmental Holdings?
• Intragovernmental Holdings are Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts.

These ‘intergovernmental holdings’ seem a place of mischief.  We hold our own debts which is, I believe, inflationary.  The first time the Bureau of Public Debt broke down the data separating debts held by outsiders and debts held by the government was in September, 2001.  It was less than half of what is held today: 

3,339,310,176,094.74

2,468,153,236,105.32

5,807,463,412,200.06

$3.4  trillion in public holdings, $2.5 trillion in government holdings and a total of nearly $6 trillion.  

03/31/2005

4,572,715,640,119.20

3,204,223,407,550.94

7,776,939,047,670.14

  In 2005, the differential between ‘public’ and ‘private’ remained the same but the debts were climbing, fast.  Back then, Japan held about $600 billion in US government debt.  China, only $400 billion.  But over the last 4 years, both increased their holdings tremendously which is why the ‘public’ debt grew only by a trillion dollars while the public debt shot up from $4.5 trillion in 2005 to nearly $7 trillion just three years later!

Government – Frequently Asked Questions about the Public Debt

What is the Federal Financing Bank?

Obligations are issued to the public by the Federal Financing Bank (FFB) to finance its operations. Obligations are limited to $15 billion unless otherwise authorized by the Appropriations Acts. The FFB was established “to consolidate and reduce the government’s cost of financing a variety of federal agencies and other borrowers whose obligations are guaranteed by the federal government.”

http://www.ustreas.gov/ffb/financial-statements/fy2008_07.pdf

The Federal Financing Bank (the Bank) was created by the Federal Financing Bank Act of 1973 

(12 USC 2281, the Act) as an instrumentality of the U. S. Government and a body corporate under the 

general supervision of the Secretary of the Treasury (the Secretary). The budget and audit provisions of the 

Government Corporation Control Act are applicable to the Bank in the same manner as they are applied to 

other wholly owned government corporations. 

The Bank was established by Congress at the request of the U.S. Department of the Treasury (Treasury), in 

order “to assure coordination of Federal and federally assisted borrowing programs with the overall 

economic and fiscal policies of the U. S. Government, to reduce the cost of Federal and federally assisted 

borrowing from the public, and to assure that such borrowings are financed in a manner least disruptive of 

private financial markets and institutions.” The Bank was given broad statutory authority to finance 

obligations issued, sold, or guaranteed by Federal agencies so that the Bank could meet these debt 

management objectives. 

The Bank is authorized to issue obligations to the public in amounts not to exceed $15,000,000 with the 

approval of the Secretary. Additionally, the Bank is authorized to issue obligations in unlimited amounts to 

the Secretary and, at the discretion of the Secretary, may agree to purchase any such obligations. 

Interest on Loans  

The Bank’s general policy is to capture the liquidity premium between Treasury securities and the 

private sector lending rates, and to charge a rate that reflects the risk inherent in a borrower or 

transaction, when such a rate will accomplish a broader goal. The income resulting from the interest 

spread covers the administrative expenses of the Bank and any surplus is transferred to the 

Treasury’s General Fund. Under amendments to the Federal Credit Reform Act, effective October 1, 

1998, while the Bank is permitted to charge a spread on new lending arrangements with government- 

guaranteed borrowers, the margin is not retained by the Bank, but rather is retained by the loan 

guarantor. In the event that this results in the Bank being unable to fund its administrative expenses 

related to these loans, the Federal Credit Reform Act, as amended, states that the Bank may require 

reimbursement from loan guarantors. 

So, this organization is like so many of our financial organizations: started up in order to deal with something that got entirely screwed up due to wars.  The Vietnam War destroyed our financial base.  To fix this, Nixon and Burns decided to create ‘the floating fiat currency regime’.  This meant setting up all sorts of strange restrictions, regulators and other agencies that were supposed to CONTROL the CURRENCY just like Lincoln set up during the Civil War, for example. 

All previous organizations set up to control paper currency were kept in place and more systems were added.  The Bureau set up to keep tabs on our debts was founded  June 30, 1940.  The US began funding Britian’s wars, yet again, with Lend/Lease.  To run up war debts, FDR had to solemnly swear, he would not run up our debts to 100% GDP.  Of course, he did run it up to 100% GDP.

Just like the OCC, all of this was done so that debts wouldn’t rocket upwards to infinity.  This is the essential problem we see all the time: the temptation to go to infinity is extremely strong. Once a government crosses this invisible line and simply gives up even trying to pretend to balance the books, that country is doomed.

The US layered many organizations on top of each other and then DEFANGED them all, systematically, secretly, year after year.  So most of them have been reduced to being simple reporters.  Just like the OCC faithfully tracked the Derivatives Beast as it grew swiftly from one trillion dollars to an insane, near quadrillion dollars without saying a peep or doing anything to stop this, the Bureau of Public Debt simply tracks the inevitable accumulation of debt doubling every 8 years.
 

Bureau of the Public Debt: Our History

Public debt is a fact of life. HAHAHA  The U.S. has had debt since its inception. Our records show that debts incurred during the American Revolutionary War amounted to $75,463,476.52 by January 1, 1791. Over the following 45 years, the debt grew.

Notably, the public debt actually shrank to zero on January 8, 1835, under President Andrew Jackson. But soon after, it quickly grew into the millions again.

This little history doesn’t mention Jackson eliminating the National Bank.

The American Civil War resulted in dramatic debt growth. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. The debt grew steadily into the Twentieth Century and was roughly $22 billion as the country paid for involvement in World War I.

I fear that the biggest mistake we ever made was allowing a bunch of foreign and domestic financiers relaunching a National Bank only making it private and then, taking over our Treasury’s Constitutional operations. Then, this new bank decided to bankroll the UK/French side in WWI.  A total waste of good credit.  So both the UK and France refused to negotiate some sort of peace with Germany.  The 20th century was then born in blood and vast US credit.

The buildup to World War II brought the debt up another order of magnitude from $51 billion in 1940 to $260 billion following the war. After this period, the debt’s growth closely matched the rate of inflation until the 1980s, when it again began to increase rapidly. Between 1980 and 1990, the debt more than tripled. The debt shrank briefly after the end of the Cold War, but by the end of FY 2008, the gross national debt had reached $10.3 trillion, about 10 times its 1980 level.

The debt is now 12 times the 1980 level.  Obviously, no one is keeping up with the news at this website.  

Government – Intragovernmental Holdings and Debt Held by the Public

Intragovernmental Holdings are mostly made up of the Government Account Series (GAS) held by government trust funds, revolving funds, and special funds. Debt Held by the Public includes all federal debt held by individuals, corporations, state and local governments, foreign governments, and GAS deposit funds, such as the Thrift Savings Plan.

OK: the public holds the most debt.  But look below: the intergovernmental INTEREST holdings are much greater than the public.  

The bar graph below is from the Bureau, too.  It shows how our debts grew from less than $2 trillion in 1983 to $12+ trillion today.  

Bureau of the Public Debt: Our Strategic Plan

The strategic plan for Public Debt sets an exciting and challenging course that is filled with promise—for our programs and for our customers. The directions that we outline here are far-reaching and are the latest products of a long-standing process in our organization-strategic thinking supported by continuous improvement.

This is the end.  Using brilliant minds, they devise all sorts of nifty ways of selling US debt instruments.  If they sell to the US citizens, it is cheaper in interest rate expenses than when they sell it to China and Japan.  This is why they would like us to buy our national debts.  But only if they can sell it at 0.25% interest.  And the only people interested in this sort of deal are people who have ulterior plans with their money that involves unpleasant, sudden moves in world markets.  

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