The US Treasury is now the sole capitalization entity in our dead banking system. Sometimes, bankruptcy is healthy: it reveals all the defects and deceptions of deep in debt deadbeats, it finally clears the books of impossible to pay loans, and it allows the survivors to start over again. The US banking system is nearly totally bankrupt. And now, trying to save it, the US government is toying with going too deep into debt and thus, also going bankrupt.
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Then there is the business of Goldman Sachs running our Treasury or I should say, running away with our Treasury. We have had several of these guys running it in the past and the record is not good. Goldman Sachs is no longer boasting about how they dodged the bullet. They are sliding off the same cliff all the other banks are falling off of. For this mess, created by these very same gnomes, is now turning on all of them. For they all did the exact same stupid things in unison. Indeed, the death of the giant banks is due entirely to past successes in screwing around with financial systems so global paper profits would pour into the coffers of these banking giants.
The U.S. may need to spend another $1.2 trillion to recapitalize the eight largest financial institutions and stabilize the markets because private investors won’t take the risk, an FBR Capital Markets analyst said.
“The sheer size of the capital deficiency, coupled with the opaque nature of credit risk, will keep private capital sidelined,” Paul Miller said in a research note yesterday….Miller, who’s based in Arlington, Virginia, said Treasury’s preferred equity investments aren’t “real capital” and won’t ensure the firms will survive.
Though Treasury’s cash injections so far have bolstered bank capital, they giveTreasury a senior repayment position that leaves common equity holders to absorb the majority of the losses, Miller said.
“Only injections of true tangible common equity will solve the current crisis,” Miller said. Treasury spokeswoman Brookly McLaughlin declined to comment on Miller’s report….Recapitalizing those eight largest firms would help stabilize the rest of the U.S. financial system, he said. Other mid-sized and small financial firms aren’t as heavily leveraged and should rebound once credit starts to loosen up.
“Once the system is running smoothly and private capital begins to return, we can debate the best way for the government to extract itself,” he said.
In other words, you and I will be taking on more future national debt in order to capitalize the eight largest banking scams on earth? This is, obviously, totally infuriating. End The Fed Demonstrations November 22 are one way to show some ire. The NY demonstration will be at 1pm at the CORNER OF Liberty St and Church St on 11.22. Then march to the FED and back to park. Then some will march to Seaport and others to City Hall train station for handouts and information. Probably end sometime after 3 pm.
The day for this demonstration was to remind us about how the sneaky bankers in the past created the Federal Reserve. For this is the 101st anniversary of the secret meetings that launched this central bank which is private, not public. For reporters discovered some small information about the meeting to be held on Jekyll Island and were held off by police as the private railcars left Hoboken that night, on the 22nd of November.
Back to the present bank heist: the US is no longer a capitalist nation. We are a captive nation. We have decided to capitalize ourselves with debt. This was falsely called ‘leverage’ but it is more like a shovel used to dig our own graves. In Goethe’s Faust, Part II, the wizard imagines his demonic servants are digging great channels to make water flow to places he wants. He thinks he is expanding his control of the landscape.
But the demons are digging his grave. Finally, Faust looks into his grave and sighs, ‘Verweile doch! Du bist so schön!’ The deal was, Faust would go to hell only once he said this. So he didn’t say it no matter how happy he was with sexy women or money or anything. This is how the Outer Darkness operates: he was so happy with death’s doom opening at his feet, he wanted that moment to last forever.
The US has been busy digging its own grave for 35 years. When Nixon unilaterally chose to launch the floating currency, it was only a matter of time before we switched from saving money and building up real reserves to living entirely on debts. Debts are holes in the ground. Not growth. We can risk debts when we build things. But when we use debts to destroy things, we die.
A good deal of the overhang of excess US debts are due to death-operations. Namely, spending on wars from the Vietnam War, the Cold War and now, the War on Terror. Also, we built up trillions in debts by dumping this on top of all our manufacturing systems to pay for nothing useful at all. These were all ‘buy out’ operations where one corporation is used as a platform by the biggest investment banks to buy up another corporation, putting both much deeper into debt in the process.
Due to malicious changes in US regulations, the gnomes could do this with nearly total impunity. At first, they would pretend they needed to do this to ‘grow’. But this growth was really only a growing load of debt. In the final days of the corporate merger frenzy, they gave up all pretense of logical growth and simply used hedge funds as the vehicle for dumping debts. These unregulated, offshore entities had free rein.
Incidentally, ‘free rein’ is a phrase most people don’t understand anymore. As a horsewoman who used to drive carriages and ride horses, this is when the reins are dropped, break or the horse takes the bit in the mouth and runs off, tearing along very dangerously. This usually ends badly.
In 2004, at the request of the major Wall Street investment houses, including Goldman Sachs, then headed by Paulson, the U.S. Securities and Exchange Commission agreed unanimously to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure. The complaint that was put forth by the investment banks was of increasingly onerous regulatory requirements — in this case, not U.S. regulator oversight, but European Union regulation of the foreign operations of US investment groups. In the immediate lead-up to the decision, EU regulators also acceded to US pressure, and agreed not to scrutinize foreign firms’ reserve holdings if the SEC agreed to do so instead. The 1999 Gramm-Leach-Bliley Act, however, put the parent holding company of each of the big American brokerages beyond SEC oversight. In order for the agreement to go ahead, the investment banks lobbied for a decision that would allow “voluntary” inspection of their parent and subsidiary holdings by the SEC.
The corruption at the heart of US imperial politics at work! The US government usually does the bidding of the biggest donors to either political party. These bribers will pour money into the pockets of whoever is running things. If anyone dares to put them under any sort of controls or regulations, the party that allows this is punished by the gnomes moving all their bribery loot to the opposing party.
Right now, seeing Americans getting totally fed up with the Republican Party, all these gnomes are breaking ranks with the GOP and flooding the Democratic party with their loot. They are most desperate to gain the allegiance of the Democrats so they can call all the shots. They are mostly interested in preventing any regulations and taxes.
So here we are today: our entire government from top to bottom is focused on bailing out these criminals who evaded government regulations! The mushrooming mess took off after they ceased to be regulated by the SEC. The utter and total failure of all these investment banks is totally their own irresponsibility! They did this, not us! They created this mess. And now they want more than a trillion dollars to fix things.
One of the important regulations of our government vis a vis banks is to insure that they are properly capitalized. This means, they must have enough savings to pay for any losses due to their lending. To evade this, the bankers created all sorts of goofy schemes so they could move loans off of their books and park them elsewhere. The plot was for them to create infinite loans and move them outwards in waves. This way, they could make obscene profits. The only hitch was, where could these loans be parked?
This began the great Easter Egg Hunt for dupes. The gnomes needed places willing to go deeper and deeper into debt. This way, they got ‘capitalized’ and this was immediately cannibalized by being put into the back pockets of the gnomes, themselves. So their pay shot up. Bonus after bonus: they all became the richest bastards on earth. But not forever.
The stock fell as much as $2.83 to a low of $52.35 in New York Stock Exchange composite trading this morning, giving Goldman a market value of $25 billion. At 9:38 a.m. the stock was down $1.89 to $53.29. The New York-based company’s value reached a high of $105 billion, or $248 per share, on Oct. 31, 2007.
Goldman, which converted from the biggest U.S. securities firm into a bank holding company in September, has given up more than 75 percent of its market value this year as investors shy from companies that derive financing and revenue from capital markets. Lloyd Blankfein, Goldman’s chief executive officer, said last week that the firm intends to stick to its strategy of serving as an adviser, financier and investor.
As the grave yawns at Goldman Sach’s feet, they are filled with fear. This is why they are most frantic to have you and me capitalize them. They lost three quarters of their value in three quarters. The beginning of the collapse of Goldman Sachs stocks happened only three months after the banking crisis began in July, 2007. Citigroup, another criminal operation, is very close to $0 and is in hysterics, trying to save itself.
The spectacle of bankrupt Detroit car presidents flying to DC on private jets caused many Americans to lust for the end of our native auto industry. But the pirates and gnomes get no negative press for coming to DC in their fleet of private jets. There are virtually no hearings, considering the size of this mess. The $25 billion bail out of our very physical and very important auto industry has people steamed. But a $1.2 trillion bail out of the bankers who caused this mess, this is getting little press outrage.
Time to go to the past to see how this evolved:
Mr. Risk Goes To Washington
Hank Paulson’s profound understanding of risk and reward makes him the perfect pick for the Treasury
Think of Paulson as Mr. Risk. He’s one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits. By some key measures, the securities industry is more leveraged now than it was at the height of the 1990s boom. It has also extended its global supremacy since then.
Goldman, under Paulson’s leadership, became one of the greatest and most profitable risk-taking machines ever built. Since 1999, when he took over as sole CEO, Goldman has competed with bigger rivals such as Citigroup (C ) and JPMorgan Chase & Co. by being aggressive, making smart gambles, and putting the company’s own money into deals. Paulson stresses Goldman’s willingness to take risks along with clients in the latest annual report: “Investment banks are expected to commit more of their own capital when executing transactions.”
The subject has become an obsession at Goldman: how to find profitable risks, how to control and monitor them, and how to avoid the catastrophic missteps that can bring down whole companies. That means taking on more debt: $100 billion in long-term debt in 2005, compared with about $20 billion in 1999. It means placing big bets on all sorts of exotic derivatives and other securities. And it means holding almost $50 billion in the piggy bank, enough cash and liquid securities to keep the firm going in the event of a financial crisis.
By contrast, Robert E. Rubin, head of the National Economic Council and later Treasury Secretary under President Bill Clinton, was Mr. Prudent. Rubin also came out of Goldman Sachs, but it was a much smaller firm back then, and because Goldman was a private partnership, it had limited access to the public capital markets. That made Rubin far more attuned to the need to preserve and protect capital. Perhaps that’s one reason why he pushed for frugality from the very moment he entered government.
The appointment of Paulson, Mr. Risk, as Treasury Secretary is at once ironic and completely appropriate. According to conventional economic wisdom, the single biggest problem the U.S. faces is a massive accumulation of debt. Both liberal and conservative economists warn that the bulging trade deficit, now roughly 6% of gross domestic product, poses a danger of sending the dollar plunging and causing a financial meltdown. The federal budget deficit for 2006 will hit at least $300 billion. And current projections call for Social Security and Medicare to run up enormous deficits in the long run.
Yet Goldman actually has leveraged up faster than the U.S. government in recent years. In 1999, Goldman had about $1.60 in long-term debt for every dollar in net revenue. In the same year, the federal government had $3.10 in debt, mostly long-term, for every dollar in revenue. Today the government has about $3.70; Goldman, around $4.
The Saudi bankrolling Citibank has a very shady past and his ‘money’ has little physical reality. I suspect he is bankrolling the bank via debts that are hidden from view. Indeed, many of these systems are based on debts. Paulson made Goldman Sachs grow by piling on more and more debts and playing riskier games. To enable this, he and his cohorts all paid our government many millions of dollars to undo regulations and throw away laws inhibiting the growth of debt and the use of leverage to run risky gambling operations.
Indeed, these same people went into the gambling business for the same reason: to grow richer while producing nothing of great value or utility for our society. Both Goldman Sachs and the US government went deeper into debt during this decadent decade. Note how Goldman Sachs now owes $4 for every $1 they earned…TWO YEARS AGO. Both the government and the corrupt bribers of GS are now deeper in debt vis a vis either taxes or revenues.
Note here, how the same people driving their banks into a hole are also directly responsible for driving our own government into the hole. And to save their own skins, they are forcing us to dig our government into ever-deeper holes! This is why I want Paulson arrested. This is Grand Theft, writ large. Here is another old article from back, when Goldman Sachs went ‘public’ and began to sell shares in the DOW market:
GOLDMAN Sachs, the eminent Wall Street investment bank, is poised to float part of the company on the stock market.
Goldman’s six-man executive committee agreed unanimously to float between 10 per cent and 15 per cent of the bank on the New York Stock Exchange this autumn provided the firm’s 190 partners, who have already expressed overwhelming support, approve a more detailed plan to be proposed in the near future.
The investment bank is thought to be worth about $30 billion (GBP 18.4 billion) on the market compared with its book value of $6.3 billion and a listing will add greater fire power to the bank’s expansion ambitions. Jon Corzine and Henry (Hank) Paulson, co-chairmen and co-chief
Basically, GS is now worth $5 billion less than when it went public. HAHAHA. If we took into account, inflation, then this is actually closer to $8 billion less. Many manic bubbles last about 8 years. When we look at the stock charts of the top 8 investment banks including the already dead ones, we see the exact same bubble. This is due to the fact that the cessation of regulations coupled with Greenspan dropping interest rates to 1% are the causes of this sudden swelling of seeming wealth. This is yet another reason for NOT recapitalizing any of these investment banks. They enabled this mess by corrupting the Fed and the Treasury as well as Congress and of course, the Presidency itself, both Clinton and Bush I and Bush II.
They are traitors. They are now destroying us all while frantically trying to preserve their social advantages and vast wealth as well as a huge fleet of yachts and private jets. Here is yet another article about GS from 1999:
Instead the 130-year-old bank will focus on what executives think are the missing pieces: fortifying its asset management division and building a strong Internet presence. Asset management is particularly important, since it will heavily influence Wall Street’s perceptions of the company’s earnings stability. After its IPO, Goldman will be valued as the nation’s third-largest investment bank, behind Morgan Stanley Dean Witter ($63 billion) and Merrill Lynch ($33 billion). However, it’s likely to trade at a price/earnings multiple below those banks’ as well as other peers’ like J.P. Morgan. Each of those firms has a large fee-generating asset management business that provides steady income streams when banking deals evaporate. The result is a more stable stock, and a higher P/E ratio. Goldman’s earnings are too dependent on investment banking and volatile trading activities. (Asset management accounts for less than 10% of its revenues, compared with 17% at Morgan Stanley and 22% at J.P. Morgan.) If interest rates suddenly rise or an emerging country’s economy, like Brazil’s, tanks, Goldman’s earnings, and its stock price, could fall faster and harder than its peers’….
Some Wall Streeters wonder whether we will see the mother of all deals–a merger with Chase or Morgan Stanley Dean Witter. Others scoff. “Goldman’s going to buy us? How’s it going to do that?” asks a Morgan Stanley Dean Witter banker. He’s got a point: Morgan Stanley’s market cap is more than twice that of Goldman’s. But given the waves of consolidation in the banking industry, Goldman needs to move swiftly if it wants to be a course-setter. Goldman itself would be attractive to at least several other financial giants. So if it doesn’t shop quickly, it could wind up having to adapt to someone else’s plan, not its own.
This old article gives us a good idea of the feeding frenzy that was unleashed by the death of government regulations. On top of this, the noxious Japanese carry trade was taking off at this point although it was not mentioned in the news, it being a secret back door for borrowing money. Note also how this article talks about how fees would feed banks in bad times. So it was: as everyone borrowing money struggled to stay above water, fees poured into these banks. But the minute people declare bankruptcy: boom. It collapses. Thus, the need for ‘capitalization’ in case of forfeits.
This is where the noxious Derivatives Beast enters the room, looking for banks to eat. They decided to NOT capitalize at all but rather, move this risk into the new credit default swap market. This is what is now collapsing even worse than any other sector. Now, back to the unfolding disaster today:
Shares of the two remaininginvestment banks slipped Monday, despite news that Goldman Sachs’ top executives are foregoing their bonuses this year.
The decline came as analysts cut their estimates for the companies, with a Bernstein Research analyst noting this past quarter “represented the most difficult capital market environments in the last decade.”…In an interview, Hintz said the investment banks are experiencing difficulty across all of their business lines as the economy struggles, with seemingly every strategy for turning a profit running into problems. Illiquid markets for fixed income products like corporate bonds and preferred stock, difficulty hedging and high volatility are all driving down the ability to make money, he said.
“Government trading is the only thing that is doing well,” he said, referring to the sale of government bonds. “Government trading only does well when the economy is in a free fall.”
They are all running to the Central Bank and the government for cover. After destroying all regulations! I say, this takes some cheek. They are getting fees for moving government funds in and out of the central bank, their own bankrupt messy banks and then back into the government again, this round robin of money moving is all DEBT. No one has any reserves that comes anywhere matching the losses.
As business around the world dies, bankruptcies rise. This hammers the system from below. The government is printing money to make up for the losses but the businesses are closed and workers are not gaining income so they can’t spend and this is where the mess is going to get really nasty. Everyone is reducing their workforce as fast as possible. Especially the big investment banks. This reduces spending and thus, commerce and thus, the returns banks can get on loans as more and more of these go belly-up.
The housing collapse in the US came when the US economy was still functional! Stocks were rising, not falling! Now, all are falling and falling into the same deep debt hole dug by the gnomes themselves.
The bank has posted four consecutive quarters of losses, caused by billions in write-downs. Nine of its investment funds have cratered this year. And now the bank could face a tsunami of new losses in its once-lucrative consumer loan business as the global economy weakens.
Within the bank’s Manhattan offices, television screens have stopped displaying the company’s stock price. Traders have begun making jokes comparing Citigroup to the Titanic….“All the danger signs are flashing red,” said Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology.
Much of the fear centers on the unknowable. It is unclear just how bad banks’ losses on consumer loans, credit cards and mortgages will be as the economy weakens. Commercial real estate loans are deteriorating, and it is unclear whether banks have sold the worst of their holdings. Then there are all the investments that lurk off of banks’ balance sheets, in the so-called shadow banking system. And a new uncertainty has leapt to the forefront as the automotive industry teeters, sending investors scrambling to calculate how much banks are exposed to these loans….The current rout appeared to have gained momentum after Treasury Secretary Henry M. Paulson Jr. announced last week that the government would abandon its original plan to purchase troubled bank assets. That sent prices of commercial mortgage bonds and other loans into a nosedive. Mr. Paulson also said the Treasury would let the incoming administration determine how to deploy the remaining $350 billion left in the program.
Yet investors have grown increasingly nervous about the appearance of a leadership vacuum in Washington as the financial markets burn, and some have begun saying that President-elect Barack Obama should move more rapidly to release a plan.
If Pelosi had listened to us online fanatics, she would have impeached both Bush and Cheney. But she didn’t. Not that any of the banking gnomes demanded impeachment. Far from it! They were extremely happy to have this destructive duo in control. They paid a LOT of money to get them in control and were quite pleased with the changes wrought by the Republicans. Demanding Obama release a plan is pure silliness. If they wanted the Democrats in control, all they had to do was defund the GOP in 2004. Back then, they were very happy with Bush! So now, we pay the price.
Obama can’t launch a plan today for the simple reason, Congress is filled with GOP dead ducks who are leaving office. Why would they cooperate? And why would Obama want to risk a plan being shot down by a bunch of sore losers? Obviously, not. If Congress wishes to resign today and restart with the new members, fine. I would laugh to see that.
Ho, ho, ho, Freddie and Fannie Santas are coming to town!
The six-week halt will begin Nov. 26, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements today. The hiatus is designed to give servicers more time to implement a streamlined loan modification program for struggling borrowers.
“It’s a giant time out,” Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia, said today in a Bloomberg Television interview. “I wouldn’t be surprised to see this across the board.”
Fannie and Freddie, government-sponsored enterprises that own or guarantee $5.2 trillion of the $12 trillion U.S. home mortgage market, were placed under federal control Sept. 6. They have since been pushed to work harder at modifying troubled single-family and multifamily mortgages to curtail foreclosures.
Until a streamlined modification program is up and running, “we felt it was in the best interest of both borrowers and Fannie Mae to take this extra step to ensure that homeowners with the desire and ability to prevent foreclosure have an opportunity to stay in their homes,” Fannie Chief Executive Officer Herb Allison said in a statement.
Only the sword of eviction keeps many homeowners up with their payments. Many people prefer to pay tomorrow. Witness our entire banking system! So there has to be a huge element of fear here or people will put off paying for anything. Once we cease having evictions, the people who are ‘honest’ feel resentment. Especially when they see free-spending neighbors who loaded tons of debt on their homes to go on vacation, live in fancy houses and buy lots of toys, getting another free ride.
The moral dimension of debt is all-important. Moral hazard is often the only barrier to running up too much debt. But then, this is the Donald Trump nation. Multiple divorces and bankruptcies while living the high life. I have seen many ads on TV or the internet, telling people to take on more loans to pay for ‘fun stuff’ like swimming pools or vacations. The bankers knew perfectly well, this money was being used frivolously.
U.S. bank regulators may exclude the shortest-term loans from a $1.4 trillion debt-insurance program, helping the Federal Reserve avoid further unpredictable swings in the country’s main interest rate.
Federal Deposit Insurance Corp. staffers are likely to recommend excluding loans that mature in 30 days or less, which would encompass overnight interbank loans at the rate targeted by the Fed, a person briefed on the plan said on condition of anonymity. FDIC Chairman Sheila Bair and other board members are scheduled to vote today on regulations governing the plan.
The Fed has failed for two months to keep the federal funds rate close to the target set by policy makers because of more than $1 trillion of loans flooding the banking system. The original FDIC proposal required fees to insure debt, spurring complaints that it would lead to an exodus from the $250 billion market for overnight loans between banks.
Another obvious sign that this is a fundamentally bankrupt system. The US has to recognize that we can’t use debt to get rich. The investment bankers tried this and failed. Donald Trump has tried this more than once and failed. Like his defunct TV show used to bellow, ‘You are FIRED!’ And all these people should be fired. We can’t save them. Not even half of them. Time to have a real ‘time out’. Namely, to have a national conversation about the floating currency, accumulation of debt and the all-important trade deficit.
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