What's Another $500 Million after $250 Billion among Friends?
Today the FED and Bernanke told Congress that they want to pay
Commercial Banks, starting this year, for reserves which these banks are required to
with the Federal Reserve. Reserves have long been required to assure the safety
the banking system. Two years ago the Republican Congress quietly voted to start
the banks an interest rate equal to the Federal Funds rate, but this was not supposed
start until 2011. With interest rates low, this is estimated to be $150 million a
if interest rates were to jump to 20%, as they were in 1980, we're talking about
billion and a half dollars. Over a five year period, this could easily amount to $2
dolllars taken out of the US Treasury to subsidize banks.
This is one more example of Bernanke being the agent of
big elite banks, rather
taxpayers or the rest of America. In March, the Fed financed the JPM buy out
of Bear Stearns even though the Fed could be left holding a bag of collateralized assets
worth far less than the $30 billion it gave JPM. Exactly how much has been
and investment banks in return for very questionable mortage collateral?
Kutlow said on a TV show it amounted to $650 billion. The Wall Street Journal
supports this estimate: "the Fed is starting to run low
on unconventional ammunition;
started with only (SIC!) about $800 billion in Treasury and repo assets and had already
rolled off or pledged about half before Fridays facility to Bear Stearns was
Fed announced the Term
Securities Lending Facility... Under that facility, dealers
borrow up to $200 billion of Treasurys from the Fed in return for agency
This is part of a pattern wherein the Fed gives banks lots of US Treasury money at very
low interest rates without requiring much of anything in return. It shows that the
hopelessly corrupt and a willing captive of the wealthiest elite banks. It proves
that the FED
will do anything to stretch its authority to bale out failing financial
That the FED must now openly
go to such lengths shows outsiders several things:
(1) that the current Federal Reserve System is hopelessly corrupt and chose
to regulate the mortgage business as the bubble of home prices grew and grew.
(2) that Banks are desperate and the banking system is in real danger, because
of so many mortgage owners just walking away from their home loans.
(3) that good paying jobs are declining and wealth in the US is becoming so
concentrated in the US there is a real possibility of far-reaching credit failures
that will bring down a number of major banks.
(4) that the Fed must print so more and more Dollars.
(5) inflation will become such a severe problem and interest rates will have to be
raised very steeply as they were from 1977 to 1980.
The Credit Crisis Is Not Getting Better
Banks loans are much harder to get, just when more and more
people need them. The
interest rates are not being passed along to consumers. Look at your credit
rate of interest. Banks are scared. They have themselves borrow billions form
Federal Home Loan Bank. In fact, the "Feds discount window
lending is vastly
by that of the FHLBs, which have lent $99 billion to Citibank, $51 billion to
and $44 billion to Washington Mutual, to name three pressed borrowers."
The evidence keeps building that the losses and delinquencies are
to prime mortgages. If home prices keep sliding, and they have corrected only 20% of
gains between 1996 and 2006, as many as 10 million households will be in negative
as far as their equity in their home goes. This creates a very big incentive for a
more mortage defailts and "walk-aways". A 30% drop in home prices - now
wipe out $6 trillion in household wealth". The lay-offs created by the banks'
facto tightening of credit, couppled with inflation and much higher gas prices, are
and increasing the rate of the defaults on credit cards, auto and student loans.
if there is a recession, which seems likely, 10+% of US corporations may
on their loans.
Paulson Is Also Not To Be Trusted
Secretary of the Treasury tells us that "the credit crisis
over". Sure, if you run a
bank and the FED guarantees you can't fail.. He also said that the subprime crisis
about because of some bad lending practices." Why, after decades of
evaluating borrowers and making loans, did lenders suddenly make so
bad loans, all across the country? .
Damnable Adjustible Rates
Them in at Low Rates, 0% Down. And Then Sock It To Them
example of the spreading credit crisis is seen in Don Doyle, a computer engineer at
Martin who makes a six-figure income and had a stellar credit score in 2004,
he refinanced his home in Northern California to take cash out to pay for his daughters
tuition. Mr. Doyle, 52, is now worried that he will have to file for bankruptcy,
cannot afford to make the higher variable payments on his mortgage, and he cannot sell
home for more than his $740,000 mortgage. The whole plan was to get out
rate reset, he said. Now I am caught. I cant sell my house. Im having a
Ive avoided bankruptcy for months trying to pull this out of my savings.
Greg Palast writes:
"While New York Governor Eliot Spitzer was paying an escort
a hotel room in Washington, just down the road, George Bushs new Federal
Board Chairman, Ben Bernanke,
was ... handing over $200 billion in
tryst with mortgage bank industry speculators. Both acts were wanton...
theres a BIG difference. The Governor was using his own checkbook.
man Bernanke was using
ours. This week, Bernankes Fed, for
the first time
its history, loaned a selected coterie of banks one-fifth of a trillion dollars
banks mortgage-backed junk bonds... Up until Wednesday, there was one single,
politician who stood in the way of this creepy little assignation at the bankers bordello:
Spitzer. Who are they kidding? Spitzers lynching and the bankers enriching
of regulating the banks that had run amok, Bushs regulators went on the warpath
Spitzer and states attempting to stop predatory practices. Making an unprecedented
of the legal power of federal pre-emption, Bush-bots ordered the states to NOT
consumer protection laws.
the feds actually filed a lawsuit to block Spitzers investigation of ugly racial
steering. Bushs banking buddies were especially steamed that Spitzer hammered bank
across the nation using New York State laws. Spitzer not only took on Countrywide,
took on their predatory enablers in the investment banking community. Behind Countrywide
the Mother Shark, its funder and now owner, Bank of America. Others joined the sharkfest:
Sachs, Merrill Lynch and Citigroups Citibank made mortgage usury their major profit
They did this through a bit of financial legerdemain called securitization.
I believe the banks called Justice and said, Take him down today!
Naw, thats not how
system works. But the big players knew that unless Spitzer was taken out, he would create
ruckus to spoil the party. Headlines in the financial press one was Wall
on Spitzer - made clear to Bushs enforcers at Justice who their number one
And it wasnt Bin Laden.
was the night of February 13 when Spitzer made the bone-headed choice to
his Washington Hotel room. He had just finished signing
these words for the Washington
about predatory loans: Not
only did the Bush administration do nothing to protect
it embarked on an aggressive and unprecedented campaign to prevent states
protecting their residents from the very problems to which the federal government
turning a blind eye. ... Spitzer was in Washington to launch a
campaign to take on the Bush
and the biggest financial powers on the planet. Spitzer wrote, When
history tells the story
the subprime lending crisis and recounts its devastating effects on the lives of so many
homeowners the Bush administration will not be judged favorably.
MANY AMERICANS ARE MUCH WORSE OFF
THEY WERE 8 YEARS AGO?
George W. Bush took office in 2000, oil was $28 per barrel, the euro was $.87
the dollar, gold was $274 per ounce, and the national debt was $5.9 trillion. Today, oil
record $123 per barrel, the euro is nudging $1.60 on the dollar, gold over $900 per ounce,
the National Debt is $9 trillion. The country is presently trapped in the $3 trillion
named Iraq. The federal government's budget has balooned
under Bush. Real wages are in decline. Unemployment is rising as
food prices soar.
50 million Americans have no health care insurance. A recession seems unavoidable
interest rates at 3%. What will we have when interest rates go back up to defend the
and fight inflation? Even the NASDAQ is 400 points below what it was when Bush
stupid $3 trillion Iraq war played a major role in this. Vastly higher US
rising oil prices were direct consequences of Bush's blunder. Nor has the US
additional security. After 9/11 the US had the sympathy of the world. That was
the Federal Reserve also has played a major role in bringing about Americas economic
Greenspans lowering of interest rates, without imposing any limits to the gathering
bubble was guaranteed to bring disaster. Zero-percent down, adjustible mortgages
the equivalent of lettinf people buy stocks in 1929 with on 5% margin. Now the banks
on beneath a mountain of non-performing loans and foreclosures.