Friday, March 27, 2009

Psst! Timmy.I think we have a problem

This monster on the left is supposed to be a hydra headed monster, a metaphor for the dangerous silliness going on in DC. You thought the banks were insolvent because the real estate market tanked because immigrant strawberry pickers were falling behind on their San Joaquin Valley mcmansions after their ARMs reset. Well actually it's a little more complicated than that. George Soros the other day dropped a bomb predicting a big drop in commercial real estate in the US but actually ComRE has been imploding elsewhere. One of the German Government's early bailouts was a real estate firm. So I decided to try to find out the percentages of loan composition on these banks balance sheets and this is what I found:
Residential mortgages account for only about one quarter off their loan portfolio(26%).
Commercial,Industrial, non farm nonresidential and construction loans amount to 40%. Public anger is growing to more bank bailouts and a drop in the value of banks commercial loan portfolios could trigger the next grand mal seizure in the banks not to mention in any derivatives or SIVs tied to commercial real estate. Hello AIG! Don't Ask! Meanwhile over in Europe ahead of the G20 meeting in London, the President of the EU, Mirek Topolanek yesterday said the Obama economic policies are putting it on "The Road to Hell." My sentiment exactly.

Tuesday, March 24, 2009

The Summers/Geithner Burka

I have spent the past 2 days looking at Trashy Tim's latest regurgitation of Horrible Henry's failed TARP program and the long blog I wrote examining the pros(none) and the cons(many) so depressed me that I sent it to my digital landfill and I will now try again. If you were hoping that that ill stared Obama Economic team might finally come up with a credible and fair plan to address the financial crisis, you had better think again. Henry Paulson's plan was bad but it was 3 pages and it was pretty clear. This plan of Geithner and summers is anything but clear. It is vastly complicated and I think a disingenuous obfuscation designed from the outset to confuse and obscure what it is: a gussied up cash for trash program which is yet another attempt to bail out the banks and foist the losses on the taxpayer . We are early in the economic depression of this country and you have to keep in mind that we have a real hydra headed monster on our hands. This particular stupid plan is more than a pig with lipstick, It is a pig with lipstick under a burka. It is a way to avoid bank nationalization and prop up insolvent banks. It involves setting up yet another government entity to buy up nearly worthless toxic debt held by banks. In yet another end run around congress and the American people, it involves dragging in a a heretofore solvent FDIC to be its pimp.It would create a "public/private partnership" using very little private(3-7% it seems) and the rest taxpayer money loaned at low interest to private equity firms and hedge funds in a hokus pokus scheme to try to talk up the prices of this trash by a mysterious auction process . You see the banks are insolvent if you pay 30 cents on the dollar for this trash and some are probably insolvent even if you pay 60 cents on the dollar,which is what the banks think a lot of them are worth. So there is a spread between what the market thinks and what the banks think they are worth and Geithner wants this "partnership" to pay what the banks want rather than what the market wants. To attract the hedgies he has structured it so they get most of the upside and the taxpayer gets most of the the downside. The loans to the hedge funds are non recourse loans as well which is what the hedgehogs wanted, meaning that the loans are secured by the asset(ie., the trash). It looks like it was written by the hedgehogs for the hedgehogs. This plan has Larry Summers fingerprints all over it. You may recall he was fired from the Presidency of Harvard for degrading and derisive comments about women. Where did he go for his next job? To DE Shaw, a big NY hedge fund.
People of the United States! Wake up! Your government has been and is still being run by and for the moneyed and financial interests of Wall Street and the Banking and financial fat cats who care not at all for the economic future of your children. These people , the Treasury and the Fed ARE the government. Even the Congress is powerless and of course the congressmen in the important Banking and Finance committees get the bulk of their campaign contributions from banks,insurance and real estate interests. And the really really sad thing that hit me is that Barak Obama in this financial debacle is George Bush in blackface, just like Al Jolson. His whole election is starting to look like a fraud. Virtually nothing has changed at the Fed and at treasury. Geithner's plans and Summer's plans are Paulson's plans. Bernanke's plans are Greenspan's plans. If Obama goes along with these Wall Street insiders in his economic cabinet, his presidency is doomed.
I was delighted to see a picture of Barak's pretty wife with a rake or hoe turning over sod for the white house garden. As I looked at that picture, it occurred to me that the country voted for the wrong Obama.

Friday, March 20, 2009

Apocalypse Now

America, you are being had! You are being played like a tin kazoo. The AIG bonus babies are fleeing to the four corners pursued by IRS Suburbans as the 535 Washington clowns spout their phony outrage at $218 Million while they cover up their complicity at handing out $170 BILLION to Hank Paulson's old bank and a collection of his European friends. The economic Keynesian national destruction continues in the beltway with the looting of the treasury led by Barak's economic imbeciles. I wonder when the American People will wake up and realize that they are not citizens in a democracy but serfs of the Federal Reserve Banking Globalized World Government circa 1984. The latest news continues to worsen with the Fed Printing Reichsmarks at a torrid pace so they can buy more trash for cash from Freddie and Fannie as well as buying up Treasury Securities. It is a futile effort to stave off more asset price destruction and thus give the banks some breathing room , wishful thinking that these primarily real estate "assets" will stop losing value and finally these insolvent banks can resume lending and thus jump start John McCain's American Dream. If I am reading Bernanke and the boys correctly, I think they still believe that the problem is a liquidity problem when it is almost certainly a debt problem. It seems so clear to a financial neophyte like myself. Why is it not clear to them? In the good old days of course the government would borrow to fund its deficit spending by peddling T bills to China and Japan to raise money but now it funds its deficits by buying its own debt to fund its deficit spending. Try to wrap your mind around that. We are living in a Keynesian Bizarroworld that even Jon Stewart cannot joke about. The CBO says the deficit will be more like $2 Trillion instead of a measly 1.75 as Barak promised. Oops. This rescue of the world's biggest debt machine by yet more debt creation is insanity on steroids. The world is starting to think we are nuts. And they are right. The German Economics and Technology Minister was on PBS last night and he was at a loss for words when Paul Solman asked why Germany wasn't spending more on stimulus like the good old US of A. European Industrial production fell 17.3% from Jan "08 to "09. Debt is imploding worldwide at the fastest rate in probably world history and Baraks bright idea for change is to create more debt? The dollar is dropping like a rock reversing a recent rise against other fiat currencies . The Administration is of course led by President Benanke and his Knights Templar at the Fed and they are well on their way to destroying what's left of our economy printing digital money to buy up nearly worthless minimally negotiable mortgage securities to prop up a still overpriced real estate market. A 30 year mortgage of 1 % is too high if the house is overpriced. This will likely be the greatest depression of the last 150 years and the actions of our government by propping up insolvent enterprises is just delaying the inevitable rebuilding process and ultimately making it so much worse. We had massive asset price inflation fueled by the Greenspan Fed with banks leveraging their toxic mortgage "assets" and these assets are still dropping in value like a stone reverting to a true value and pulling the over leveraged bets and derivatives of financial institutions worldwide into a black hole. In the next year or two the American people will be needing money to eat and stay warm and where will the money for that come from? Somehow, SOMEHOW the American people need to grab these misguided greedy wall street bankers and their beltway politicians by the lapels and slam them up against the sheetrock and demand that they get it! It may take a French Revolution of sorts for that to happen but it could be closer than you think. The bankers and politicians have no shame, no guilt and they have destroyed the economic system of the world. In 1789 bankers and lenders were dragged from their mansions in France and torn to pieces by the mob. I would like to hope that our society has advanced sufficiently that this would not occur here but these folks need to be named and punished and the absurd spectacle of actually rewarding them really triggered a raw nerve in the lethargic mystified American public this week. I think this financial Armageddon could morph into a political Armageddon of retribution against the politicians and financial rogues who have so utterly destroyed America's economic future.
There are far better ways to to mitigate this Depression than dragging bankers out of the Goldman Sachs Building and kicking their ribs in. Unfocused anger is potentially very destructive to a society and as imperfect as our political system is, it just may be possible to force our politicians to do what is needed. Here are my suggestions.
1. Force the banks and insurance companies and mortgage companies to do an honest accounting of their assets and debt. No bank can lend to another bank if they don't know if that bank is solvent. Close them or nationalize them if they are insolvent.
2. Declare a moratorium on lending ANY more money to any financial entity, any commercial entity for a period of time, say 90 days. This will stop the rush mentality of doing something/anything(!) in Washington.
3. Stop foreclosures for 1 year. Offer the former inhabitants the ability to rent their homes at prevailing market rate.
4. End all collateralized debt obligations and regulate or abolish derivatives and hedge funds.
5. Capitalize solvent banks as needed and institute the same kind of banking regulations as were repealed by these same banking interests in the 1990's.
6. End all business tax deductions for companies moving headquarters or production abroad.Have a national goal to return the US to a manufacturing economy.
7. Develop a crash program to provide a national transportation system of electrified rail, not high speed rail. Electrified Rail is a vastly cheaper and sustainable way to move cargo and people than our ribbons of asphalt and concrete with their short expensive life expectancy.
8.Nationalize Health Care like virtually every developed country in the world.
9. Bring our military home and close the 1000 odd overseas bases. Use our military to defend the country not defend globalized corporate interests.
10. Reduce energy consumption of all types by tax policy and conservation . Cap imported oil
use at a level similar to other developed economies. Most of the developed world use 30 to 50% of oil per capita as we in the US.
11. Barak Obama seems to be a diligent and intelligent president but he is getting horrific advice from a deeply flawed sector. Flood the White House with mail and email. Plant some doubt in his head that he just might be on the wrong course.Send mail to Michelle. She may whisper in his ear. If he is as smart as I think he is, he may yet figure out better options on his own.

Saturday, March 7, 2009

American Democracy is Dead

Anyone who has seen "Shane" will recognize the backdrop as the Grand Tetons. The three well dressed men smiling and joking with each other are possibly among the most dangerous men on earth. They undoubtedly do not have that perception of themselves. They look relaxed because this is the look of the cognitive dissonant Federal Reserve male at rest. The guy in the tan blazer is Don Kohn, vice chair of the Fed. I think you know the other two, clueless Tim and dangerous Ben. They are attending the Jackson Hole Economic Symposium last August. The theme was "Maintaining stability in a changing financial system." They are just weeks from taking the first steps in the destruction the economic future of our children. They will testify before Congress in September that they will provide transparency. They lied and they covered up and they concealed. Meanwhile over at AIG there was no stability being maintained so Ben and Hank Paulson said the US taxpayer needed to rescue the world's largest insurance company because it wrote Credit Default Swap insurance to someone and now the claims were being filed and there was nowhere near enough money on hand to pay those claims. So now the US taxpayer had to pony up and pay those claims. Whaaaat? Gretchen Morgenson of the NY Times reported that Ben and Hank and Goldman Sachs met in September to bailout Hank Greenberg and his 350 man financial services arm of AIG over there in London. The people who paid their insurance premiums now wanted their money and the world's largest insurance company had no way to pay them. And who was filing these claims that Hank Paulson wanted to rescue? Hank refused to say because revealing their names could harm their businesses. One was certainly obvious: Goldman Sachs. Hank's old employer had to be one of the counterparties. If this sounds like a gigantic conflict of interest to have Hank's old bank present at the negotiations, you are right and it shows how utterly corrupt our political system has become. The powerful banking and insurance interests have kidnapped and hijacked the US political system and it should have been obvious to anyone, but little was said at the time in our equally co opted media. The counterparties were paid off in secret and Ben and Hank steadfastly refused to reveal their names. Two days ago Don Kohn was still refusing to reveal those names but yesterday the Wall Street Journal somehow obtained the names of the counterparties and no surprise, they are the names of the largest and most powerful US and European banks, some of whom are already insolvent. Here is the list:

Covered Counterparties

Some banks that were paid by AIG after it was bailed out by the government

  • Goldman Sachs
  • Deutsche Bank
  • Merrill Lynch
  • Société Générale
  • Calyon
  • Barclays
  • Rabobank
  • Danske
  • HSBC
  • Royal Bank of Scotland
  • Banco Santander
  • Morgan Stanley
  • Wachovia
  • Bank of America
  • Lloyds Banking Group

Source: WSJ research

If this bailout of world banks by the US taxpayer makes you furious, it should. We as taxpayers must find some way to make the Fed and the banks accountable. It's time to flood our representatives with letters demanding an end to this unimaginable bailout of world banks. How can this be happening? Their power must be restrained if we are to have any chance of saving what shred of our democracy that remains. I see no way except to abolish the Federal Reserve System and start from scratch with a new agency who is accountable to the citizens of the United States.

Thursday, March 5, 2009

America:Cognitive Dissonance on Steroids

I've been falling behind a bit on my blog trying to study the Panic of 2008 and I find myself returning again and again to either pictures from the Great Depression like this gem by Margaret Bourke-White from 1937 or images of lying and liars . But the thought hit me the other day after watching Ben Bernanke in his latest committee appearance. In response to a question from Ron Widen of Oregon , he said if there was one thing that had made him mad, It was AIG. Ben said that the world's largest insurance company had morphed into a giant hedge fund that happened to sell insurance. It may have made him mad but it didn't stop him from adding another $30 Billion to the $150 Billion already shoveled at AIG. He slipped and dodged and feinted like Crazy Legs Hirsch(remember him?). Where is the money going to at AIG? To Whom? Why? Can't say. It might impair confidence. Anyone with an economic IQ over 100 knows that it's about the credit default swaps of AIG. Who's getting the payouts? Paulson? Goldman Sachs? Sovereign Wealth funds like Abu Dhabi? Swiss banks? Confidence? It's the same song and dance as when He and Crazy Legs Paulson stated last fall when they promised "transparency" in the TARP program. Who did the money go to? Can't say. Might impair confidence. So Mr Bernanke, you are telling me that the trillions we are stealing from my children to bail out deadbeats and criminally incompetent enterprises largely given with minimal strings, are you telling me that the people of the United States do not have the right to know who is getting the money and how much? Yup. It's confidence. Ben! We don't have any friggin' confidence! And it's people like you and Tim Geithner and Larry Summers, Robert Rubin and gawd knows how many other Citigroup and Goldman Sachs bastard children out there in this and the last 4 administrations that have caused me to lose confidence! We have lost confidence in the entire financial system and nothing you have done since you succeeded the Ayn Rand troll Greenspan has inspired anything in the way of confidence in this citizen or in the markets. You have lied sir. You promised transparency and you have not delivered on your promise. But why should you. The Fed can do anything it chooses, say what it wants, spend what it wants withhold what it wants. It is accountable to no one. This is one horrible system and it illustrates how evil and powerful the now worldwide system of central banks and bankers are. They have amassed power at the expense of the citizenry and the governments of the world. But I guess it was when Barak told us to go out and buy stocks for the long term that I got the thousand yard stare. That's when I realized that maybe there was something more to this mystery than misstatements, incompetence or lying. These guys are in the death throes of a malignant Cognitive Dissonance. Barak! What are you thinking? We're broke! How the heck can we buy stocks or houses or cars if we're broke? If the companies are broke! In fact how can you buy wars or F-22s or rebuild the infrastructure of GAZA(?!!!) if you're broke? And now a $1.75 Trillion deficit:50% of the budget! Everything you say shows cognitive dissonance. I think now I've got it. Cognitive Dissonance:on steroids! The whole country has it. Hillary sure has it. Just a few months ago she was saying the Chinese holding almost 2 Trillion is US debt was a threat to national security but in her recent political lap dance in Bejiing she practically begged Wen Jiabao to please oh pretty puleeze..... buy some more T bills! Cognitive Dissonance. What else can it be? Cognitive Dissonance is that crummy feeling you get when you try to hold two contradictory ideas in your mind. You get dissonance when you realize the contradiction like those black folks in line below the picture of the American Dream. You are asking us to have confidence when no rational human being could possibly have confidence. And like all chronic sufferers of CD as I will now call it, in the face of massive evidence to the contrary, you persist in repeating your bailouts of banks and hedge funds and deadbeats. Ben you have to stop. You have to come clean and admit that you and Tim don't know what you are doing. What is the extent of the CDS, CDO, CDLs and all the other toxic acronyms out there? Do you know? So tell us if you do! Anyone can see that your actions are sheer fiscal insanity. And stupid! Will Rogers said that"If stupidity got us into this mess, then why can't it get us out?" We know what got us into this mess. We elected Ronnie Reagan who knew that cutting taxes and spending without strings was the way forward. It would trickle. And that pesky Paul Volker had to go. Ron now deep in the throes of incipient Alzheimer's fired him in 1987 and gave us the jowly mumbling double speaking Greenspan who presided over two financial bubbles and caused the mother of all bubbles by promoting massive leveraged debt assumption, asset inflation, low interest money, more deregulation, repeal of the Glass-Stegall, bailout of the LTCM hedge fund, promotion of these new toxic instruments, massive credit expansion to anyone who could fog a mirror, unregulated derivatives and in the final insult, peddled this fabulous Ayn Rand financial neutron bomb orthodoxy to the world sending out callow MBA missionaries from the Sloan School and Harvard proselytizing at places as dissimilar as AIG and the Central bank of Iceland, urging them to use their new incomprehensible geek math models to turn paper into real money and the key concept of course was to leverage the living bejusuz out of every bet you made. That way you could get rich quicker. Greed is good you know. Sorry. I gotta go. It's snowing and I need to plow.