financial system – Infinite Unknown

Wall Street Is A High-On-Crack Driver That Just Smashed Into Your House

February 15, 2010 by Infinite

Compared to Wall Street the US government and the Fed nuked the economy, the dollar and any bright future that the people in the US might have had. The people will experience the fallout very soon.

The ‘Greatest Depression’.

Cynthia McKinney is spot-on :

– Cynthia McKinney at Munich Germany NATO Peace Rally: ‘My Country Has Been Hijacked By A Criminal Cabal’

(This guest post comes from Tavakoli Structured Finance)

If a high-on-crack driver crashed his speeding rental car into your house and killed your spouse, you would be outraged if law enforcers took bribes and gave the driver a pass on a blood test. If the judge then merely fined the killer and ordered you to pay it, you would appeal, wondering what happened to justice. If the government then handed the crack-driver keys to a bigger rental car and presented you with the rental bill, you would certainly protest.

How is it, then, that you have remained largely silent in the face of the same sort of behavior by Wall Street and Washington? Bonus-seeking bankers careened off the right path and ran Ponzi schemes that nearly ruined our economy. Bureaucrats and elected officials bailed them out without demanding consequences. Bankers are revving their engines again.

Bankers Get Bonuses, the USA Gets the Great Recession

Taxpayers are asked to believe that over-borrowing by U.S. consumers created a global financial crisis. This myth aids and abets Wall Street. The economy was nearly destroyed because banks borrowed massively, and they borrowed many multiples more than they could afford. Wall Street pumped the Fed’s cheap money through financial meth labs, and deceptive financial vehicles ran over securities laws at top speed.

More than 20% of mortgage loans–including originally sound loans–are underwater, meaning the borrower owes more than the home is worth. Official unemployment numbers hover at around 10%. If you include underemployment, it is around 18%. In depressed areas where the nation’s poorest–chiefly minorities–have been hurt the most, unemployment has soared past 30%. For this destitute group, unemployment combined with underemployment exceeds 50%.

As U.S. soldiers fought wars in Iraq and Afghanistan, Wall Street flattened Main Street. Our foreign wars drag on, while the U.S. battles a crippling recession at home.

Global Ponzi Scheme

Fraud by borrowers, fraud on borrowers, and speculation by people who thought home prices would rise forever have all tarnished mortgage lending. Yet this pales compared to the epidemic of predatory lending.

Predatory snipers committed financial murder as deliberately as British soldiers sold smallpox contaminated blankets to Native Americans. Honest homeowners were systematically targeted and actively misled into bad mortgage products. Loans were presented as gifts, but these Trojan horse loans hid destructive risk. “Disclosures” were acts of malice.

When Wall Street packaged these loans and sold deceptive “investments,” documents did not specifically disclose that credit ratings were misleading. If you know or should know a car’s gas tank will blow up, you cannot use a misleading third-party consumer report as an excuse. Yet bonus-seeking bankers used this sort of excuse to get through a few more highly-paid bonus cycles, before it all fell apart. Only the elite crowd of insiders prospered.*

This was the most massive Ponzi scheme in the history of the global capital markets. U.S. taxpayers became unwilling unsophisticated investors when we bailed out the financial system. We must hold Wall Street accountable for its fraud.

The United States may be “days away from a complete meltdown of our financial system”

September 19, 2008 by Infinite

Key lawmakers promise fast action on bailout

WASHINGTON (AP) – Senate Banking Committee Chairman Chris Dodd says the United States may be “days away from a complete meltdown of our financial system” and Congress is working quickly to prevent that.

Dodd said Friday that Democrats and Republicans on the Hill are coming together to support the Bush administration’s developing plan to buy up bad debt from financial institutions and get the credit system working again. Dodd told ABC’s “Good Morning America” that the nation’s credit is seizing up and people can’t get loans.

The ranking Republican on the Banking Committee, Senator Richard Shelby, predicts the new bailout plan will cost at least half a trillion dollars.

Shelby says the nation has “been lurching from one crisis to another.” Both veteran lawmakers say this is the most serious financial crisis they’ve seen in their years in Congress.

Record bail-out in US of Fannie Mae and Freddie Mac

September 6, 2008 by Infinite

THE US TREASURY will today announce a rescue of Fannie Mae and Freddie Mac, two giant American mortgage banks, in what is likely to be the biggest financial bail-out of recent history.

The move may trigger a bounce in global stock markets tomorrow. However, analysts warn that some of the uncertainties that plagued the markets last week, including worries over the duration of the credit crunch, will persist.

Large U.S. bank collapse seen ahead, says ex-IMF chief economist

August 19, 2008 by Infinite

SINGAPORE (Reuters) – The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world’s biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.

“The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say ‘the worst is to come’,” he told a financial conference.

“We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks,” said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund’s chief economist from 2001 to 2004.

8,500 U.S. banks; many will die soon

July 21, 2008 by Infinite

I called the death of Indymac Bancorp on Monday, July 7th. The Federal Deposit Insurance Corporation seized Indymac on Friday, July 11th.

I called the implosion of the two Government Sponsored Entities in the mortgage business, Fannie Mae and Freddie Mac on Wednesday, July 9th. Sunday, July 13th the White House announced a bailout for them.

Want to know what happens next? It’s ape ass ugly and it’s going to happen to you, so don’t say I didn’t warn you.

U.S. Financial Breaking Point Soon

July 20, 2008 by Infinite

Something is going to break, and soon. Banks are insolvent and failing by the hundreds if not thousands. Hedge funds are on the edge of oblivion. Only a tiny percentage of toxic waste losses in real estate and other asset classes of collateral, which will eventually amount to over $1.4 trillion in the US alone, has to date been recognized by the lying bankster fraudsters. Bonds are producing negative rates of return even based on ludicrously understated official rates of inflation (until this month, when we finally got some data bordering on the truth).

Status Report on the Collapse of the U.S. Economy

July 17, 2008July 16, 2008 by Infinite

“But, realistically, all ordinary people can do today is try to survive, perhaps by working with friends and neighbors in planting food and living within the underground economy. At least people might not then have to starve to death, because hard as it is to believe that “it could happen here,” widespread famine in the U.S. seems a real possibility over the next several years. Nations take such risks when they allow capitalist agribusiness to destroy local agriculture.”

With the economic news of the week of July 14-the continuing crisis among mortgage lenders, the onset of bank failures, the announced downsizing of General Motors, the slide of the Dow-Jones below 11,000-we are seeing the ongoing collapse of the U.S. economy.

Even the super-rich are becoming nervous as cries for an emergency suspension of short selling ring out.

What is really taking place, however, is that the producing economy of working men and women is being crushed by the overall debt burden on households, businesses, and governments that could reach $70 trillion by 2010. The financial system, including mortgage giants Fannie Mae and Freddie Mac, is bankrupt, as the debts it is based on cannot be repaid.

IMF orders X-ray of the entire US financial system

June 30, 2008 by Infinite

IMAGINE the Reserve Bank of Australia, concerned that its friends in the city of Sydney (but perhaps Melbourne) who, having wallowed in wealth all their adult lives, were no longer gainfully employable and their wildly extravagant lifestyles were in danger, and, having the powers to intervene in the market, decided to do just that on their behalf.

Imagine them offering to enter the market and buy shares that would prop up the foolish gambles of the bankers, gambles they had encouraged them, until recently, to take by providing them with cheap money.

On top of that, they told this group they would provide hundreds of billions of dollars in credits to these same profiteers on the grounds they were so big and important to the economy they were indeed too big to fail.

Then, imagine, despite pouring untold taxpayers money into stocks and allowing their cronies access to vast sums, the system continued to fail. So they announced they would need greater power and with it more secrecy.

For its growing band of critics has, perhaps unwittingly and in the interest of public good, this has become the principal function of the US Federal Reserve.

If this was to happen in Australia the International Monetary Fund would be hammering at the door of the Reserve Bank. But Australia does not have a President’s Working Group on Financial Markets, commonly known as the Plunge Protection Team, that allows the US Government to prop up the markets by buying shares. But to imagine the IMF investigating the US financial system is unthinkable, or was. But, at the weekend, Der Spiegel reported that the IMF would conduct a full investigation into virtually every aspect of it.

Der Spiegel wrote that the IMF had “informed” Federal Reserve chairman Ben Bernanke of plans that would have been unheard of in the past: a general examination of the US financial system. The IMF’s board of directors has ruled that a so-called Financial Sector Assessment Program is to be carried out in the US.

This, Der Spiegel wrote, “is nothing less than an X-ray of the entire US financial system”, adding that “no Fed chief in US history has been forced to submit to the kind of humiliation that Ben Bernanke is facing”.

The fact that the IMF is knocking on the very doors of its parents and waving legal papers about who lost the house, the car and the kids will, if the past is anything to go by, be buried in the US by pom-pom waving on CNBC telling all what a great time it is to buy.

But the news that the US Fed has now lost its last vestige of credibility did not end with the German report.

The Telegraph from London weighed in, following the Royal Bank of Scotland’s statement last week (also lost on the US public) that it was time to head for the crags, and reported Barclays Capital’s closely watched Global Outlook analysis that said US headline inflation would hit 5.5% by August and the Fed would have to raise interest rates six times by the end of next year to prevent a wage spiral.

If the Fed hesitates, the bond markets will take matters into their own hands. “This is the first test for central banks in 30 years and they have fluffed it,” the report found. “They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility.”

Der Spiegel reports that the IMF is threatening to seriously study the accounts of America, something President George Bush is determined to prevent at least while he is in the White House, informing the IMF that it can begin its investigation but cannot complete it until he leaves office.

U.S. risks stagflation, says BIS chief

April 30, 2008 by Infinite

BASEL, Switzerland, April 29 (Reuters) – Stagflation is an increasingly plausible prospect in the United States and weak economic growth could last well into 2009, if not longer, the head of the Bank for International Settlements says.

That does not herald a rerun of the economic stagnation and rampant inflation that ran riot during the 1970s when oil prices last soared to unprecedented levels, Malcolm Knight, BIS general manager, said in an interview.

But it does cast some doubt on the White House’s thesis that the economy will rebound in the second half of 2008 in response to the tens of billions of dollars of tax rebates the government will be delivering to U.S. households in the coming weeks.

“I see a certain amount of scope for stagflation in a number of economies and that usually tends to result in subpar economic growth performance for an extended period of time, which could go well into 2009 or even longer,” said Knight, a Canadian who worked for more than 20 years at the International Monetary Fund.

“I think the U.S. economy is likely to experience weakness this year and in much of 2009,” said Knight, speaking to Reuters at BIS headquarters in Basel, Switzerland.

“Stagflation is a definite risk.”

On the brink of disaster

April 3, 2008April 2, 2008 by Infinite

The three newbies – the term auction lending facility, the primary-dealer credit facility, and the term securities lending facility – total more than half-a-trillion dollars, with more if needed. Much of this money is available not only to commercial banks but also to investment banks, which normally aren’t allowed to borrow from the Fed.

How can the Fed afford this largesse? Easy. Unlike a normal lender, the Fed can’t run out of money – at least, I don’t think it can. It can manage monetary policy while in effect creating banking reserves out of thin air and lending them out at interest.

That’s how the Fed reported a $34 billion profit in 2006, the last available year, of which $29 billion was sent to the Treasury. The Fed can even add to its $800 billion stash of Treasury securities by borrowing more of them from other big players.

Then there’s the Treasury. In March the Treasury – which failed this past winter to get private firms to establish a $100 billion “superfund” (please, no giggles from people who equate the term with Love Canal) to keep things called “structured investment vehicles” from having to sell their holdings in a bad market – unleashed Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500) and the Federal Home Loan Banks to buy hundreds of billions of dollars of mortgage-backed securities.

Germans Fear Meltdown of Financial System

December 7, 2008March 30, 2008 by Infinite

Germany and other industrialized nations are desperately trying to brace themselves against the threat of a collapse of the global financial system. The crisis has now taken its toll on the German economy, where the weak dollar is putting jobs in jeopardy and the credit crunch is paralyzing many businesses.

A trader reacts in front of the DAX board at the Frankfurt stock exchange.

The Bundesbank, Germany’s central bank, doesn’t like to see its employees working too late, and it expects even senior staff members to be headed home by 8 p.m. On weekends, employees seeking to escape the confines of their own homes are required to sign in at the front desk and are accompanied to their own desks by a security guard. Sensitive documents are kept in safes in many offices, and a portion of Germany’s gold reserves is stored behind meter-thick, reinforced concrete walls in the basement of a nearby building. In this environment, working overtime is considered a security risk.But the ordinary working day has been in disarray in recent weeks at the Bundesbank headquarters building, a gray, concrete box in Frankfurt’s Ginnheim neighborhood, where the crisis on international financial markets has many employees working late, even on weekends.

IMF tells states to plan for the worst

March 17, 2008March 14, 2008 by Infinite

Governments might have to intervene with taxpayers’ money to shore up the financial system and prevent a “downward credit spiral” from taking hold, the International Monetary Fund said yesterday.

John Lipsky, the IMF’s first deputy managing director, said: “We must keep all options on the table, including the potential use of public funds to safeguard the financial system.”

By Krishna Guha in Washington

Published: March 13 2008 02:00 | Last updated: March 13 2008 02:00

Source Financial Times