Defaulting banks - where will it stop?

[Jan Klimkowski]

I still don't know what is behind the massive purchase of US Treasury securities (public debt) by the UK Bank of England (govt), much of it unloaded by the Chinese.

In July 2009, the UK owned 97.1 billion dollars of US Treasury securities.
The Chinese govt owned 939.9 billion dollars of US Treasury securities.

By June 2010, the UK owned 362.2 billion dollars of US Treasury securities.
The Chinese govt owned 843.7 billion dollars of US Treasury securities.
Source: http://www.treas.gov/tic/mfh.txt

It smells like some kind of geopolitical racketeering scheme, cloaked in smoke and mirrors.

ENGLAND BUYS $170B USTBONDS FROM SAVINGS ???

This story is a gem. The Chinese dump USTreasurys and England accumulates them. Or more accurately, the USFed hides its vast monetization efforts in the United Kingdom account ledger item. No way to the reasonable man can Britain purchase $170 billion in USTreasurys in five months from legitimate sources of savings!! In May 2010, China reduced their USTreasury holdings by $32.5 billion, now the lowest level since June 2009. China shed $35.4 billion in short-term USTBills, offset by a mere $2.9 billion in purchased USTBonds. Furthermore, Japan reduced holdings in USTBonds, as did the OPEC nations. However, buyers could be found, all Anglo descent, at least on the surface. The total foreign USTreasury holdings rose from $3957 billion to $3964 billion. Attribute the good tiding news to gigantic ongoing accumulation by England, just like the last several years. The UK-based buying is highly suspicious, like a neighborhood crack house purchasing a swimming pool, but arouses no attention except by intrepid analysis divorced from Wall Street or the USGovt, the bicameral syndicate. Generally, the United States financial system suffered a dramatic decline in May as foreign purchases of US assets hit a wall, falling from $110.3 billion to just $33 billion. See the graph of steady Chinese unloading of USTreasurys in the last several months.

http://www.marketoracle.co.uk/Article21285.html

$102 Billion In 2,5 And 7 Year Treasuries On Deck For Next Week As Fed Prepares To Become Top Holder Of U.S. Debt

Submitted by Tyler Durden on 08/19/2010 13:01 -0500

Even as the public debates aggressively on the nature of bond bubbles and whether they have a footing in the US economy, Tim Geithner's office has no intention to discover the denouement of this particular polemic, and instead is preparing to belch the lastest batch of US-backed paper. In the upcoming week the US Treasury will issue a total of $102 billion in 2, 5 and "curve sweetspot" 7 year notes, with nominal amount all in line with expectations.

August 24 $37 billion in 2 Year Bonds
August 25 $36 billion in 5 Year Bonds
August 26 $29 billion in 7 Year Bonds

And in the unlikely event that China decides to reorient its purchases to even more non-US debt and sell existing holdings as it did in June (previously discussed on Zero Hedge), there is always that UK-based nest of direct bidders who just can't get enough of their own, pardon, American issuance. With holdings of over $360 billion and rising, the otherwise insolvent UK needs just $440 billion to become the second largest holder. And since it has purchased $280 billion in the last year alone, the probability that the Fed, pardon, the UK will soon be the second, and possibly biggest holder of US debt is distinctly possible.

And incidentally speaking of the real, not shadow, Fed, its holdings of $777 billion in US Treasurys, and growing once again at a rate of $30 billion per month, will surpass Japan as the second largest holder of USTs by the end of September, and China, which holds just $40 billion more, by the mid-term elections. In other words, we should not worry that China will soon forsake us - after all the Fed is gladly once again monetizing the Chinese stake.

http://www.zerohedge.com/article/102-bil...er-us-debt

[Peter Lemkin]

Krugman: "The Question Is Whether Our Economy Is Governed By Any Kind Of Rule Of Law"

Submitted by George Washington on 10/15/2010 16:26 -0500

Ben Bernanke Capital Formation CRAP Fail James Galbraith Krugman Obama Administration Too Big To Fail Wall Street Journal

→ Washington’s Blog

Paul Krugman writes:
The mortgage mess is making nonsense of claims that we have effective contract enforcement — in fact, the question is whether our economy is governed by any kind of rule of law.

***


True to form, the Obama administration’s response has been to oppose any action that might upset the banks, like a temporary moratorium on foreclosures while some of the issues are resolved. Instead, it is asking the banks, very nicely, to behave better and clean up their act. I mean, that’s worked so well in the past, right?



The response from the right is, however, even worse .... conservative commentators like those at The Wall Street Journal’s editorial page have come out dismissing the lack of proper documents as a triviality. In effect, they’re saying that if a bank says it owns your house, we should just take its word. To me, this evokes the days when noblemen felt free to take whatever they wanted, knowing that peasants had no standing in the courts. But then, I suspect that some people regard those as the good old days.

I'm happy that someone as prominent as Krugman is weighing in on the side of the rule of law.

I've been banging on this drum for years:
Fraud Finally Being Discussed in Polite Company ... Now Where Are the Prosecutions?
A Free Market Is Not Possible Without Strong Laws Against Fraud
The Economy Will Not Recover Until The Perpetrators Of Our Crises Are Held Accountable
Economist James Galbraith: Economists Should Move into the Background, and "Criminologists to the Forefront"
Senior S&L Regulator Says Government Engaging in Massive Cover-Up of Economic Crisis: “The Entire Strategy Is to Keep People from Getting the Facts”
No Wonder the Economy Isn't Improving
The Root of the Economic Crisis: Dishonesty

Karl Denninger makes a similar point today:

Charles Hugh Smith [writes]:

Either there is due process of law or you have a kleptocracy/"banana republic" oligarchy. At present, that is the decision we face as a nation. If the banking Elites and their partners in the Central State (Fed and Treasury) are allowed to "win" and gut the property laws of the states, then the U.S.A. will be revealed as a kleptocracy/"banana republic" oligarchy.



If state laws are upheld, then the "too big to fail" banks are insolvent and they will fail. Then the question of kleptocracy arises once again: will the banks be allowed to fail as per Classic Capitalism, that is, their owners and managers will have to absorb the losses of that bankruptcy/failure, or will the Central State use its powers to collect taxes and cover the private losses of the Bank/Financial Power Elites? Privatizing profits and socializing losses has been the entire game plan since the global house of cards collapsed in 2008.



It's decision time, citizens. Either the banks/Central State "win" and we are a kleptocracy/ "banana republic," or they lose and the U.S. mortgage/ banking sector implodes and is either formally socialized (i.e. owned lock, stock and barrel by the Central State) or rebuilt from scratch without big banks, Federal guarantees and the Fed's incestuous interventions. ("We create the credit that enables the mortgage, you issue the mortgage, and then we buy the mortgage.")

There is no "fix" or half-measure that can patch this over now.

Yep.



The bottom line now is that Bernanke thinks he can continue to paper over this crap with yet more "QE" and other monetary games. He's wrong. All he's done, along with Greenspan, is enable not just bad behavior but outright lawlessness, while at the same time savers, senior citizens and those on fixed incomes are seeing their mandatory spending soar, destroying their savings. Instead of using his regulatory power to put a stop to it, he feeds the bankster criminals that in their drug-induced mania have trashed our nation with yet another shot of heroin laced with meth, empowering yet another wilding binge of destruction.



Every time Bernanke speaks he talks about "more credit." But we're here because instead of capital formation we have shifted to relying on "more credit." Credit, however, is debt. Those policies great for the debt merchant, including of course The Fed, but highly-destructive to the capitalist who is trying to provide a good or service into the economy. He is slowly asset-stripped by the banksters through his reliance on these mechanisms, where he should be relying on asset accumulation - that is, capital formation.



By destroying capital formation Bernanke both destroys those on fixed incomes and savers through intentional devaluation of their asset base and wrecks the structures that are necessary for productive investment and economic stability, say much less growth.



In a very real sense, Bernanke is throwing Granny and Grandpa down the stairs - on purpose. He is literally threatening those at the lower end of the economic strata, along with all who are retired, with starvation and death, and in a just nation where the rule of law controlled instead of being abused by the kleptocrats he would be facing charges of Seditious Conspiracy, as his policies will inevitably lead to the destruction of our republic.
We're at a crossroads folks. Either the rule of law is restored and the games stopped, with the removal from positions of power of those who have enabled the scams and frauds and the fraudsters themselves put out of business and jailed, or the spiral will tighten and the pressure build [with more and more] capital flight and destruction of final demand ....

[Jan Klimkowski]

Ticker Forum's Karl Denninger thinks QE2 is the end:

America's Alarm Clock Has Rung: Time's Up

Here's the deal folks.

The banksters asset-stripped the public. Twice. The first time in the 1990s with the Internet bubble, the second time in houses. If you bought a home from 2003 onward you got screwed. It doesn't matter if you were a good borrower or not - you overpaid. American business was also asset-stripped. We covered this by shipping our labor off to China, India and Vietnam.

During the last part of the 2000 decade, the Federal Reserve, Bank Regulators, Government and the Banks themselves were all in on it. We know this. We know it because Citibank's former Chief Underwriter has testified to it under oath.

http://fcic.gov/hearings/pdfs/2010-0407-Bowen.pdf

It is not speculation or mathematics, it is admitted fact. This was an intentional, malicious act that involved government and finance. Your "representatives" didn't represent you, they represented the banks. They acted as guards not of your wealth, but instead they held you at gunpoint while the bank robbed you. This is the proximate cause of the market and economic collapse - your productive wealth was literally stolen through these frauds.

Now they're at it again. First, Ben Bernanke imposed, without a vote, a tax on the American People of over $1 trillion through his original "QE " game. This went immediately into commodity and stock prices worldwide but was in fact a tax on you, and on every productive business. This is the reason that unemployment remains at close to 10%. By now we should be well on our way to recovery. The government blew $600 billion on stimulus programs. They got nothing for it because of QE, which took it all back out, plus more through the tax - a tax that went directly into the bankers pockets. This unlawfully-imposed tax was used to cover the banks' insolvencies, along with the blatant extortion practiced by Rep. Kanjorski on FASB (who, incidentally, lost his seat Tuesday.) But the banks did not clear their balance sheets - they are, in fact, still insolvent. Instead, they literally took the money and paid it in bonuses.

Now that the banks are once again running out of money Ben Bernanke is at it again. He has announced another $600 billion in illegal taxation on America, and intends to give it again to the bankers. A good part of it already showed up in oil and other commodities. The rest of it will. It is guaranteed. The "benefit" will go overseas. The tax will fall on you.

THIS IS THE LARGEST TAX EVER IMPOSED ON THE AMERICAN PEOPLE IN THE HISTORY OF THE NATION. IT IS MORE THAN FOURTEEN TIMES THE BUSH TAX CUTS "ON THE RICH" THAT EVERYONE IS DEBATING. GOLDMAN SACHS BELIEVES THAT BERNANKE WILL IMPOSE A TOTAL TAX THROUGH QUANTITATIVE EASING OF MORE THAN FOUR TRILLION DOLLARS OVER THE NEXT TWO YEARS, OR MORE THAN FIFTY SEVEN TIMES THE BUSH TAX CUTS.

If you, America, do not rise and stop this NOW you're all going to be effectively dead economically.

Your assets will be stripped.

All of them.

Your homes.

Your businesses.

Your savings - as if having the earnings you can receive on a safe CD cut from 5% to 0.5% isn't bad enough.

And, when the inevitable margin collapse comes in the corporate sector, your stock portfolio will detonate again and your pension funds, Medicare, Medicaid and Social Security will be gone.

Either you rise and stop Bernanke and The Fed, or he - and they - win - and we all lose.

There is no "individual path" that will keep your assets safe from this. There is no means to hide, so long as you're an American citizen and live in this nation.

We have two choices: we collectively stop this madness or we all get destroyed.

Those are the only choices.

For three years and change I have warned of this outcome. I have pointed out that there is three trillion dollars or more of losses that have to be taken in the economy.

Those losses should fall on the banksters who committed these acts. Doing so will cause these banks to be taken into receivership. They will have to be resolved.

Virtually none of those losses attributed to them have been taken by these institutions.

These losses have all fallen on you, through unemployment, through higher energy prices and higher prices at the grocery store. All of these are taxes that are being illegally imposed on you by a Central Banker who lacks the legal authority to impose a tax.

Yet he's doing it, and you're being told to cheer because the DOW is up 200 points.

I want to note that in 2007 I wrote a similar Ticker urging people to stop this bastard when he started interfering like this. You did nothing, because the S&P was headed to 1576 and the DOW over 14,000 on the back of his original "rate cuts" and other machinations. I was called all sorts of names, the kindest of which were "kook." You sat on your hands instead of rising to stop this crap and were repaid by watching your portfolio get cut by 60% in the next two years, two major banks blowing up in an uncontrolled fashion, and threats of tanks in the streets.

If you do not stop him - remove him from office - NOW - you will be destroyed.

That is a certainty.

We no longer have the "margin" to absorb another mistake like the last one. And the crap that Bernanke is pulling now is the mother and father of all mistakes.

It's your choice America - but where this road leads is not open to debate. These institutions that robbed you can only survive the consequences of their acts by destroying you, and they are hellbent and determined to do exactly that, with Ben Bernanke as the man who is literally destroying not only your economic present, but that if the future as well for yourself and your children.

You no longer have the luxury of time.

http://market-ticker.org/akcs-www?post=171263

[David Guyatt]

This piece fits remarkably well with something I was told about over ten years ago, namely a conversation someone had with Nick Brady, former US Treasury Secretary under the Reagan Administration. Brady let slip that American business was being shipped off lock stock & barrel to the Southern Hemisphere. When his conversation partner queried this, he said it was too late to argue "the decision's already been made".

Prior to finally packing up shop and going, the plan seems to have been to plunder and asset strip the US.

[Peter Lemkin]

Wise and sobering words by Denninger above, even if he and I might disagree on why it is being done - we agree on WHAT is being done and the consequences! I fear the Sheeple won't act and to the extent a few will they can't [will be beaten down and imprisoned]. I think he got only one thing wrong. The sound is not the alarm bell, but the bell tolling for the death of America as we once knew it could be. Its basically all over folks...and it is already spreading to Europe and will to most of the World. The ONLY chance is to discard the entire system in the USA (and elsewhere) and build a new one....so different most Humans can't even imagine what it would need to be like.......:joyman:

The Ultra-Rich seem intent to finish their plan and drain every drop of wealth of any kind from the rest of the humans and environment and leave the Planet destroyed. From their hill-top/island mansions, surrounded by Xi guards they will live a few more years...but then they too will perish, if not dealt with earlier by the angry mobs.. tickyman:

Sad commentary on human society. Welcome to neo-Feudalism!

[David Guyatt]

Welcome to neo-Feudalism!

Always the long-term goal of the Rhodes-Milner Group using the world's central banks to achieve it via the Bank for International Settlements --- as spelled out in Carroll Quigley's huge book "Tragedy & Hope".

The means may have changed over the decades but the goal of feudalism hasn't.

Quigley was an "insider" who blew the whistle and thereafter was shunned. Almost all the copies of his book were taken out of circulation and the plates destroyed without his knowledge, making a reprint impossible - such was the anger and alarm of the ruling elite that the big secret had leaked out into the public domain.

Had it not been for small, independent publishing houses, Jack may have been successfully sealed back in is box.

[Paul Rigby]

Quigley was an "insider" who blew the whistle and thereafter was shunned. Almost all the copies of his book were taken out of circulation and the plates destroyed without his knowledge, making a reprint impossible - such was the anger and alarm of the ruling elite that the big secret had leaked out into the public domain.

Had it not been for small, independent publishing houses, Jack may have been successfully sealed back in is box.

An alternative explanation: US unilateralists, impatient with the sentimental ties to London, ensured its publication, complete with some limited criticisms of their primary instrument (CIA), and the semblance of suppression, the better to disguise their purposes. This was a fairly standard MO of the CIA, in particular, in the period (and since).

This is not to argue that Quigley was cut of the same cloth as the unilateralists: He was, after all, pretty much what he said he was - a loyal critic of the Round Table.

[Jan Klimkowski]

UK Chancellor (Treasury Secretary) Baron "Sneerer" Osborne reveals his true masters.

Tax cuts for the banks, shock therapy for the masses.

George Osborne plans to cut levy on banks' balance sheets

Treasury considers cutting proposed levy after learning it could raise an unexpectedly high £3.9bn a year

Jill Treanor The Observer, Sunday 14 November 2010

The government is preparing to cut the tax it expects to impose on City banks through George Osborne's £2.5bn a year levy, prompting a furious reaction from tax experts and opposition MPs.

After being alerted by leading banks that the proposed levy could raise an unexpectedly high £3.9bn a year, the Treasury is considering cutting the rate of the tax on UK and international banks to ensure the chancellor's £2.5bn target is not breached.

The Treasury had consulted on a levy that would consist of a charge of 0.04% of a bank's total balance sheet in the first year — generating £1.1bn — rising to 0.07% in 2012-13 to raise £2.3bn and up to £2.5bn in 2013-14. But the draft legislation, published last month, does not specify these figures, to clear the way for the Treasury to cut the levy.

Chuka Umunna, a Labour MP on the Treasury select committee, said: "It's just a limp piece of legislation and a sop to those who have been arguing that the financial services industry should contribute more to deficit reduction."

Richard Murphy, director of Tax Research UK and an advisor to the TUC, concurred. "It is designed to be modest ... £2.5bn is a modest charge especially if set against bank bonuses of £7bn."

The Centre for Economic and Business Research has forecast that £7bn will be paid out in bonuses this year, with about half of that being paid in personal taxes.

In last month's comprehensive spending review, Osborne said that the bank levy needed to be set in such way to extract the "maximum sustainable" tax revenue. City sources said the move was recognition that if the levy was set too high banks might be driven offshore.

The Treasury insisted no decisions had been taken. "Having finalised the detailed design, we are considering whether the rates proposed at budget are appropriate to deliver the expected yield. Rates will be announced when final draft legislation is published towards the end of 2010, as part of consolidated draft clauses planned for the finance bill 2011."

http://www.guardian.co.uk/business/2010/...ut-bonuses

[David Guyatt]

Absolutely fucking disgraceful!

[David Guyatt]

George Osborne plans to cut levy on banks' balance sheets

Treasury considers cutting proposed levy after learning it could raise an unexpectedly high £3.9bn a year

Jill Treanor The Observer, Sunday 14 November 2010

The government is preparing to cut the tax it expects to impose on City banks through George Osborne's £2.5bn a year levy, prompting a furious reaction from tax experts and opposition MPs.

After being alerted by leading banks that the proposed levy could raise an unexpectedly high £3.9bn a year, the Treasury is considering cutting the rate of the tax on UK and international banks to ensure the chancellor's £2.5bn target is not breached.

Wouldn't it be fun if the final agreed figure of bonus reduction were.....£2.5 bn?

http://www.bbc.co.uk/news/business-11754621

15 November 2010 Last updated at 11:35 Share this pageFacebookTwitterShareEmailPrint
Banks negotiating deal to reduce bonuses

The scale of bankers' bonuses remains a controversial issue with the public
Continue reading the main story
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Britain's biggest banks are in talks about collectively reducing the amount they will award in new year bonuses.

BBC business editor Robert Peston said serious negotiations about the "thorny" issue were ongoing under the umbrella of the British Bankers Association.

One participant suggested total bonuses could be cut from £7bn to £4bn, but accepted such a figure would still attract criticism from politicians.

A senior banker stressed there was no guarantee of a "workable agreement".

"We are talking to each other about making some kind of joint statement about bonuses that would demonstrate that we are reducing the amount we are allocating to remuneration this year," the banker added.

'Big number'
With the rest of the economy undergoing belt-tightening measures and banks still being accused of not lending money to small businesses, the bonus issue will be monitored closely when it crops up in the new year.

Business Secretary Vince Cable has said banks could face more taxes if they paid out "outrageously large" bonuses.

One of the great paradoxes about all of this is that ministers would love us to agree to cut bonuses, but they're powerless to stop us being prosecuted under competition law”

Banking source
One participant in the secret talks told our correspondent: "What's the most we could achieve? Right now the expectation is that banks in the City will pay out around £7bn in bonuses.

"Maybe we can cut that to £4bn. But although that would be a huge reduction, £4bn is still a big number - and we'll still face attacks."

Our correspondent says the talks themselves may be counter-productive as the banks could be seen to be colluding on a competitive issue and could therefore be prosecuted by the Office of Fair Trading.

"One of the great paradoxes about all of this is that ministers would love us to agree to cut bonuses, but they're powerless to stop us being prosecuted under competition law," one banker said.

However, British Bankers' Association insisted that there were no negotiations under way.

In a written statement it added, "It is no secret the major UK banks ... have sought for some time to get an international agreement on bonuses."

The BBA believes that the UK has the toughest regime for bankers of any G20 country but is, "well aware of the public view [on bonuses] and will take this into account when bonuses are decided."

The statement went on to say, "Right now, speculation about the size and the issue of bonuses is just that - speculation."

City exit
Any cap on bonuses could lead to top banking talent relocating to other financial centres where there are fewer concerns about big pay, says our correspondent.

British banks are said to be irked that Wall Street is resistant to the idea of a mutual agreement on restricting bonuses.

"There's no chance that the big US investment banks will follow our example, which means that business and good people could leave London for New York or elsewhere, if we're seen to be paying less than the market rate," one banker said.

The total size of the bonus pool on Wall Street for 2010 performance is expected to be about $20bn (£12.4bn), or about 80% greater than the expected London bonus pool.

Tax income reduced
The estimated figure for City bonuses this year is already sharply down from the £11.6bn awarded at the height of the financial boom in 2007.

If this figure falls further to £4bn, as suggested, this would mean a drastic reduction in tax revenue that goes to the government.

The Centre for Economics and Business Research (CEBR) estimates that the tax man will lose about £1.8bn in revenue.

Douglas McWilliams, chief executive of the CEBR, said that the City financed a major part of public spending in successful years.

"Seeing the banks attempting to drive a coach and horse through competition law to pay their employees below the market norm should cause sensible people to get worried," he said.

(my bolding)