Defaulting banks - where will it stop?

[Peter Presland]

I've found time only to skim this thread so far. It's long and has been running since late last year, well before I joined. However, the thrust of what I have read is impressive. It demonstrates that there is solid awareness of the extent to which Banksters are at the heart of what is on any reasonable analysis, a thoroughly corrupt globalised system. I must make time to search it more thoroughly.

A few points: I too monitor Carl Denninger's site. He's an irrascible sod; bombastic and cock sure of himself, but he's also sharp as a razor and does deliver some impressive insights and analysis. I also find Mish Shedlock useful and the folks over at Leap/Europe 2020. The FT Alphaville site also throws up some good stuff although the sheer volume of posts is difficult to keep up with. Lots of competing views on the Inflation/Deflation dichotomy but that's the stuff of insight production.

I have to say my own view leans heavily towards the thesis that the last 10-20 years has produced such overwhelming evidence of the physical 'Limits to Growth' (to use a very broad brush term) that it has effectively precipitated what we are currently witnessing - which is one of two things:

1) The insights of the individuals, groups and corporation that define and dominate the worlds major power/wealth centres have finally become aware of the above in a visceral manner. It's no longer a clever intellectual exercise (as the European project of the same name in the 70'a arguably was) - but something that has suddenly become immediate and very threatening to their power and wealth. They have therefore begun what is turning into a cascading series of defensive actions, in 'Rats deserting a sinking ship' fashion.

2) The awareness of 1. has developed in a much more systematic fashion - and over a longer period - and what we are witnessing is its culmination, provoked with quite deliberate timing (since it was inevitable anyway) and with well developed plans to deal with its global effects already in place and largely unkown by the masses.

I am beginning to lean towards 2. - although in truth it is far more complex and probably a chaotic amalgam of both.

In any event the problems are indeed epoch-defining -IMHO anyway. A conjunction of unsustainable population growth, resource extraction growth and man-made climate and general environmental change.

The thing that really bemuses me is that - for public consumption - there is no debate or any proposals other than 'how to get the global economy back on track' with the words 'back to economic growth' ALWAYS figuring large. In other words, ALL efforts (that we are privy too) are aimed at fixing the unfixable and debate of the really substantive issues remains verboden. After all how can our present monetary system exist at all without gowth? - answer It can't. It is defined by growth

And as Ken Boulding so eloquently puts it:

"Anyone who believes exponential growth can go on forever on a finite planet is either a madman or an economist"

It seems we are ruled by madmen - but appearances can be deceptive eh?

PS Apologies if I have repeated stuff already covered.

[Jan Klimkowski]

Peter - welcome to the site, and thank you for your post above.

I largely agree with your analysis. However I have no doubt that the plans you describe in point 2) are indeed "well developed". Those who currently control the vast bulk of global wealth are ruthless and will do anything to preserve Their power.

The notion of permanent economic growth is fundamentally flawed, and is at the heart of the problem. The current political response seems to consist of funnelling taxpayer money to failed banks and attempting to create yet more bubbles.

This cannot but fail. The system is collapsing, and They are simply buying a little time.

In the West, the masses have been diverted into blind alleyways.

Eg the cult of celebrity: I am famous, therefore I am.
(Even if, like Big Brother stars, one is famous for being stupid.)

Eg the cult of shopping: I consume, therefore I am.

They hope that ordinary folk will carry on consuming, rather than rioting.

But when ordinary people finally say enough is enough, and take to the streets across Europe & North America in massive numbers, then riot police will not be enough.

Then we will see what Their plans really consist of.

[David Guyatt]

But when ordinary people finally say enough is enough, and take to the streets across Europe & North America in massive numbers, then riot police will not be enough.

Then we will see what Their plans really consist of.

I predict bad things will happen once the new massive tax debt begins to bite.

But Iam not at all sanguine about what will happen. For decades past every high street and main road has had cameras installed, many now with face recognition software and a police force trained in subduing riots (the Miners strike as an example) and shooting innocent people (De Menezes for one) in times of great stress. Meanwhile, weapons have been made illegal to carry by us ordinary mortals, whereas the range of weapons now carried by the police is military in scale.

I suspect their plans have been laid quite carefully over a long period of time.

[Peter Lemkin]

But when ordinary people finally say enough is enough, and take to the streets across Europe & North America in massive numbers, then riot police will not be enough.

Then we will see what Their plans really consist of.

I predict bad things will happen once the new massive tax debt begins to bite.

But Iam not at all sanguine about what will happen. For decades past every high street and main road has had cameras installed, many now with face recognition software and a police force trained in subduing riots (the Miners strike as an example) and shooting innocent people (De Menezes for one) in times of great stress. Meanwhile, weapons have been made illegal to carry by us ordinary mortals, whereas the range of weapons now carried by the police is military in scale.

I suspect their plans have been laid quite carefully over a long period of time.

While they always kept us 'plebs' in contempt and abused us, they needed us. Now, no longer...that's what 'globalization' was all about. They can exploit others for even lesser sums. And soon they'll have robots, and we'll all be totally expendable. I also sense 'they' are just getting so annoyed at many of us being so 'uppity' on the internet and being able to get around their MSM propaganda net......sadly, I agree with those above who think things will soon get ugly and the 'friendly cop on the corner' will not much be on our side, nor 'keeping the peace.'

[Peter Presland]

Expanding on the 'Deserting Rats -v- was it all planned' thing:

I have followed Bilderberger/TLC/RIIA/CFR et al influence and apparant agenda(s) for years now. There is no doubt that strenuous efforts have and are being made to drive and maintain an Elites consensus on the over-arching issues of global control. The World Bank, IMF and BIS are their Globalised banking tools, subscribed to and steered by a hierarchy of Central Banks dominated by private Elite interests. The Military, Police and State SS's are their enforcement tools. I am not convinced their agenda is altogether 'going as planned' though. The shenanigans at Davos this year together with what appears to be increasingly organised and determined rejection of IFM/WB terms of trade and assistance by 'Third World' and 'Bolivarian Revolution' countries are a taster of the dissent and fragmentation to come perhaps. Effective integration of China, Russia and Iran (to name only the most powerful) appear distant if not impossible. Excluding their Elites whilst dealing comprehensively with the threats they would represent as a result is problematical to put it mildly.

Granted preparations to deal with domestic civil unrest and effective dissent are alarmingly well advanced in the US, Europe and the UK - and elsewhere too I guess (Israeli control of the West Bank being a 'state-of-the-art test-bed) but the possibility of the current 'Washington Consensus' consolidating and holding through what we are faced with seems to me remote - which implies that the risks of dramatic fragmentation, war and severe domestic repressions are correspondingly high. In that respect I am also uncertain that the current dominance of US military capabilities, with 1000 or so overseas installations, its mind-blowing surveillance and remote power projection capabilities and a budget greater than the rest of the world combined are altogether the asset assumed by the Anglo/US Elites grouping either. Short of a major worldwide conflagration with totally unpredictable and catastrophic consequences, the dispersed manpower elements could easily metamorphose into a huge and potentially crippling liability.

On the domestic surveillance/security State front, I agree that things are well advanced and becoming truly Orwellian. On a journey from Derby to Ormskirk yesterday I tried to count the number-plate recognition cameras I passed and lost count at 48 (in around 80 miles). They began to appear over a decade ago and now log every number-plate read, with date, time and location. The resulting possibilities are endless: For whatever trivial reason, your name flashes up on some obscure criteria-driven system at GCHQ say. The NPR system is then told to track your vehicle; henceforth the state knows its movements better than you do. Or - A number plate is read in Derby then the same number pops up 200 miles away less than 200 miles/x MPH later - bingo! one is false and the cops are onto both in a flash. The face recognition and RFID stuff available and in preparation for roll-out is the really scary bit though. The surveillance/tracking capabilities provided to the SS's if and when that is integrated into ID cards with active Tx/receivers at every conceivable location will complete an ongoing Orwellian transformation. Welcome to 1984 just 2-3 decades late eh?

[Jan Klimkowski]

In that respect I am also uncertain that the current dominance of US military capabilities, with 1000 or so overseas installations, its mind-blowing surveillance and remote power projection capabilities and a budget greater than the rest of the world combined are altogether the asset assumed by the Anglo/US Elites grouping either. Short of a major worldwide conflagration with totally unpredictable and catastrophic consequences, the dispersed manpower elements could easily metamorphose into a huge and potentially crippling liability.

Tragically, I suspect the likely answer to the ridiculous & burdensome cost of maintaining US & NATO military capabilities lies within your musings.

The banker elites have a long history of playing all sides to ensure a plentiful supply of wars & conflagrations. There's hardly a horse They didn't back in the run up to WW2.

The elites may not be in total control of how matters play out, but They know it's a racing certainty that war is always good for business.

False flag operations from the Nazi's Gleiwitz scam or "Saddam bayoneted my baby" - see url below -

http://www.deeppoliticsforum.com/forums/...php?t=1091

to the Gulf of Tonkin are routine psyop operations to channel the anger of the masses into attacking an Evil Enemy rather than those exploiting them at home.

Numerous thinktanks, using familiar MSM outlets, are currently trying to convince us that Pakistan harbours an Evil Enemy, which needs to be destroyed militarily. This is a relatively easy sell to Americans - many of whom don't know the difference between Afghanistan, Kazakhstan and Pakistan - except that Borat comes from one of them. And Faux News can be relied upon to produce a steady stream of propaganda on demand.

However, war on Pakistan would be a disastrous option for the UK, with our large, multi-generational, population of Pakistani origin.

War, or wars, are a definite possibility. Especially since there are so many hugely rich subcontractors - from Halliburton to Blackwater/Xe - who want to keep those costs-plus contracts rolling...

[Jan Klimkowski]

Shameless.

The bankers' coup d'etat continues... :captain:

STEPHANOPOULOS: And some are saying you should go back and recoup on another, much bigger issue having to do with AIG, and that’s all the payments they made to their so-called counterparties. Let me show our viewers who got the money from AIG after they got a government bailout -- $13 billion to Goldman Sachs; $12 billion to Bank of America; more than $30 billion to a series of foreign banks. That has upset a lot of members of Congress. Elijah Cummings and 26 other members of Congress have written a letter saying they want to know why an attempt wasn’t made to renegotiate.

Let me read exactly what they said. “Was any attempt made to renegotiate and close out these contracts with haircuts? If not, why not? What was the benefit of the decision to pay 100 percent of face value to the American taxpayers who provided the bailout funds, and how did it support the goal of ensuring the stability of the economic system?”

Now, Goldman Sachs, for example. Their chief financial officer said he had no material economic exposure to AIG. So why weren’t they forced to take a discount?

GEITHNER: George, we came into this crisis as a country without the tools necessary to contain the damage of a financial crisis like this. In a case of a large, complex institution like AIG, the government has no ability, had no meaningful ability to come in early to help contain the fire, contain the damage, prevent the spread of that fire. Restructure the firm, change contracts where necessary, and helped make sure that the financial system gets through this...

STEPHANOPOULOS: But it would have been the right thing to do, right?

GEITHNER: If we had the legal authority, that’s what we would have done. But without that legal authority, we had no good choices. We were caught between these terrible choices of letting Lehman fail -- and you saw the catastrophic damage that caused to the financial system -- or coming in and putting huge amounts of taxpayer dollars at risk, like we did at AIG, to keep the thing going, unwind it slowly at less damage to the ultimate economy and taxpayer.

STEPHANOPOULOS: So how about now, Goldman Sachs is taking other government money. They got this $13 billion whole from AIG. Congressman Brad Sherman and others have said, they should give that $13 billion back.

GEITHNER: George, the important thing is, we have no legal ability now. That’s why I went to Congress last week, to propose a broad change in resolution authority so that we have the capacity to do what we do with banks now.

STEPHANOPOULOS: But wouldn’t it be the right thing for Goldman?

GEITHNER: To give that money back?

STEPHANOPOULOS: Uh-huh.

GEITHNER: Look, again, the government of the United States in a situation like this has to make sure that we’re containing the damage that might come from default by a major complex financial institution. We need better legal authority to do that, did not have that authority coming into this crisis. It’s a tragic...

STEPHANOPOULOS: So nothing to be done looking back, but going forward, that’s exactly the authority you would want.

GEITHNER: Absolutely. Our obligation now, again, is to defuse and help unwind this deeply complicated problem that AIG presents. But we want to work with the Congress to put in place stronger tools, stronger resolution authority, so the government can come in more quickly, earlier, before things have passed the point of no return, contain the damage, prevent the fire from spreading, restructure the firm, have it emerge stronger, at less risk to the taxpayer. That’s what we need. We should have had this before this crisis, but we didn’t. But we need to move quickly now.

http://www.cqpolitics.com/wmspage.cfm?pa...0003087586

[Jan Klimkowski]

Mike Whitney back on form, chronicling the coup d'etat:

This time the banks are zeroing in on Geithner's cash giveaway bonanza, the "Public Private Investment Partnership" (PPIP). As expected, Bank of America and Citigroup have angled their way to the front of the herd, thrusting their snouts into the public trough and extracting whatever morsels they can find amid a din of gurgling and sucking sounds. Here's the story from the New York Post:

As Treasury Secretary Tim Geithner orchestrated a plan to help the nation's largest banks purge themselves of toxic mortgage assets, Citigroup and Bank of America have been aggressively scooping up those same securities in the secondary market, sources told The Post...

But the banks' purchase of so-called AAA-rated mortgage-backed securities, including some that use alt-A and option ARM as collateral, is raising eyebrows among even the most seasoned traders. Alt-A and option ARM loans have widely been seen as the next mortgage type to see increases in defaults.

One Wall Street trader told The Post that what's been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay.

Recently, securities rated AAA have changed hands for roughly 30 cents on the dollar, and most of the buyers have been hedge funds acting opportunistically on a bet that prices will rise over time. However, sources said Citi and BofA have trumped those bids.

http://www.nypost.com/seven/03252009/bus....

Thus begins the next taxpayer-subsidized feeding frenzy, featuring all the usual suspects. The race is on to vacuum up as much toxic mortgage paper as possible so it can be dumped on Uncle Sam at a hefty profit. These are the same miscreants the Obama administration is so dead-set on rescuing. Better to let them sink from their own bad bets.

How is it that industry rep Geithner couldn't see that his latest round of corporate welfare would create incentives for the bank scoundrels to game the system again? Naturally, if the government goes into the business of buying crap-loans from teetering financial institutions, the speculators and snake oil salesmen will follow. And so they have. Citi and B of A are just the first to respond to Geithner's pigwhistle. Next will be the hedgies and the Private Equity porkers, all nuzzling up to the Treasury's feedbin.

Geithner's plan is a disaster from the get-go. It jacks up the price of garbage assets, rewards the misallocation of capital, invites rampant fraud, and prolongs the recession. Worst of all, it transforms the FDIC into a hedge fund putting individual bank deposits at greater risk. Economist Jeffrey Sachs sums up Geithner's "public-private" boondoggle in his article "Will Geithner and Summers suceed in raiding the FDIC and Fed?":

Geithner and Summers have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve to subsidize investors to buy toxic assets from the banks at inflated prices. If carried out, the result will be a massive transfer of wealth -- of perhaps hundreds of billions of dollars -- to bank shareholders from the taxpayers (who will absorb losses at the FDIC and Fed)...

The FDIC is lending money at a low interest rate and on a non-recourse basis even though the FDIC is likely to experience a massive default on its loans to the investment funds....In essence, the FDIC is transferring hundreds of billions of dollars of taxpayer wealth to the banks...The public will not accept overpaying for the toxic assets at taxpayers' expense. Thus, it is very likely that the Administration will attempt to avoid Congressional oversight of the plan, and to count on confusion and the evident "good news" of soaring stock market prices to justify their actions. ....

Other parts of the plan support subsidized loans from the Treasury and, even more, from the Fed. The Fed is already buying up hundreds of billions of dollars of toxic assets with little if any oversight or offsetting appropriations. Since the Federal Reserve profits and losses eventually show up on the budget, the Fed's purchases of toxic assets also should fall under the Federal Credit Reform Act and should be explicitly budgeted.

http://www.huffingtonpost.com/jeffrey-sa....

As Sachs points out, the Fed's liabilities will eventually be shifted onto the taxpayer. But that hasn't stopped Bernanke from writing checks on an account that is overdrawn by $11 trillion. Nor has it compelled Geithner to seek congressional authorization before he leverages the FDIC up to its eyeballs. These decisions are all being made by a small coterie of bank loyalists who operate independent of any oversight or government supervision. They do what's best for their constituents and let the chips fall where they may.

Earlier this week, Geithner asked Congress for additional powers to take over insolvent non-bank financial institutions. The Washington Post:

Quote:
The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

http://www.washingtonpost.com/wp-dyn/con....



Geithner must think he's a shoe-in for the new "systemic regulator" post because of the exemplary way he handled the AIG bonus scandal.

Of course, in the bizarro world of Washington--where failure typically catapults one to higher office--it's only logical that Geithner would be elevated to Uber-Regulator, not only controlling the public purse, but using his own peerless grasp of the marketplace to decide which institutions pose a systemic risk and need to be sidelined, and which need stepped-up government support via limitless capital injections.

Prediction: If Geithner is granted these special powers by the braindead Congress, the country will undergo the greatest period of bank consolidation in its 230 year history. This is a blatant power grab by a shifty character who has risen to his present pay-grade by nosing his way up the political stepladder. Congress had better get its act together and put an end to this nonsense or the nation will continue its fast-paced metamorphosis into a feudal oligarchy run by the Bank Mafia and Wall Street racketeers. The first step, is to give Geithner, Summers and any other of the Rubin-clones a full-body bacon-rub followed by a few brisk dunks in the shark tank. Then, hose down Treasury and bring in a whole new team.

Nobel Prize winning economist Joseph Stiglitz summed up Geithner's "public-private" fiasco like this:

Quite frankly, this amounts to robbery of the American people. I don't think it's going to work because I think there'll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.

http://www.cnbc.com//id/29848741

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com

http://www.counterpunch.org/whitney03272009.html

[Jan Klimkowski]

Karl Denninger, lifelong Republican voter and highly astute observer of financial markets, reckons that America will have to default on its debt:

Off-Balance-Sheet - Now CREDIT CARDS

Nearly two years ago I was screaming about the scam called "off balance sheet" vehicles, as is found here:

Despite your claim on Cramer's show that "we'll profit from this" I believe your firm is going to be hurt badly, both from defaults (which your own 8K you filed this morning says have doubled in the last year) and from greater spreads which will make it tougher - or impossible - to sell your loans off into the CDO market at a profit. I also believe that reality is that we're looking at a price decline for homes, both new and used, and we are facing higher real interest rates - and no rate cut from the Fed. Finally, I would love to see a real look inside your kimono at that company, including all "off balance sheet" entities and everything your firm has marked to market, including the thousands of REOs that, according to another site, you currently own

.

That was Countrywide. They would have outright "boomed" if not for Bank of America buying them in a shotgun marriage.

I wrote that in April of 2007.

Two years later, we have done NOTHING about the problem:

It will force card issuers -- such as Citigroup Inc., Bank of America Corp., American Express Co., Capital One Financial Corp., Discover Financial Services and J.P. Morgan Chase & Co. -- to bring off-the-books credit card loans onto their balance sheets. These companies will be taking on these securities at a time when losses on these loans are piling up amid rising unemployment.

American Express said in its annual report that if the amended FAS 140 goes through, the company would have to bring onto its books $29 billion of card loans and set aside an additional $1.8 billion in loss reserves, according to figures as of Dec. 31. American Express' loss reserves totaled nearly $3.4 billion at the end of 2008.

Citigroup, using figures as of Dec. 31, would have to take onto its books $98.2 billion of card loans, according to its annual report. The altered FAS 140 will have a "significant impact" on its financial statements, the company said in the regulatory filing. Discover currently estimates that it will have to assume $20.6 billion of card loans on its balance sheet.

This garbage must stop!

As I have repeatedly pointed out we are in this mess because our wonderful "financial system" made loans to people they could not pay back.

That is, there is too much debt in the system for the amount of earnings power that people and corporations have.

This is the root of the economic and financial problem we have in this country, and we cannot clear it, nor can we restore growth, until that excess debt is cleared from the system.

Hiding that debt will not make it go away.

There are only two ways to clear it: Pay it down or default it.

It should be obvious by now that we can't pay it down.

That leaves defaulting it.

The people have had it with outright looting operations conducted against the taxpayer, and the claims by various firms and their CEOs that are either outright false or present only half of the truth.

Distracting people with GM and Chrysler will not work any more than distracting the people with AIG's bonuses did while the real theft with AIG was the nearly $100 billion funneled to banks around the world.

There is no political capital available to further encumber the taxpayer for more bailouts, and with good cause. The people have been lied to repeatedly by both the current and previous administrations, with both having been turned into stooge departments for monied interests, much as happens in a banana republic.

Treasury has less than $100 billion left of the stolen TARP money (yes, stolen, given that none of it was spent on actual purchase of assets thus far!) and despite what President Obama might like I'm willing to bet that if he attempts to get more appropriated the result could be half the unemployed in America - over 2 million people - lay siege to the Capitol (hopefully peacefully!) and demand the resignation of all 535 clowns inside.

An even worse outcome is possible, of course - continued attempts to steal from the taxpayers for the benefit of lying bankers could easily lead to a near-immediate outbreak of widespread civil unrest or worse. Public opinion is tinderbox hot and dry at present and further looting is unlikely to be tolerated - no matter the excuse.

We are now being compared to Russia or Argentina prior to their collapses, and while that's a bit overstated, I unfortunately must agree that the overstatement is minor, and in general, it is spot-on.

Time is running out to stop the stupid as tension is building among the citizens of this nation dramatically and if we do not have actual leadership and the truth is not told and those who looted are not forced to give it back and go bankrupt - soon - the process of re-basing our economy to a sustainable level will not happen in an orderly fashion, but rather through violence and destruction.

May God visit upon our elected leaders the wisdom necessary to change their course of action, because I have seen no evidence that they possess that wisdom to date.

http://market-ticker.org/archives/913-Of...CARDS.html

[Jan Klimkowski]

In conventional economic terms, Denninger is correct.

However, I believe there are additional factors at play here, which include:

i) financial wildcards, such as David Guyatt's research into "black gold" and the elite's willingness to attempt to rewrite the nature of money (eg through an attempt to create a new global currency);

ii) wars - either deliberately created or allowed to happen - as national economies stop functioning;

iii) the playing of a technological wildcard to shock and awe the global population. For instance, Skunkworks/Tesla technology disguised as something else in a truly terrifying global psyop - perhaps some C21st of the Orson Welles' War of the Worlds but played out for real by the elites.