Posts tagged Bailout
Federal Reserve Whistleblower Tells America The REAL Reason For Quantitative Easing
A banker named Andrew Huszar that helped manage the Federal Reserve’s quantitative easing program during 2009 and 2010 is publicly apologizing for what he has done. He says that quantitative easing has accomplished next to nothing for the average person on the street. Instead, he says that it has been “the greatest backdoor Wall Street bailout of all time.” And of course the cold, hard economic numbers support what Huszar is saying. The percentage of working age Americans with a job has not improved at all during the quantitative easing era, and median household income has actually steadily declined during that time frame. Meanwhile, U.S. stock prices have doubled overall, and the stock prices of the big Wall Street banks have tripled. So who benefits from quantitative easing? It doesn’t take a genius to figure it out, and now Andrew Huszar is blowing the whistle on the whole thing.
From 2009 to 2010, Huszar was responsible for managing the Fed’s purchase of approximately $1.25 trillion worth of mortgage-backed securities. At the time, he thought that it was a dream job, but now he is apologizing to the rest of the country for what happened…
I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.
When the first round of quantitative easing ended, Huszar says that it was incredibly obvious that QE had done very little to benefit average Americans but that it had been “an absolute coup for Wall Street”…
Trading for the first round of QE ended on March 31, 2010. The final results confirmed that, while there had been only trivial relief for Main Street, the U.S. central bank’s bond purchases had been an absolute coup for Wall Street. The banks hadn’t just benefited from the lower cost of making loans. They’d also enjoyed huge capital gains on the rising values of their securities holdings and fat commissions from brokering most of the Fed’s QE transactions. Wall Street had experienced its most profitable year ever in 2009, and 2010 was starting off in much the same way.
You’d think the Fed would have finally stopped to question the wisdom of QE. Think again. Only a few months later—after a 14% drop in the U.S. stock market and renewed weakening in the banking sector—the Fed announced a new round of bond buying: QE2. Germany’s finance minister, Wolfgang Schäuble, immediately called the decision “clueless.”
That was when I realized the Fed had lost any remaining ability to think independently from Wall Street.
Of course the fact that the Fed cannot think independently from Wall Street should not be a surprise to any of my regular readers. As I have written about repeatedly, the Federal Reserve was created by the Wall Street bankers for the benefit of the Wall Street bankers. When the Federal Reserve serves the interests of Wall Street, it is simply doing what it was designed to do. And according to Huszar, quantitative easing has been one giant “subsidy” for Wall Street banks…
Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets.
But Huszar is certainly not the only one on Wall Street that acknowledges these things. For example, just check out what billionaire hedge fund manager Stanley Druckenmiller told CNBC about quantitative easing…
“This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.”
“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”
Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”
“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”
And Donald Trump said essentially the same thing when he made the following statement on CNBC about quantitative easing…
“People like me will benefit from this.”
The American people are still being told that quantitative easing is “economic stimulus” which will make the lives of average Americans better.
That is a flat out lie and the folks over at the Federal Reserve know this.
In fact, a very interesting study conducted for the Bank of England shows that quantitative easing actually increases the gap between the wealthy and the poor…
It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.
Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.
Many said the BOE’s easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”
And this is exactly what has happened in the United States as well.
U.S. stocks have risen 108% while Barack Obama has been in the White House.
And who owns stocks?
The wealthy do. In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.
Meanwhile, things have continued to get even tougher for ordinary Americans.
While Obama has been in the White House, the percentage of working age Americans with a job has declined from 60.6% to 58.3%, median household income has declined for five years in a row, and poverty has been absolutely exploding.
But the fact that it has been very good for Wall Street while doing essentially nothing for ordinary Americans is not the biggest problem with quantitative easing.
The biggest problem with quantitative easing is that it is destroying worldwide faith in the U.S. dollar and in the U.S. financial system.
In recent years, the Federal Reserve has started to behave like the Weimar Republic. Just check out the chart below…
The rest of the world is watching the Fed go crazy, and they are beginning to openly wonder why they should continue to use the U.S. dollar as the de facto reserve currency of the planet.
Right now, most global trade involves the use of U.S. dollars. In fact, far more U.S. dollars are actually used outside of the United States than are used inside the country. This creates a tremendous demand for U.S. dollars around the planet, and it keeps the value of the U.S. dollar at a level that is far higher than it otherwise would be.
If the rest of the world decides to start moving away from the U.S. dollar (and this is already starting to happen), then the demand for the U.S. dollar will fall and we will not be able to import oil from the Middle East and cheap plastic trinkets from China so inexpensively anymore.
In addition, major exporting nations such as China and Saudi Arabia end up with giant piles of U.S. dollars due to their trading activities. Instead of just sitting on all of that cash, they tend to reinvest much of it back into U.S. Treasury securities. This increases demand for U.S. debt and drives down interest rates.
If the Federal Reserve continues to wildly create money out of thin air with no end in sight, the rest of the world may decide to stop lending us trillions of dollars at ultra-low interest rates.
When we get to that point, it is going to be absolutely disastrous for the U.S. economy and the U.S. financial system. If you doubt this, just read this article.
The only way that the game can continue is for the rest of the world to continue to be irrational and to continue to ignore the reckless behavior of the Federal Reserve.
We desperately need the rest of the planet “to ignore the man behind the curtain”. We desperately need them to keep using our dollars that are rapidly being devalued and to keep loaning us money at rates that are far below the real rate of inflation.
If the rest of the globe starts behaving rationally at some point, and they eventually will, then the game will be over.
Let us hope and pray that we still have a bit more time until that happens.
This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.
Image credit: http://theeconomiccollapseblog.com
Whistleblower Explains How Banks Gamble With Customer Funds
Cathy Scharf, former compliance officer, spoke at the Certified Anti-Money Laundering Specialists (CAMS) conference in Nevada; explaining how SunFirst Bank (SFB), a Utah bank, she worked for was “illegally processed at least $200 million for the offshore gambling sites PokerStars and Full Tilt Poker.”
Scharf said that executives at the bank supported the activity because it kept their bank from going under.
The bank then hired “criminal lawyers to threaten” her to arrest if she revealed the scheme.
SFB was also entangled in offshore money laundering connected with gambling operations that explained why the bank was focused on acquiring more customer deposits.
Scharf explained: “Whenever a gambler transferred funds to one of the offshore card sites, the money went through the small Utah bank. The bank was making $400,000 a month in transaction fees, violating a 2006 law that makes it a federal crime to knowingly accept payment for illegal internet gambling. They wanted to keep making money so they could bring the bank back. My frame of mind was just shoot me and put me out of my misery.”
In April, former House Representative Ron Paul stated that the depositor theft in Cyprus exposed how “these banks then took their bad investments to the government, demanding a bailout from an already beleaguered Cypriot treasury. The government of Cyprus then turned to the European Union (EU) for a bailout.”
Paul went on to state: “The elites in the EU and IMF failed to learn their lesson from the popular backlash to these tax proposals, and have openly talked about using Cyprus as a template for future bank bailouts. This raises the prospect of raids on bank accounts, pension funds, and any investments the government can get its hands on. In other words, no one’s money is safe in any financial institution in Europe. Bank runs are now a certainty in future crises, as the people realize that they do not really own the money in their accounts. How long before bureaucrat and banker try that here?”
David Stockman, former director of the Office of Management and Budget (OMB) under the Reagan administration, said: “As a result of being rescued and having the cleansing liquidation of rotten balance sheets stopped, within a few weeks and certainly months they were back to the same old games . . .”
Earlier this year, it was revealed that Wells Fargo was involved in loan manipulation to the tune of $176 billion in cooked books. Deposit monies climbed for Bank of America (BoA) to $221 billion, while JP Morgan & Chase Co (JPM) reported $460 billion in excess of depositor funds.
In 2012, the biggest banks in the US were given advisement by US regulators that they must make plans to stave off a complete financial collapse without relying on the US government.
BoA, Goldman Sachs and other technocrats have secretly crafted worst-case scenarios in which they can continue to thrive during a full-blown domestic monetary crisis.
The Federal Reserve Bank (FRB) and the US Office of the Comptroller of the Currency (OCC) named Citigroup Inc., Morgan Stanley and JPM, as well as others, to devise “recovery plans” in 2010. Banks were directed to have schemes to remain afloat by selling off assets, finding alternative sources of funding, reducing risky measures that make a quick buck. These strategies were to be perfected with “no assumption of extraordinary support from the public sector.”
Resolution plans , required under the 2010 Dodd-Frank financial reform law describe how to liquidate banking assets without causing further damage to a failing financial system. By selling “non-core assets” without upsetting shareholders while protecting the monetary system, taxpayers and creditors is the work of the mega-banks who have contributed solely to the destruction of the global financial markets.
The OCC constantly monitors the largest banks and evaluates their resolution plans to provide assurance to the US government that financial instability will not destroy the banking industry in America.
The details of the resolution plans are considered confidential. While the mega-banks wait to see if another round of banker bail-outs will alleviate the pressure of the international interests as BoA and Citigroup begin to act as if they are implementing their resolution plans covertly.
BoA has sold off portions of their domestic assets to secure capitol while Citigroup has followed suit.
Citigroup, in their resolution plan decided by management meetings by regulators, will “make appropriate assumptions as to the valuations of assets and off-balance sheet positions.”
Image credit: http://www.occupycorporatism.com
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By adhering to initiatives provided by the Financial Stability Board (FSB), these mega-banks will, when they enact their resolution plans, coordinate with international banking institutions and regulators rather than simply implode.
Fed Czars go to War – Chuck Morse
Published by NextNewsNetwork
For what may be the first time in the 100-year history of the Federal Reserve System, two candidates are publicly contending to replace the Fed’s outgoing chairman, Ben Bernanke.
Janet Yellen, vice chairwoman of the Fed’s Board of Governors, is said to be locked in a dead heat with Larry Summers, former President of Harvard and a former high-ranking economic adviser to Presidents Clinton and Obama.
As is the case in electoral politics, the contest between Yellen and Summers has included dirty campaigning — with supporters of Yellen accusing Summers of sexist behavior as Harvard President. They also point out that Mr. Obama would make history by appointing Yellen to be the Fed’s first female chairman.
In substantive terms, there’s not much difference between Yellen and Summers. Both of them support the Keynesian model of economics in which debt-driven government spending is seen as the key to expanding the economy.
During the 1990s, Summers played a key role in creating the real estate and mortgage bubble and the huge derivatives market that grew out of it — all of which led to the financial panic of 2008 and the ongoing recession.
Yellen, for her part, believes that Bernanke’s energetic expansion of money and credit has been inadequate. If she is appointed as Fed chairman, Yellen might well inaugurate an era of hyperinflation.
The Fed Chairman has more power over the U.S. economy — indeed, the world economy — than either the president or the Congress. Why is this so? Why does the Federal Reserve exist, and are we stuck with it? We’ll discuss this today with radio host and economic analyst Chuck Morse.
In addition to hosting the nationally syndicated “Chuck Morse Speaks” program on the IRN/USA Radio Network, Chuck has written two books — The Art and Science of American Money, and The Socialist Bible. He is also a columnist whose work has appeared in the Boston Globe, the Washington Times, WorldNetDaily, and numerous other publications.
Posted by Karen DeCoster
MSNBC: “Detroit is America’s Most Libertarian City”
MSNBC’s Ari Melber describes Detroit’s plight with the usual media rinse-and-repeat conventional spin straight from the standard script: debt up the wazoo, decayed this, bombed-out that, no services here or there. Yawn. Seems I’ve read that 1,492 times prior. And this “condition” of decay he describes is what he deems as a condition one could expect to see as the result of libertarianism. According to Ari, a city that has been governed by unions and Marxists, and raped by nepotistic mobs, has presented to the world a visual of what libertarianism would bring us were we to put it into practice. Yet he never explains the connection between a libertarian philosophical framework and Detroit’s 4+ decades of decline.
Ari states that Detroit needs to “look to Washington.” Indeed, he says Detroit should be an outpost of the Potomac, just like the Banksters. Ari thinks that Congress should convene a special session to save Detroit. The Feds, he says, could bring jobs to Detroit, invest in property, and start up a Detroit branch of the Smithsonian to save the art of the Detroit Institute of Arts (DIA).
These media twerps never express one intelligent sentence about Detroit’s political history and sociological challenges as they pertain to the long-term decay and the current crisis. And now, finally, it can all be blamed on libertarianism and a too-small government. Melber is a boob. Follow me on Twitter @karendecoster. Thanks to Allan Caetano for the link.
Video capture added to original post.
Submitted by Tyler Durden
“I Refused To Let Detroit Go Bankrupt” – Barack Obama, October 2012
Just nine short months after proclaiming victory on his plan to save Detroit by throwing taxpayer money at the ‘problem’ of over-levered, over-unioned, and under-demanded auto manufacturers, it seems the ball is back in President Obama’s court once again. He “refused to throw in the towel and do nothing. We refused to let Detroit go bankrupt. We bet on American workers and American ingenuity, and three years later, that bet is paying off in a big way.”
Of course, what the rest of the unsuspecting US citizenry is likely unaware of yet is that once again the municipal workers’ pension plans (that face 90% losses) will be bailed-out via the Pension Benefits Guaranty Corporation (PBGC) – A US Government (ponzi) Agency. But of course, that’s for the good of the whole nation…
Non-stop information you should be following at:
New EU Plan Will Make Every Bank Account In Europe Vulnerable To Cyprus-Style Wealth Confiscation
Did you actually believe that they were not going to use the precedent that they set in Cyprus? On Thursday, EU finance ministers agreed to a shocking new plan that will make every bank account in Europe vulnerable to Cyprus-style bail-ins. In other words, the wealth confiscation that we just witnessed in Cyprus will now be used as a template for future bank failures all over Europe. That means that if you have a bank account in Europe, you could wake up some morning and every penny in that account over 100,000 euros could be gone.
That is exactly what happened in Cyprus, and now EU officials plan to do the same thing all over Europe. For quite a while EU officials insisted that Cyprus was a “special case”, but now we see that was a lie. International outrage over what happened in Cyprus has died down, and now they are pushing forward with what they probably had planned all along. But why have they chosen this specific moment to implement such a plan? Are they anticipating that we will see a wave of bank failures soon? Do they know something that they aren’t telling us?
Amazingly, this announcement received very little notice in the international media. The fact that bank account confiscation will now be a permanent part of the plan to bail out troubled banks in Europe should have made headline news all over the globe. The following is how CNN described the plan…
European Union finance ministers approved a plan Thursday for dealing with future bank bailouts, forcing bondholders and shareholders to take the hit for bank rescues ahead of taxpayers.
The new framework requires bondholders, shareholders and large depositors with over 100,000 euros to be first to suffer losses when banks fail. Depositors with less than 100,000 euros will be protected. Taxpayer funds would be used only as a last resort.
According to this new plan, bondholders will be the first to be required to “contribute” when a bank bailout is necessary.
Do you want to guess what that is going to do to the price of European bank bonds?
Shareholders of the bank will be the next in line to get hit when a bank bailout happens.
After that, they will go after those that have more than 100,000 euros in their bank accounts.
EU officials say that such a plan is needed because bailing out banks with taxpayer money was creating too many problems…
The European Union spent the equivalent of a third of its economic output on saving its banks between 2008 and 2011, using taxpayer cash but struggling to contain the crisis and – in the case of Ireland – almost bankrupting the country.
But a bailout of Cyprus in March that forced losses on depositors marked a harsher approach that can now, following Thursday’s agreement, be replicated elsewhere.
Oh wonderful – the “Cyprus solution” can now be “replicated” everywhere in Europe.
This plan will now be submitted to the European Parliament for final approval. The goal is to have this plan finalized by the end of this year.
If you have a bank account in Europe with over 100,000 euros in it, get your money out now.
I am not sure how else to say it.
In Cyprus, there were retirees and small businesses that lost hundreds of thousands of euros overnight.
Do not let that happen to you.
And without a doubt, we are going to see a lot of banks fail in Europe over the next few years. This will especially be true once the next great financial crisis strikes.
But even though we haven’t even gotten to the next great financial crisis yet, the economic depression in Europe just continues to get even worse. Just consider these facts…
-Car sales in Europe have hit a 20 year low.
-Overall, the unemployment rate in the eurozone is sitting at 12.2 percent. That is a brand new all-time record high.
-An average of 134 retail outlets are shutting down in Italy every single day. Overall, 224,000 retail establishments have closed down in Italy since 2008.
-It is being projected that Italy will need to ask for an EU bailout within 6 months.
-Consumer confidence in France has dropped to an all-time low.
-The unemployment rate in France is up to 10.4 percent. That is the highest that it has been in 15 years.
-Government is now responsible for 57 percent of all economic output in France.
-In May, household lending in Europe declined at the fastest pace in 11 months.
-During the first quarter, disposable income in the UK declined at the fastest pace in 25 years.
-It is being projected that the unemployment rate in Spain will hit 28.5 percent next year.
-Just a few years ago, the percentage of bad loans in Spain was under 2 percent. Now it is sitting at 10.87 percent.
-The national debt in Spain has grown by 19.1 percent over the past 12 months alone.
-The Greek government says that the Greek economy will shrink by 4.5 percent this year.
-It is being projected that the unemployment rate in Greece will rise to 30 percent in 2014.
And it certainly does not help that China has essentially declared a trade war on Europe. That is not going to help struggling European industries at all.
I hope that more Americans will start paying attention to what is happening in Europe. The crippling economic problems that are sweeping across that continent will come here too.
And at some point there is a very good chance that we will also see Cyprus-style bank account confiscation in this country.
So don’t put all of your eggs in one basket. It is good to have your assets spread around a bunch of different places. That makes it much harder for them to be wiped out all at once.
What we are watching in Europe right now is really unprecedented in modern times. They are declaring open season on large bank deposits. In the end, a lot of people in Europe are going to lose a lot of money.
Make sure that you are not one of them.
Source : http://libertycalling.net
Posted by Judy Morris
USDA Announces 38 Million Dollar Sugar Bailout to Prevent Big Sugar Bailout
Despite the near 17 TRILLION dollars in debt this country already has, and the complete failure of federal bailout programs throughout recent and past decades, and despite the Congress of the United States being on the brink of passing an unfunded 1 TRILLION dollar farm bill-which the house thankfully just rejected 234-195-the United States Department of Agriculture has announced it will be spending 38 million dollars on a preventative sugar bailout, thanks to information gathered by the Star Tribune.
The government logic behind the USDA’s plan to spend 38 million dollars in the sugar market has been shared with the individuals, families, and businesses whose money will be used, because that’s the level of transparency the Obama administration promises to deliver when it steals your money for something it needs.
The Department of Agriculture announced that it will implement an estimated 38 million dollar minor bailout in sugar purchases to ”forestall a larger bailout” that could range between 100 and 300 million dollars if farmers default on federal loans.
Current federal loans in the program are estimated to be 700 to 800 million dollars, but the government, like normal people and businesses, makes mistakes, and these numbers are just estimates. Although, unlike mistakes made by individuals and businesses that affect those who voluntarily participate and associate, when the government screws up, it screws everyone, because everyone is forced to participate and associate.
By purchasing sugar that the farmers will have to give up at a lower price, the USDA hopes it will artificially create demand & raise sugar prices, allowing farmers in the federal loan program to pay back the loan in money earned from possible sales and purchases at artificially raised sugar prices.
Read the rest at Living Not Surviving, here.
The USPS is a Soviet nightmare. Want to rent a P.O. box? Be prepared to fill out an extensive and invasive application form and prove that everything on it is accurate.
People hate the USPS so much they look for any possible alternative. Which is one reason they lose a ton of money. Then come crying to the taxpayer to bail them out.
Just last month the USPS told us they lost $1.9 billion in the second quarter of the year. The Postal Service says it is in desperate need of legislation to help make them “more competitive.” Only government action can make them competitive!
“‘To return the Postal Service to solvency requires a comprehensive approach, which is reflected in our updated Five-Year Business Plan,’ said Postmaster General and CEO Patrick Donahoe.”
Five year plan? Where have we heard that before? Oh yes…
So now we hear that the same USPS that cannot operate without massive financial losses — even with a monopoly on first class mail delivery — somehow has the resources to photograph the front and back of each piece of mail processed!
They cannot deliver our mail properly, cannot operate at a profit, cannot provide anything resembling customer service beyond the 1950s East Europe model, yet somehow they have unlimited resources to play big brother with all our postal communications.
Image added to original article.
Germany’s largest bank might have failed to admit up to $12 billion of unrealized losses during the financial crisis, as stated in a complaint filed by three former Deutsche Bank employees to the US securities regulators.
The complaint claims that Deutsche Bank hid $12 billion in losses on credit derivatives during the 2008-2009 crisis, the Financial Times reports on Thursday, and citing people familiar with the submissions. It is almost three times the bank’s net income of 4.3 billion euro for 2011. The improper accounting was enough for the bank to avoid a government bailout, according to the ex-employees.