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Posts Tagged ‘Bailout’

Overdose – The Next Financial Crisis

Posted by commendatori on September 9, 2010

Part 1

Part 2

Part 3


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BUNCH OF TURKEYS! – Bailout 101

Posted by commendatori on March 19, 2009

by Puru Saxena
Editor, Money Matters

Vicious selling continues on Wall Street and the pathetic action of the financials is dragging down the entire market. So far, the banking index has declined by roughly 83% from its highs! As I have said for years, banking is the only industry which is always in a state of permanent bankruptcy and people have finally realised that the emperor has no clothes! We can thank the fractional reserve banking system for this mess; a totally fraudulent system which allows banks to create multiples of credit compared to bank deposits. This is the reason why I urged you repeatedly to stay well clear of financial shares and I hope that you followed my advice.

Today, investors in financials have lost nearly everything and before this is over, I suspect the majority of banks in the West will be nationalised. This would mean a total catastrophe for those who invested in bank stocks or corporate bonds. So, no matter how strongly your private banker pushes you to load up on “cheap” financial stocks, please DO NOT go “bottom fishing” in this bankrupt industry. Banking is no longer a growth industry and financials will disappoint investors for many years. Furthermore, if you have any exposure to hedge funds, structured products, accumulators or derivatives of any kind, I sincerely urge you to get rid of all this highly toxic garbage. Such ponzi schemes were very good for the private bankers (due to the huge amounts of commissions involved) but they are a disaster waiting to happen. Today, our planet has roughly US$600 trillion worth of derivatives and this is roughly 10 times the size of the global economy! So, please get rid of your derivatives based “investments” immediately.

Even though the financials are getting killed, our fundamentally sound stocks in solid sectors continue to report good operating results and their stock prices are much higher than the lows recorded last fall. So, this is a positive divergence and shows that the market’s internal breadth is improving with fewer stocks breaking down to new lows. Another positive sign is that the Asian markets are faring much better and are nowhere near the lows recorded last fall.

During such turbulent times, it is worth remembering that your stocks represent partial ownership in underlying businesses with real assets (plants, reserves, land, machinery, technology, cash and human resources). And even though the stock market’s current appraisal is not favourable, it has no connection with the intrinsic value of your holdings.

Various central banks continue to steer this economy like drunken sailors and they are injecting TRILLIONS of dollars into the system. I would argue that many nations in the West are already bankrupt (US, Britain, Germany, Spain, Iceland and Ireland come to mind) and the ONLY thing they can do now is to print even more money. For example, America’s total debt is worth US$54 trillion and there is no way the US can ever hope of repaying its debt in today’s money. In other words, either the US will default (highly unlikely in my view) or it will print and inflate so that this huge mountain of debt feels much smaller in the future due to the loss of its purchasing power. Remember, the best way to make debt more manageable is by inflating the supply of money in the system. And this is precisely what the various central banks are doing.

It is worth noting that nations like Germany and the US have already started using the printing press and more nations will soon follow. When the entire planet is covered with oceans of paper “money”, its purchasing power will sink and hard assets will sky-rocket. At least this is what has happened throughout history. So, please don’t be fooled by this temporary contraction in hard assets and hold on to your positions. If anything, take advantage of the ongoing fire-sale and if your financial situation permits, convert more cash to quality assets in the resources sector.

A bunch of turkeys have hijacked our monetary system and all they know is how to print money. Rather than let the market clear itself out, central banks continue to use tax payers’ money to bail out insolvent institutions. This brilliant strategy has NEVER worked in the past and it will not work this time around. Instead of robbing innocent people of their savings, the establishment must allow the weak banks to go bust. For example, if Citibank is on the verge of collapse, then the US Treasury must let it go bust! All Mr. Geithner needs to do is to protect the customers of Citibank, allow Citibank’s investors (shareholders and bondholders) to suffer and sell the bank’s book to another institution. This is all that needs to happen. This way, depositors will not lose anything and only investors in Citibank will suffer – and they should! Why should the public share the losses with these investors? When Citibank did well in the past, did its shareholders and bondholders distribute the profits to the public? Of course not! So, why should the reverse occur now?!

Personally, I find these bail-outs absurd, unethical and a total waste of valuable resources! Who gave these politicians the authority to act like investment bankers? Mr. Geithner is not a qualified ‘merger & acquisition’ expert, so how does he have the audacity to use other people’s money to take over insolvent banks? Likewise, Mr. Bernanke is now using American taxpayers’ money and buying distressed debt! I find this outrageous! Is he going to act like a debt collector when people default on their loans?

Mark my words – the establishment is only making matters worse and prolonging the pain. Moreover, by printing insane amounts of paper, the politicians are setting everyone up for an inflationary nightmare! One thing is for sure – before this drama ends, the viability of the US Dollar as the world’s reserve currency will come under question. When the US Dollar starts to implode, hard assets will go through the roof. Remember, commodity prices went ballistic in the late 1930’s as well as during the 1970’s. We should expect similar action in the years ahead.

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In Michigan, Bank Lends Little of Its Bailout Funds

Posted by commendatori on January 15, 2009

TROY, Mich. — The bad bets made by executives at Independent Bank of Michigan are on display in spots across the state: a defunct bowling alley, a new but never occupied shopping center and the luxurious Whispering Woods Estates, which offers prime lots for never-constructed dream homes.

Now it is the federal government making the big bet here.

The Treasury Department has invested $72 million out of the $700 billion in federal bailout funds to help prop up this community bank, which traces its roots back 144 years in Michigan. It is a small chunk of the giant rescue fund being wagered by Washington to encourage banks like Independent to resume lending and jump-start the frozen economy.

But Independent, hard put to find good borrowers in a suffering economy, and fearful of making the kind of mistakes that got it into trouble in the first place, is not doing much lending these days. So far it is using all of the government’s money to shore up its own weak finances by repaying short-term loans from the Federal Reserve. “It is like if you are in an airplane and the oxygen mask comes down,” said Stefanie Kimball, the bank’s chief lending officer. “First thing you do is put your own mask on, stabilize yourself.”

This is not what the Treasury Department had in mind when it started this program, saying it would give the nation’s “healthy banks” enough money to start lending again, so that people could buy homes and businesses could invest and create jobs, thereby invigorating a disintegrating economy.

A close look at Independent Bank’s handling of its government money demonstrates just how much harder this has turned out to be, and the conflicting challenges that banks across the United States are confronting in the new bailout era. Like hundreds of other banks, it is caught between the government’s push to increase lending and its own caution.

As of Tuesday, 257 financial institutions in 42 states had received $192 billion in capital injections from the Treasury’s Troubled Asset Relief Program, or TARP, out of $250 billion set aside for this purpose. Seven giant banks — like JPMorgan Chase and Citigroup — have received more than 62 percent of the total so far, and have gotten most of the attention.

But it is the smaller community banks like Independent that are seeing the largest number of investments, with 186 banks so far getting allocations of less than $100 million. With little public attention, this money in recent weeks has been streaming out to community banks across the nation, in dollops as small as $1 million — the amount set aside for Independent Bank of East Greenwich, R.I. Ultimately, more than 1,000 banks are expected to take part in the program.

While most of the banks that have received money appear to be relatively healthy, dozens of other banks that received federal funds are, like Independent Bank of Michigan, financially stressed by a high volume of delinquent loans.

Bailout Is Questioned

Economists say the decision by banks like Independent to use the federal money for purposes other than lending, while perhaps disappointing, is not surprising, given that the Treasury Department did not honor its plan to give the money only to healthy banks.

“It’s a matter of logic — when you are in a perilous position, like many of them are, you try to bolster your balance sheet,” said Alan S. Blinder, a monetary policy economics professor at Princeton. “But this is a real flaw in the program.”

Some banking experts are even questioning if the bailout may be doing more harm than good, in some cases, by giving banks like Independent a cushion as they struggle to fix their problems, rather than forcing them to sink or swim on their own. It could also delay mergers of weaker banks with healthier ones.

“You are keeping a lot of troubled institutions in kind of a status quo state,” said Eric D. Hovde, the chief executive of a Washington-based hedge fund that invests in the banking industry. “They can continue on their merry ways.” In Congress, anger over the management of the TARP program runs deep. Many lawmakers say that there is little oversight, and that they can see no evidence that the taxpayer money is making its way from the coffers of banks to businesses and consumers. The program is likely to be fundamentally changed under the administration of Barack Obama, who on Monday asked President Bush to request that Congress release the remaining $350 billion.

Some lawmakers have criticized the Treasury for allowing banks to use the government’s bailout money to acquire rival banks.

As additional evidence of the growing anxiety, bank regulators on Monday sent a notice to banks receiving federal money ordering them to disclose how they are using it. It also pushed them to emphasize new loans. “A lot of the money is already out there and the inspector general needs to get up to speed on how banks are using it,” said Senator Claire McCaskill, Democrat of Missouri. “We need to make sure we get this money back and the only way we can do that is with strong oversight on how this money is spent.”

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US: Bailout, Crisis and Upcoming Fascist Takeover

Posted by commendatori on October 27, 2008

Here is a good article – Review of the Economic situation for the week. They write one every Monday.

Signs Economic Commentary for 29 September 2008 — Signs of the Times News

Here are some excerpts, but I do recommend reading the entire article.

“Here is the borrowing that’s happened in 2008 alone, with precious little public debate:

– $29 billion to bail out Bear Stearns.

– $40 billion in the first mortgage-holder bailout.

– $80 billion for an additional year of Iraq war operations. (Another $150-$200 billion in war costs such as future veterans’ disability benefits were incurred but not funded.)

– Up to $85 billion to bail out AIG.

– $153 billion to households for “economic stimulus.”

– $200 billion, and possibly more, to bail out Fannie and Freddie.

– $290 billion in farm subsidies, despite agricultural prices and grains profits being at record highs.

– $700 billion general bailout of securities backed by bad debt. (The International Monetary Fund estimates this figure will rise to at least $1 trillion.)

That comes to $1.6 trillion, explaining the debt-ceiling rise, and does not include roughly $300 billion in essentially interest-free cash issued to banks by the Federal Reserve on an emergency basis, which may or may not be repaid, but which in any case make all existing money somewhat less valuable. Why is the debt aspect of the splurge barely being remarked on by the mainstream media and by politicians? Why are the young not furious? And about that $700 billion about to the shoveled to the Wall Street elite — in 2007, George W. Bush vetoed an increase of $7 billion per year in health care spending for the poor, saying the country couldn’t afford it.”…

…”The Golden Rule when consuming all mass media coverage of economics is, of course, to remember that it is always wrong; either factually or in its timing, or both.

Which means, given the universally bleak tone of last night’s Crunchy TV, that either:

a) the economy is about to boom

b) the situation is even worse than portrayed and we’re facing The Apocalypse

Or, those calling the shots want the economy to crash now. Since all the assets were propped up by optimism, basically, making everyone severely pessimistic will ensure a crash. And, as the blogger, Badtux points out, deflation is to be feared more than inflation by average people. The rich, however, are hurt more by inflation. After a deflationary crash, those with cash can buy up all the assets for pennies on the dollar.”…

…”If you are wondering, I believe the AIG bailout is a very good model for how it has to go down. These institutions get the money — but the government gets ownership of them and can throw out the bad managers and reform their practices so they don’t do this stupid evil s**t again, and then sell off the workable assets and fold the part that’s not workable. Any bailout that’s going to work long-term is going to have to work like that, else this nonsense is just going to happen again. You can’t just throw money at these institutions. You have to take them over and reform them.”…

…”Now, at that point economic activity has *also* fallen, since economic activity needs cash to lubricate it and a lot of cash has been diverted towards futile attempts to pay unpayable debts rather than buying stuff. Figure that the economy is moving 10% of the goods and services that it formerly moved. Furthermore, food was planted and picked at the older, cheaper value of the food. So the stores are full of food, but nobody can afford to buy it because an orange that costs $1 is now only worth 1c but the store can’t sell it to you for 1c and make money because they paid the farmer 50c for it at the beginning of the year (thanks to the futures market). The end result is food riots, crops rotting in the fields, and the real threat of a fascist takeover of the country. Look up Father Coughlan and get back to us — it was only barely that FDR kept Father Coughlan’s cronies from taking over (see: Business Plot) and sending us down the same path that Germany and Italy went down. And that was before twenty-five years of rote recitation of “government is the problem, not the solution” discredited FDR’s brand of liberalism in the minds of most Americans — today, a FDR would not be allowed to be elected (I don’t consider Obama to be an FDR, looking at his policy proposals on his web site they appear to be fairly moderate free-enterprise-oriented proposals, not something shockingly socialist like the CCC program that built much of the infrastructure in Death Valley).

In other words, I don’t expect the U.S. to go down the path of FDR if we have another Great Depression. I expect a Mussolini, probably some general taking charge to “restore confidence and pride in our government”, and the usual stuff that happens when you have a Mussolini in charge. Bad things. Really bad things. You know the drill.”…

…”So the stage is now set for a fascist, Mussolini-style takeover of the U.S. Take a look at the following list of laws passed since 9/11,
courtesy of
George Ure:

1. USA Patriot Act
– A 342 page document presented to Congress one day before voting on it that allows the government access to your bank and email accounts, as well as your medical and phone records with no court order. They can also search your home anytime without a warrant.

2. USA Patriot Act II
– This one allows secret government arrests, the legal authority to seize your American citizenship, and the extraction of your DNA if you are deemed a potential terrorist.

3. Military Commissions Act of 2006
– Ends habeas corpus, the right to an attorney, and the right to court review of one’s detention and arrest. Without this most basic right, all other rights are gone too since anyone can be detained indefinitely. Now anyone may be arrested and incarcerated and nobody would know.

4. NSPD 51
– A directive signed by George W. Bush on May 9, 2007, that allows the President to declare martial law, effectively transforming the U.S. into a dictatorship with no checks and balances from the Legislative or Judicial Branches. Parts of this directive are considered classified and members of Congress have been denied the right to review it.

5. Protect America Act of 2007
– Allows unprecedented domestic wiretapping and surveillance activities with a reduction in FISA court oversight. Probable cause is not needed.

6. John Warner Defense Authorization Act
– Signed by George W. Bush on October 17, 2007, this act allows the President to declare a public emergency and station troops anywhere in America without the consent of the governor or local authorities to “suppress public disorder.”

7. Homegrown Terrorism and Radicalization Act
– Passed overwhelmingly by Congress on
October 23, 2007, is now awaiting a Senate vote. This act will beget a new crackdown on dissent and the Constitutional rights of American citizens. The definitions of “terrorism” and “extremism” are so vague that they could be used to generalize against any group that is working against the policies of the Administration. In this bill, “violent radicalization” criminalizes thought and ideology while “homegrown terrorism” is defined as “the planed use of force to coerce the government.” The term, “force” could encompass political activities such as protests, marches, or any other form of non-violent resistance.

So when you add in:

It starts to get a little scary.”

Scary indeed.

Here is an easier to read link for “Haliburton Confirms Camps Constructed

Another good article:

Mike Whitney: Black Monday?

Some excerpts

“Rep Dennis Kucinich (D-Ohio) gave the best speech of the day railing against the financial industry and defending the interests of working class Americans.

Rep. Dennis Kucinich: “The $700 bailout bill is being driven by fear not fact. This is too much money, in too short of time, going to too few people, while too many questions remain unanswered. Why aren’t we having hearings…Why aren’t we considering any other alternatives other than giving $700 billion to Wall Street?
Why aren’t we passing new laws to stop the speculation which triggered this? Why aren’t we putting up new regulatory structures to protect the investors? Why aren’t we directly helping homeowners with their debt burdens? Why aren’t we helping American families faced with bankruptcy? Isn’t time for fundamental change to our debt-based monetary system so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the US Congress or the Board of Directors of Goldman Sachs?”

Bless him.

“There was greater opposition to the Paulson bill than any legislation in the last half century. The groundswell of public outrage has been unprecedented, and yet, Congress, completely insulated from the demands of their constituents, continues to blunder ahead following the same pro-industry script as their ideological twins in the White House. There’s not a dime’s worth of difference between the two parties. Not surprisingly, neither Pelosi nor any of the Democratic leadership has even met with any of the more than 200 leading economists who have stated unequivocally that the bailout will not address the central problems that are wreaking havoc on the financial system. Instead, they have caved in to Bush’s demagoguery and the spurious claims of G-Sax bagman Henry Paulson, a man who has misled the public on every issue related to the subprime/financial fiasco so far.”

Hmmm…I would think that meeting with experts would be the wise thing to do. But, that is just me, I guess. I have had my suspicions about Pelosi for some time. She does not quack like a Democrat…

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Jim Rogers Suspect Dollar is OUT in less than a Decade

Posted by commendatori on October 3, 2008

Who is Jim Rogers?

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$700 Billion is nothing (Must Watch!!!!!)

Posted by commendatori on October 3, 2008

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