The Fed's Year in Review, Courtesy of Jr Deputy Accountant

Ben Bernanke doesn't have a blog and if he did, it would probably be an awfully dry read but because Jr Deputy Accountant is such a nice person, she's put together a list of the Fed's Greatest Hits for 2009. It's no surprise that we kicked the year off with printing money. Of course!

Now I may have missed a few things, it's been a busy busy year for our friends at the Fed. Chances are I reported on it but if there's something I should have included in this list and didn't, please let me know.

In Crank Up the Presses - Zimbabwe Ben is on His Way, former St Louis Fed president Bill Poole warns us that the Fed is printing money. No kidding, dude, thanks for that FYI. By mid January we learned that the Fed doesn't feel it needs to tell us who got bailout funds, courtesy of Fed Vice Chair Donald Kohn in Fed Vice Chair Refuses to Admit Recipients of Fed "Loans". Gee thanks, asshat.

In February, Bernanke kind of went missing
after claiming OMGObama's stimulus was a great idea but not nearly enough (don't worry, the Fed would fix that by March). Thankfully Chicago Fedhead Charles Evans swooped in and gave us a good dash of doom and gloom shortly thereafter in Fed's Evans: News Flash, the Economy Sucks. Thanks for that, Chuck, love ya, mean it. And then our second favorite Fedhead - Dallas Fed's Richard Fisher - came by and whined about deflation. Yeah yeah yeah. Of course Atlanta Fedhead Dennis Lockhart popped his head out to say that the Fed was ready to do whatever it takes to save the economy (and his people obviously kept that promise). And to wrap up February, we had the NYT totally rubbing the Fed's balls in Pro-Fed Propaganda at its Finest from the New York Times. Not cute, people, not cute.

March was exciting if for no other reason than, you guessed it, quantitative easing! And look, it only took the Fed two months after being fronted off by Bill Poole to make their money-printing activities officially above the board! First Richmond Fedhead Jeffrey Lacker (my all-time favorite Fedhead, as most of you already know) said the Fed's independence was at risk, sealing his position in JDA's big squishy heart. The Beige Book was bad, Alan Greenspan turned 83, and the geniuses at Minneapolis Fed figured out that recession = crime. In The Federal Reserve: On a Treasury Shopping Spree?, we learned that the only option the Fed had left was a little QE and sure enough, the bastards did it. Thank God no one listened to SF Fed's Janet Yellen who was still yammering about F-bills (I'm not kidding, she actually suggested the Fed issue its own debt. Repeatedly). Oh well, at least Bernanke admitted on 60 Minutes that the Fed was printing money.

In April, Minneapolis Fed's Gary Stern retired as President of the Bank. Congress started going after the Fed's ass, so badly that I had to do Part 1 and Part 2. Ouch. Fed Governor Kevin "Pretty Boy" Warsh started hating on Tim Geithner, which of course made yours truly pretty excited. And then there was the whole thing about the Fed knowing it might lose its regulatory and supervisory powers, which of course it didn't like to hear. I'd bring up the "Stress Tests" here too but those were a joke from the gate. Maybe that's why the Fed kicked up the PR machine around the same time?

Fedgate deserves its own mention here, and the year in the Fed's biggest headache can be found here:

DBA Fedgate.

Feb 2:
Bernanke and Paulson: Economic Terrorism at its Finest

Feb 20:
Bank of America: From Bad to Worse

April 23:
Did Bernaulson Violate Securities Law in BofA's Merrill Mess?
Mutiny Among Pirates: Paulson Throws Bernanke Under the Bus on Bank of America/Merrill Deal
Lewis: Bernaulson Made Me Do It

April 26:
Cuomo Hands Off BofA/Merrill... Case Has 1/3 of a Chance

June 9:
Federal Reserve Subpoenaed Over Bank of America/Merrill Deal

June 10:
Fed E-Mails Show Bank of America Bagged on by Bernanke, Fed Lawyers
The Enron Connection and a Peek Inside Actual Federal Reserve Inboxes. And?

June 11:
The Fed on Bank of America: "Ugly" Indeed, With the Email Chains to Prove It

June 24:
Bernanke, Issa, the King of the Goldman Rats, More BofA and OMG Not the Internet, Obama!
Surprise! The Fed Engaged in "Cover Up" on Bank of America/Merrill Deal Says New Issa Report

June 25:
Bernanke v Congress: Who the F&^k Has a Decoder Ring for *This* Bulls&$t?!
Mr Bernanke Goes to Washington: Defending the Fed, Bank of America Edition

July 1:
Regulator of Last Resort Hits a Snag: Fedgate Leads to New Questions, Uncertain Future for Fed Regulation

July 15:
Fedgate Continues! Paulson to Congress: Don't Look at Me

July 19:
Paulson's Fedgate Defense: I Did not Have Sexual Relations with those Toxic Assets

Now, on to May. Christ, busy year for our favorite central bank crooks, eh?

NY Fed's Stephen Friedman thought he could buy a bunch of Goldman Sachs stock and totally get away with it but he got busted and had to step down as Chairman of the NY Fed. Dumbass. The Fed still bought Treasurys. Duh. The stress tests were still important for some reason even though they were a total farce based on lowball numbers ("worst case scenario" LOL) but we still cared about them. Richmond Fed was still obsessed with moral hazard (it's only their favorite thing in the world) and the Fed boys took a nice little trip to Jekyll Island to get back to basics. Like printing more money. The FOMC was still trying to act like they might raise interest rates but of course we learned by the end of the year that that was just a front. Alan Greenspan came back from the dead to snitch on his former employer, teaching us an important lesson in Alan Greenspan: The Fed Does Whatever it Wants Anyway so Kiss My Old Shriveled Ass. Thanks, AG!

By June, we discovered that the Fed's QE plan was starting to backfire in Fed in Foreclosure: Mortgage Rates Battered by Fed Treasury Shenanigans, Fed Still Clueless. Shock that. And when the news got slow, there was always Fedgate to fall back on. Check out Sleepless in DC: Bernanke to Richmond's Lacker "Don't Trip, We Got This."

For July, Richmond Fed was still dealing with a PR nightmare after hiring former (bankrupt) LandAmerica General Counsel Michelle Gluck to lead their legal team. Oh and the Beige Book still sucked but sucked less. Yours truly made "Audit the Fed" my project and took on even the hardcore End the Fed crew in suggesting a thorough exam followed by regulatory reform, whatever the hell that is. Point is, I didn't have enough faith in the auditors to do the job and still don't. It's the Fed, they make up their own accounting, come on now. Oh yeah, and Bernanke lost 29% on his investments for the year. Shows what he knows.

In August, Tim Geithner's replacement at the NY Fed got offended that we'd even suggest the Fed would be monetizing debt. Sure, Bill, whatever you say. A NY judge cockblocked media attempts to crack open the Fed's secret diary, because transparency is overrated, right? Ben Bernanke's wife got her identity stolen, which made for some pretty awesome LOLz. JDA went to DC to flip off her Fed friends and loved every second of it. Oh and we discovered that one of the United States' largest creditors might be the United States itself, or at least some weird Fed money laundering scam.

World Bank's Robert Zoellick jumped on the Fedbashing bandwagon in September
but who cares about that asshat? He's worse than those Fed fuckers. Oh and we decided the Fed is banking's mattress. Big whoop. We got offended in The Fed Obviously Holds Our Accounting Skills in High Regard for the Fed's suggestion that we can't add simple math and would buy a line about them making a whole bunch of money off of bailout initiatives. Yeah ok. Gold took off and while that's not really a Fed thing, you all know exactly why it is. The Fedheads starting coming out to tell us all about this exit strategy that they didn't have and JDA fell asleep for most of it. The good part? The Fed Fails at Life and Everything, Says Fed Inspector General. Nuff said.

October came and went and Zimbabwe Ben just wanted to be reconfirmed but Congress wasn't having any of that. The Minneapolis Fed got a new President and so far he looks pretty damn cool in our book, we'll keep you in the loop if he turns out to suck as Fedheads tend to do. Don Kohn was still talking shit about pulling out in time... blah blah blah. Richmond's Lacker said things might be looking up just as his Bank's own manufacturing index started turning bad again. NY Fed's Dudley basically blew it and said the Fed is keeping ZIRP for forever and a day. Great plan, boys. Hey, there's always divine intervention if that doesn't work. And let's not forget Atlanta Fed's epic bank supervision problem, rounding out the year with the prize for The Most Failed Banks of Any Fed Bank.

In November, the Fed swore up and down it would crack down on conflicts of interest like Stephen Friedman/NY Fed/Goldman Sachs. Sure. WTF happened to our gold? Well we still don't know but Fort Knox: The Real Knock-Off Capital of the World? Or, Alternatively, SERIOUSLY WTF Gold OMG!!!!! sheds some light on the issue. Congress was still trying to be up the Fed's ass and still not doing a very good job. St Louis Fedhead James Bullard showed he believes in Mayan prophesy and didn't see the Fed considering a rate hike until at LEAST doomsday. Win. There was some dumb meeting with the Fed and banks but it was useless so we hardly gave it a second thought. Or a first. Thoughts are precious, come on.

As for December, well, we're technically still in it, hopefully it's all fresh in your mind.


AIG's Top Lawyer Leaves, Gets a $3.8 Million Severance

Thursday, December 31, 2009 , , , 0 Comments

Well well well, that's one way to bypass the Pay Czar's government-imposed pay limits.


American International Group Inc. general counsel Anastasia Kelly, who resigned after a dispute over government-imposed pay limits, will collect about $3.8 million in severance, said people familiar with the matter.

AIG concluded that Kelly, 60, was owed the money after the New York-based insurer hired a law firm to review her conduct, according to the two people, who declined to be identified because the company hasn’t disclosed the severance decision. Kelly resigned for “good reason” after her salary was cut, AIG said yesterday in a statement. Suzanne Folsom, the insurer’s chief compliance officer, also left, AIG said.

Kelly told at least four other executives last month how to protect their pay and hired outside attorneys for advice, the people said. The five leaders wrote in Dec. 1 letters to AIG that they were prepared to resign if their pay was cut by Kenneth Feinberg, the Obama administration’s special master for executive compensation. AIG, once the world’s biggest insurer, received a taxpayer-funded bailout valued at $182.3 billion, placing the company under Feinberg’s jurisdiction.

If LandAmerica's former top lawyer Michelle Gluck didn't already have a job
, I'd point her to this. It's perfect for you, girl, just perfect.


Via The Reformed Broker: WTF *Did* We Learn in 2009?

Thursday, December 31, 2009 0 Comments

Pic credit: Archinect

The Reformed Broker found a whole bunch of amazing financial bloggers to answer one question and then put their answers on TRB. So... what did we learn in 2009?

Let him tell you.

I had a lot of answers, most of which would end up being cryptic, vague, and probably trying too hard to be clever. So I stuck with what I knew, or at least found out this year. Unfortunately, placing "I Has a Sad" over Chuck Plosser's picture doesn't have the same reaction, at least not yet. There's always 2010.

I also learned in reading this list that a whole shit ton of us need to learn how to unplug and enjoy the potential for downtime that the end of the year brings. Yours truly included, even though I just returned from an unplugging. It's all good. Unplug some more. It'll still be fucked up when you plug back in, trust me.

JDA was thrilled to be included on this list with some of my favorites from the financial blogosphere. (bonus points to Howard Lindzon for getting in the Fed's Ponzi scheme in capital FED)


TSA Shows Us Who the Real Terrorists Are: Bloggers?!

Wednesday, December 30, 2009 , , , , , 3 Comments


As the government reviews how an alleged terrorist was able to bring a bomb onto a U.S.-bound plane and try to blow it up on Christmas Day, the Transportation Security Administration is going after bloggers who wrote about a directive to increase security after the incident.

TSA special agents served subpoenas to travel bloggers Steve Frischling and Chris Elliott, demanding that they reveal who leaked the security directive to them. The government says the directive was not supposed to be disclosed to the public.

Frischling said he met with two TSA special agents Tuesday night at his Connecticut home for about three hours and again on Wednesday morning when he was forced to hand over his lap top computer. Frischling said the agents threatened to interfere with his contract to write a blog for KLM Royal Dutch Airlines if he didn't cooperate and provide the name of the person who leaked the memo.

"It literally showed up in my box," Frischling told The Associated Press. "I do not know who it came from." He said he provided the agents a signed statement to that effect.

In a Dec. 29 posting on his blog, Elliott said he had told the TSA agents at his house that he would call his lawyer and get back to them. Elliott did not immediately respond to an e-mail seeking comment.

The TSA declined to say how many people were subpoenaed.

So it isn't enough for them to pat you down, subject you to humiliation in front of half of the 9:30 flight to Atlanta, and make you yell out obscenities like "That's MY 'Crap! Obama is a Marxist' netbook!" (or was that just me?), now the TSA wants to know where bloggers get their leaks. Since when can the Air Gestapo demand a direct violation of journalist/source privilege?

Why in the hell is the TSA chasing down the bloggers when the terrorists are probably in Wal-mart AS WE SPEAK getting their Fruit of the Booms for the next planned attack?

Way to fail, asshats. Oh wait, I better shut my big mouth before I get branded a terrorist. Shhhhh...


US Government Gains Controlling Stake in GMAC with Additional $3.8 Billion Infusion

Wednesday, December 30, 2009 , , 3 Comments

Congratulations on your New Year gift to yourselves, United States Government!

The rumors are true, kids, now bend over, Timmy needs to cover this one...

CNN Money:

GMAC Financial Services will receive a third round of bailout funds from the U.S. Treasury Department and the government will have a controlling stake in the company, according to a government report Wednesday.

The troubled auto and mortgage lender will collect $3.8 billion of additional aid on top of the nearly $13.5 billion already received since December 2008, the Treasury said in a statement Wednesday.

The fresh lifeline is intended to return Detroit-based GMAC to profitability in the first quarter of 2010, according to the report, and will likely allow GMAC to avoid placing its home lending unit, Residential Capital, into bankruptcy.

This additional money will give the company the "capital buffer" it needs "to meet the worse-than-expected economic scenario," GMAC said in a statement Wednesday.

The Treasury's stake in GMAC will increase from 35% to 56%, and the government will have the right to appoint two additional directors to the company's Board of Directors.

Third time's a charm, eh Timmy? Why GMAC? Do the Chinese own them too?

Also, what's this "worse-than-expected economic scenario" of which GMAC speaks? I thought everything was looking awesome and perfect and rosy?! WTF, where are the unicorn farts the mainstream media keeps shoving up our asses? Apparently GMAC doesn't read the MSM.


The Treasury Closes Out the Year with $2.1 Trillion in T-Bills

$118 billion in T-bills for the short week, way to wrap up a year of excess. Had this been a full week, I'm sure Timmy would have tried to slip an extra $100 billion in there.

"Foreign central banks" LOL.


Prices of longer-dated Treasury securities rose modestly Wednesday afternoon following a well-received auction of $32 billion in seven-year notes.

The buying extended Tuesday's rally and snapped the wave of selling since the start of last week, which sent the yields on both the two-year and 10-year notes to the highest levels since mid-August.

The rise in bond yields supported this week's $118 billion of government note sales, which have been more difficult than previous months due to thin trade during the last week of the year. The successful sale of the seven-year note wrapped up a record year of U.S. Treasury debt supply without major hiccups.

The supply of more than $2.1 trillion in Treasury notes and bonds this year was well absorbed by a wide range of buyers including foreign central banks, allowing the U.S. government to fund budget shortfalls and support the economy at historically low borrowing costs.

"Overall, [it was] an auction that was better than expected, a fitting end to a decade of Treasury issuance," said Aaron Kohli, U.S. government bond strategist at RBS Securities Inc in Stamford, Connecticut.

Wednesday's auction, conducted in a holiday-shortened week, drew bids that were 2.72 times the amount on offer. This bid-to-cover ratio compared with 2.76 in November and 2.65 in October. The average is 2.56 from the past 10 auctions.

Of course the news of another government infusion into zombified GMAC probably would have adversely affected Treasury attempts to fund unlimited GSE bailouts and whatever the hell else it is they are trying to pay for but who cares?

Happy New Year!!

(don't expect this to last):

"The government has been able to issue record amounts of paper at historically low yields," said Adam Brown, managing director of Treasurys trading at Barclays Capital Inc. in New York.

Brown noted that 2010 will be a "tougher" year for the Treasury to sell record amounts of paper. "With the economy growing again, and the Fed out of the market as a buyer, it will be tougher for the Treasury to sell at the same yield levels as 2009," he said.

$2.1 trillion in a year? Who the hell bought all that US debt? Oh wait... we know the answer already. As long as the Fed and banks acting as the Fed's fiduciary keep stuffing cash into Treasurys, they can keep this up forever. It's the Viagra of government debt and Timmy's happy to keep buffing Bernanke's balls if it means keeping up appearances. *fapfapfap*!

Watch that exit strategy! Maybe it involves MORE Treasurys!

And isn't $2.1 trillion nearly the EXACT size of the Fed's swollen balance sheet? Well if that's not a coincidence...


Here Comes Another GMAC Bailout

Wednesday, December 30, 2009 , , 0 Comments

I guess that Ally Bank isn't making as much money as GMAC had hoped as they're sniffing at the great government teat again. Or so we hear from an AP source:

The government on Wednesday was moving ahead with a fresh multibillion dollar cash infusion to stabilize auto finance company GMAC Financial Services as it continues to struggle with big losses in its home mortgage unit, according to a person with knowledge of the matter.

The person, who spoke on condition of anonymity because discussions weren't complete, says the government aid would range around $3 billion. That would be less than the roughly $6 billion the government had earlier thought GMAC (GJM) would need to stabilize the company.

Hmmm, this is absolutely not surprising or anything.


Who Wants Overstock's Horrible Financials? KPMG!

Wednesday, December 30, 2009 , , , 3 Comments

Going Concern broke it Re: the Auditors' Francine McKenna broke it and I'm still stunned. I apologize to all of the 38 Geary riders who had to hear me loudly bitching into my BlackBerry at Caleb on the way home from work tonight (and also Caleb's dad for trying to figure out where the fuck KPMG is in Chicago). It's not his fault. Of course as soon as I heard KPMG would be taking on Overstock's really really frightening financials, the first person I thought to call (after Caleb) was Sam Antar. I can't wait to read his reaction on the news.


Fucking KPMG. Come on, you can do better than this.

KPMG Rolls the Dice, Will be the Next Auditor of (GC):

But you already knew that was going to be the case. Back when we asked you to vote on which firm would be the next firm fired engaged by Overstock, over 42% of you said it would be KPMG.

This news comes despite reservations expressed by at least one reader who, at the time, had this comment:

I for one think it is sad that such a high percentage of survey responders think KPMG will pick up OSTK. I hope from a public opinion and liability standpoint that KPMG will resist the urge to add yet another high risk client to its listing and cause further damage its reputation.

Sorry, dear reader but apparently the high profile cat fight between the company and Grant Thornton wasn’t enough to scare KPMG off. Not even the very public revelation of Patsy’s creepy-ass stalking of Overstock critics in the financial media and blogosphere caused the KPMG partners in SLC to turn this client down.

Come on, Skeptical CPA, surely you have something to add to this enlightening conversation?

KPMG just sold its own ass up the river. Anyone else care to place bets for 2010 now?

I think we all know who will remain of the Big 86754...3?


Kansas City Fed's Denver Branch Gives Us a Peek Into the Fed's Secret Decision-Making Process

Tuesday, December 29, 2009 , , 2 Comments

Thanks to our friend Pinky Swear for pointing out that JDA's quick fingers aren't always as awesome as she thinks they are.

Finally, 5280 Mag (out of Denver) gives us a peek into how the Federal Reserve determines everything from interest rates to bailout recipients: the ring toss game!

(Now before the Fed purists try to pick a fight on the Internet over this one, I understand the Denver branch isn't really even a real Fed Bank - being a branch of the St Louis Fed Kansas City Fed, it's sort of like the redheaded step-child of the System - and therefore doesn't have shit to do with the big stuff like monetary policy and what-have-you. JDA knows this. Artistic license, come on now...)

Thanks for the insight, 5280! I knew there was a method to their madness, now it makes perfect sense.

p.s. who is the chick in the hat taking notes? Is that hat required? Can I get one? And if so, does it actually have a Fed logo on it? It would go awesome with the Fed hoodie I have that sometimes burns my skin when I slip it on. Who do I talk to about that?


The Creature from Jekyll Island Gets Bludgeoned and Unceremoniously Dragged into the Light

If the Federal Reserve begins to feel a slight tingling in the area where their balls would be had they a pair, don't worry, that's just the slight pressure of the unwashed masses placing said non-existent cojones into the nut vice. The nut vice, for the uninitiated (I'm not talking to you, Ben Bernanke, you should know full well what that is since yours truly has had your pair clamped there for at least a year), is not a comfortable experience. Long late night conference calls across the System trying to diffuse PR nightmares, excessive strings of emails on how to handle the flaming pitchforks... you get the idea.

The Fed knows damn well we're coming for that ass. And by we I mean mostly me but thankfully it appears as though the sheep are right behind me wielding those gleaming pitchforks ready to take back their country.

Well done, kids, keep going, we have a long way to go but this is certainly a start.

Epoch Times:

With thousand-paged bills requiring a law degree to understand sailing through Congress every day, Senators Jim Bunning (R-KY) and David Vitter (R-LA) have decided it’s time to put an end to the obfuscation and to take transparency on a new massive government program into their own hands.

In a letter dated Dec. 2 to the New York Federal Reserve Chairman, Dennis Hughes, Senators Bunning and Vitter asks him to explain in clear cut terms precisely how the Term Asset-Backed Lending Facility (TALF), for new loans, is administered.

And rightfully so.

In November 2008, the Federal Reserve Board authorized the TALF program. Shortly after, the Treasury gave the Fed $20 billion dollars of TARP funds to back these new loans for TALF. And now, current reports say that as of October, there had been over $40 billion dollars worth of loans made.

What we do know is that TALF applies to everything from credit card debt, student loans, Small Business Administration loans, car loans, and even commercial real estate mortgage-backed securities.

What we do not know is how the financial institutions get paid, how the deals are brokered, and how the recipients are selected. This leaves much to be desired.

The NY Fed isn't used to this, of course. Serving instead as Bottom Bitch to the Board of Governors (I'll save you the trip to Urban Dictionary: in a harem of prostitutes, the Bottom Bitch is the one who gets most of the Pimp's love and affection and not so much of his backhand across her face), it has up until about a year ago operated in the dark shadows of the open market, slithering around doing the Fed's dirty work undetected. Sure, you've got traders who actually care and economists who track what information they provide but up until recently, no one actually cared what the Fed was up to. At least not normal people. Yours truly obviously has a problem and needs to work on her Federal Reserve fixation but we'll save that for another day...

TALF isn't the only sketchy acronym that could use a little sunshine, the Fed's got an entire alphabet soup of programs that don't make sense. No one is asking them to write a children's book on monetary policy, all we'd like to see is some level of "this is what we are doing and here is why".

Keep dreaming.

As we learned previously, the bloody footprints are leading out of the crime scene like Hansel and Gretel's crumbs leading their way out of the forest (Sprott):

In the latest Treasury Bulletin published in December 2009, ownership data reveals that the United States increased the public debt by $1.885 trillion dollars in fiscal 2009. So who bought all the new Treasury securities to finance the massive increase in expenditures? According to the same report, there were three distinct groups that bought more than they did in 2008. The first was “Foreign and International Buyers”, who purchased $697.5 billion worth of Treasury securities in fiscal 2009 – representing about 23% more than their respective purchases in fiscal 2008. The second group was the Federal Reserve itself. According to its published balance sheet, it increased its treasury holdings by $286 billion in 2009, representing a 60% increase year-over-year. This increase appears to be a direct result of the Federal Reserve’s Quantitative Easing program announced this past March. Most of the other identified buyers in the Treasury Bulletin were either net sellers or small buyers in 2009. While the Q4 data is not yet available, the Q1, Q2 and Q3 data suggests that the State and Local governments and US Savings Bonds groups will be net sellers of US Treasury securities in 2009, while pension funds, insurance companies and depository institutions only increased their purchases by a negligible amount.

Go on, just tell us. We already know. Seriously, we all know what you did there.

If the Dirty Fed has some sins to confess, feel free to give me a call. I'll be sure to put on that soothing voice from my days as a California Call Box operator and you can tell me allllll about what you did there. It'll be cleansing. Hurry up and repent, you never know when your day will come and at this rate, the Fed will never make it to its 100th birthday. Awww, poor Fed, I'll shed a tear when I stop laughing maniacally at this delicious turn of events.

Nice knowing you money-printing pricks but it looks like JDA might need a new hobby. Any suggestions? Basketweaving? Tiddlywinks?


More MSM Lies: Consumer Confidence on the Uptick

Tuesday, December 29, 2009 , , 0 Comments

If you believe the MSM hacks paid by Lord-knows-who to make things prettier than they are, this one goes out to you.

U.S. Economy: Confidence Rises as Consumers See Brighter Future (Business Week):

Confidence among U.S. consumers improved in December for a second month as Americans grew less concerned about the immediate future, pointing to an economy that will keep expanding into 2010.

Attitudes about current conditions decreased to the lowest level in 26 years and wage expectations also fell, a reminder that the worst employment slump in the post-World War II era has shaken consumers. Gains in home and stock prices are helping households recover some of the record $17.5 trillion plunge in wealth, which may help sustain spending next year.

“We’re going to need a more definitive improvement in the labor market before confidence improves more than it has,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York, who forecast a rise to 53 for confidence. “The housing numbers are encouraging, but apparently they’re not having much influence on consumer attitudes. Consumers are focusing more on the job market than the housing market.”

Who are these consumers and where can I find one?


This Fed "Exit Strategy" Nonsense

Tuesday, December 29, 2009 , , 0 Comments

It pissed me off so much I had to go whine about it over at WC Varones.

As our dear friend beebs pointed out in the comments, the only way out is to let the imaginary capital evaporate. After that, the real capital (whatever that is anymore) can evaporate. Then, and only then, do we have a chance at "recovery". As in KA-BOOM.

(Pssst, Fed boys, that means we've got to front you off as the fraud you are. Sorry about that, nothing personal, it's just that you totally blew it.)


The First Annual Jr Deputy Accountant Year in Review Awards (or Some Sh*t)

Tuesday, December 29, 2009 5 Comments

Of course, Dan Lacey (the "Obama Unicorn" guy)
wins for Most Bizarre (and Somehow Fascinating) Art

There are no prizes unless you count my eternal love, affection, respect, and maybe admiration a prize. Next year there might be a big fake check with lots of zeros. Inflation and all...

Anyway. Without any further commentary, I present the 1st Annual JDA YIR Awards (whatever, I'll come up with a better title next year, I'm trying to close out my company's year on one hell of a highnote, you lazy ungrateful bastards):

Our friend from the Great White North A Counting School wins Post Title of the Year for "Crispy Whitebait with Peanuts". JDA isn't sure what that is but it involves Ben Bernanke and sounds totally delicious (go figure).

In the category of Best Regulatory Photoshop, we've got to give it to WC Varones on "Giant Vampire Squid Attacks SEC". That vampire squid never gets old, especially when Meaghan Cheung is the one getting jabbed by its money-hungry blood funnel.

For Greatest F&%^ing Shit We Ever Saw, The Reformed Broker wins for the "Periodic Table of Finance Bloggers". JDA swears voting was not biased just because she's on the list.

I have to hand it to Financial Armageddon, no one did Calling Hank Paulson Either a Liar or a Moron he did in "Cunning Realist Does it Again". Way to keep it classy, Michael, that's what I like about you. Skeptical CPA comes in a close second with "Towne on Gold", though "overpaid fool" wasn't quite "moron" for this award's purposes.

It's not exclusive to 2009 but LOLFed wins hands down for Best Category on a Financial Website with "bitchfights". JDA almost voted for her own "asshats" but thought that might be cheating.

And for Best Special Character Freak Out, Market Ticker pwns in "Barney Frank: Shut the F$%k Up". Seriously. I say the F word all the time and even I was taken aback by KD's awesomely edited outburst.

In Best Proof of Zimbabwe Ben in the Nut Vice, Skeptical CPA tells us a story of clients who all the sudden care about the dirty Fed in "Yves Smith Smacks Stress Tests".

Best New Blog goes to Going Concern because Caleb gets some really lame trolls, many of whom reeked of DB in the beginning. Accounting is still boring and he's still at it. Unfortunately so are the senior trolls.

For Most Depressing Use of "Waterboarding", JDA humbly tips her hat to Not One Cent for "Cash for Clunkers Hurts Poor, Sick, Unemployed, Consumer, Saver, Taxpayer, Environment, Charities, Recovery, Public Safety: Obama Waterboards Economy"

Most Appropriate Use of Diabolical Laughter in an anti-Fed Post goes, naturally, to the Mogambo Guru in "Taking Liberties with Price Stability" By a landslide.

There were, of course, many moments of joy and wonder and uncontrollable LOLing but these stuck with me as the best of the best. And it seemed nicer than just jerking myself off.

Update: from Eye on Washington, we have a bonus entry for Best Print Media (excellent idea) that has got to go to Matt Taibbi for his Goldman Sachs-bashing Rolling Stone piece "Inside the Great American Bubble Machine" that shall live forever in infamy. Congrats, Matt!


Now I Get It! The Fed is the Bad Bank!!

I totally get it. It took me a minute and I thought for a moment there that we'd tossed out that boneheaded idea to nationalize banks (nationalize? How about swoop in and shut down instead?) but now it is painfully clear to me that we are moving forward with the Bad Bank idea. And guess who gets to be bad bank? The dirty Fed of course!


The Federal Reserve on Monday proposed letting banks set up interest-bearing deposits at the central bank, in the latest step aimed at unwinding the massive liquidity pumped into the economy to counter the financial crisis.

The Fed said that, under the proposal, it would offer banks interest-bearing "term deposits" through an auction mechanism. In this way, banks would be encouraged to park their funds at the central bank, helping to drain the extraordinary amount of money pumped into the economy since the end of 2007 to fight a severe recession.

The U.S. central bank said in a statement that the plan, for which it will receive comments over the next month, had "no implications for monetary policy decisions in the near term."

With the U.S. economy growing again and financial markets improving in the second half of 2009, the Fed has been gradually scaling back the emergency programs it came up with to deal with the financial crisis. To counter the downturn, the Fed's balance sheet has swollen to more than double the level before the crisis hit at more than $2 trillion.

The Fed said Monday that term deposits could be offered at one maturity or several maturities. The central bank expects the term deposits to have relatively short maturities, likely ranging between one and six months.

The Fed is in denial about from where monetary policy decisions come but I'll let that one go for now, they've got bigger fish to fry.

From the Board of Governors:

The Federal Reserve Board on Monday proposed amendments to Regulation D (Reserve Requirements of Depository Institutions) that would enable the establishment of a term deposit facility.

Under the proposal, the Federal Reserve Banks would offer interest-bearing term deposits to eligible institutions through an auction mechanism. Term deposits would be one of several tools that the Federal Reserve could employ to drain reserves to support the effective implementation of monetary policy.

This proposal is one component of a process of prudent planning on the part of the Federal Reserve and has no implications for monetary policy decisions in the near term.

Public comments will be accepted on the proposal for 30 days after publication in the Federal Register, which is expected shortly. The Federal Register notice is attached.

I will personally sign my comment letter with XOXOs just for you, Ben Bernanke. Muahz.

But before I get to writing my angry manifesto, how exactly does the Fed think a $2 trillion "vehicle" for money laundering won't affect monetary policy? Do they actually believe that or is it, like much of what the Fed has given us on their still-elusive exit strategy, just a ruse? Between inflation fears and Zimbabwe Ben's printing problem, I cannot possibly see a way this doesn't affect monetary policy. It's money, right? And they better hurry up and get it out of there before it hits the air and sends inflation through the roof, right? So WTF, where's the "not monetary policy" in that?

And how is this any different from what banks are doing now? First they get the money from the Fed, then they keep it at the Fed, then they don't loan it and now they get rewarded for holding onto the cash that they were supposed to inject into the economy with interest?


All they did was add interest. Way to come up with a really awesome plan, boys, I'm so fucking proud of you I could throw up.


Snitches Get Stitches, UBS Guy

Monday, December 28, 2009 , , , 2 Comments


An informant in the tax evasion case against the Swiss bank UBS has asked a Florida court to postpone the scheduled Jan. 8 start of his prison term, saying he is ready to cooperate further with the United States government.

The informant, Bradley Birkenfeld, was a former UBS banker who was sentenced in August to three years and four months in prison for helping a billionaire hide assets from American tax authorities. He made the postponement request in a filing this weekend by his lawyer to a federal district court in Florida.

The filing also requested a hearing to reconsider the 40-month sentence imposed on Mr. Birkenfeld on Aug. 21.

Prosecutors described Mr. Birkenfeld as the man most responsible for igniting an investigation into rich Americans’ use of secret Swiss bank accounts to avoid taxes. Partly because of Mr. Birkenfeld’s disclosures, UBS has agreed to disclose to the United States the names of 4,450 wealthy Americans suspected of hiding assets and dodging taxes in secret accounts.

I have a feeling there are some important people who are not too happy about this dude singing all over the place to keep his ass out of the frying pan.

Little does Mr Birkenfeld realize he's still going to have to fry. *snicker*


It's Deflation, Stupid

Larry Doyle of Sense on Cents had an awesome piece over the weekend on the spectre of deflation - you know, the thing that doesn't keep Ben Bernanke up at night (he's got the sound of his helicopter rotors spinning to do that) - that I recommend. Mostly to Timmy but I digress...

Sense on Cents

Although the American consumer is much more accustomed to inflation and the threat of inflation, I am increasingly convinced that the threat of deflation remains the greater challenge. This battle between macroeconomic deflationary forces versus governmental supported inflationary programs is THE ultimate issue facing our economy in 2010 and beyond.

We hear very little about deflation from Bernanke, Geithner, or other central bankers here in the United States. Why not? If they were to even bring attention to it, I think they would cause a stir and legitimize the underlying deflationary forces at work in our economy. What do we hear? Continuous platitudes about how inflation is under control. Remember that the primary mandate of the Federal Reserve is to work to achieve stable prices. How is it going about that currently? Massive federal programs including ballooning the Fed’s balance sheet to prop the economy and prices from the weight of deflationary forces. How and why have these deflationary forces developed? Excessive debt throughout large sectors of our economy.

What other country has run up enormous debts and played the ‘extend and pretend’ game in terms of not acknowledging losses on loans and other forms of debt? Japan. What is Japan experiencing currently? Increasingly entrenched deflationary pressures.

Well yes but Zimbabwe Ben did not read Japan's handbook, all he's worried about is "preventing" a second Great Depression (too late, homeslice).

Did he read Economics 101? I don't think so.


The Fed's MBS Scheme Blew Up the Economy. For Reals.


Fannie Mae and Freddie Mac, the linchpins of the American housing market, continue to bedevil the U.S. financial system.

In February 2003, their regulator issued a report saying the companies were taking on too much risk by using implicit government backing to plunge deeper into the mortgage market.

The government-sponsored enterprises would pose a systemic threat to the economy in the “remote” chance that either failed, Armando Falcon told the Bond Market Association the same day. The Bush administration, considering his report a potential threat to financial markets, asked him to resign.

Five years later, regulators seized the mortgage-finance companies. Since then, leaders from former Federal Reserve Chairman Alan Greenspan to Warren Buffett have argued the companies can’t be sustained in their dual roles -- a for-profit enterprise beholden to shareholders and a tool of housing policy -- and should be nationalized or sold.

Nothing has happened. Instead, Fannie Mae and Freddie Mac, which buy home mortgages from banks and package them into bonds sold to investors, have been bailed out with $1.5 trillion in direct and indirect government aid. The Obama administration is banking on the companies to help end a three-year housing slump. The president is delaying plans to lay out a new framework for them in February, and Congress hasn’t scheduled hearings on their future.

“They’re going to get a giant pass on all of this,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia who is now a bank analyst at FBR Capital Markets in Arlington, Virginia. It’s going to be “three to five years before their fate is determined.”

Leave it to a recovering Fed bank examiner to know a giant pass when he sees one.

When we can't get progress to work, there are always threats, eh?

The approaching withdrawal of Fed support in the form of the mortgage-bond purchases risks “a very, very scary situation,” said Meredith Whitney, founder of Meredith Whitney Advisory Group LLC in New York. Mortgage rates would soar, endangering the economic recovery, if private buyers failed to step in to buy the companies’ debt, she said.

The status of Fannie Mae and Freddie Mac isn’t dealt with in the proposed overhaul of the financial regulatory system that the Senate plans to take up next year. While Treasury Secretary Timothy Geithner said in June that the companies’ future would be discussed in the president’s budget outline in February, the Treasury in its Dec. 24 statement promised only to provide a “preliminary report” by then.

Bet it's really scary for the Fed to think about a world without them as primary MBS investor, eh? PULL OUT, BOYS, PULL OUT!!!


Fannie and Freddie's Unlimited Bailout: Bad Bank of Housing?

Monday, December 28, 2009 , , , 0 Comments

The Fed knows damn well it can't buy MBSs forever. Good thing we've got a Plan B for that unlimited GSE bailout eh?


The government's decision to provide unlimited support to Fannie Mae and Freddie Mac probably presages more aggressive action to prop up the U.S. housing market.

The government may put a mortgage-modification effort, called the Home Affordable Modification Program, or HAMP, into overdrive in coming years, pushing for reductions in the principal outstanding on home loans overseen by Fannie (FNM 1.25, +0.20, +19.05%) and Freddie (FRE 1.57, +0.31, +24.60%) , Bose George, an analyst at Keefe, Bruyette & Woods, wrote in a note to investors Monday.

The U.S. Treasury Department said on Christmas Eve that it lifted $200 billion caps on the amount of taxpayer money that can be pumped into the ailing mortgage giants over the next three years.

Neither institution is near its $200 billion limit -- Treasury has put $60 billion into Fannie and $51 billion into Freddie since it seized the failing companies in September 2008.

See also my Christmas Day Timmy Hopes You Won't See That He Just Gave Fannie and Freddie an Unlimited Bailout for Christmas. Good times, kids, good times.


DoJ Finally Investigates Allen Stanford's "Questionable" Connections

Monday, December 28, 2009 , , 0 Comments

I've heard worse, like Stanford being an FBI hack. Whatever.


U.S. federal authorities are investigating millions of dollars contributed by fraud suspect Allen Stanford and his staff to U.S. lawmakers in the past decade, the Miami Herald reported on Sunday.

The newspaper said the Justice Department investigation aimed to determine whether the banker received special favors from politicians while he was operating his alleged $7 billion Ponzi scheme centered on fraudulent certificates of deposit issued by his offshore bank in Antigua and Barbuda.

The U.S. Department of Justice said it had no comment on the Herald report.

The newspaper said an e-mail sent to Stanford by Texas Republican Representative Pete Sessions on the day authorities announced fraud charges against the billionaire financier, as well as $2.3 million in contributions he made to Sessions and other U.S. lawmakers, were "part of the government's inquiry."

Meh. We knew this.


Market Fundamentals for Total Idiots. + Bill Gross and Loller Dollar

If they taught basic market principles in preschool, the 3 year olds would understand that the "exceptional" performance of the stock market in recent months is directly connected to the poor performance of the dollar.

Speaking of preschool geniuses, PIMCO's Mohamed El-Erian says stocks cannot continue this jerk off. No shit, does he also know that the Fed cannot indefinitely print money? This guy is brilliant, no wonder PIMCO is doing so well (erm, we'll get to that later):

Homes are selling at their fastest clip in nearly three years, the unemployment rate is falling and stocks are up 66 percent since their March lows - the best performance since the 1930s.

What's not to like?

Plenty, according to Mohamed El-Erian, chief executive of giant bond manager Pimco. The investor says the recovery may be gaining steam but is no different than a kid who eats too much candy at one of the birthday parties his 6-year-old daughter attends.

"We're on a sugar high," El-Erian says. "It feels good for a while but is unsustainable."

His point: This burst of economic activity fed by government spending and near-zero interest rates will soon peter out.

Do you think? I really hate to get filthy again but it's like a 17 hour porno movie, at some point the Fed's fucking monetary firehose has got to run out of ammo. No? Keeps fucking going. Sick bastards. I don't hate it, WaPo started it by saying "peter out"... anyway, you get the point.

Speaking of PIMCO, WC Varones channels yours truly and warns us rubbing Bill Gross would be totally inappropriate at a critical time for capitalism such as this:

[B]efore we get all warm and fuzzy about Bill Gross, look at his next comment:
“It’s capitalism, I guess, but it’s not to be applauded.”

Exsqueeze me? What the f&^@ do central planners manipulating interest rates for the benefit of the politically connected wealthy have to do with capitalism?!?

Bill Gross is an asshat.

Fuck yeah, WCV.

(The answer, of course, is not a thing but we can get to that bit later when you're ready)

Yeah so the dollar is still shit and the gold rush continues. I laugh at "the gold bull" and "the gold bubble", you show me a stable dollar and then maybe you will bear witness to a real gold bubble, otherwise this is just nature taking back the ecosystem.

Didn't you guys read Nuri in 8th grade? Come on, keep up, we did market fundamentals in 1st grade.

I'm available if Mr El-Erian needs a primer.

For my American readers, if you aren't getting your news from outside of this fucked up distorted wonderland we call home, I implore you to hop on the bandwagon. It's a sad day for America when Al-Jazeera delivers the most realistic picture of the day's news but that's just where we are right now. Don't get stuck on WSJ and NYT and the rest of the usual suspects.

As my Shanghai roommate once told me, at least in China they tell us they're going to edit our news. Here they do it to us and we don't even care.



Via Jesse's Cafe Americain: Meet Your New Global Currency

The full article is recommended in its entirety, as is the site in general for daily reading. Jesse knocks them out of the park every time.

But this - THIS! - got me:

The Americans no longer have the means to save themselves, this is what I think people don't understand. There is no credible American policy," said Wolf. (The American policy has been to maintain the status quo and to confiscate wealth by exporting fraud in amounts that are beyond all reason. This is hardly acceptable to the rest of the world. It is remarkable how few US economists understand this for what it is. Are they so abysmally ignorant by choice or by training? Sometimes it is hard to tell. What can one expect from a group that could not acknowledge the enormous bubbles that have rocked their economy in the past ten years until the damage was done. They are as reprehensible as the doctors who helped to promulgate the psychiatric abuses in the gulag of the former Soviet Union. - Jesse)

We are screwed, my dears, and hard. This is where being clever comes in. Knowing we're screwed, you have two options. Grease up before you bend over or bend over and hope for the best.

I'll be polishing bullion on my ass if anyone needs me...


Historical Jekyll Island... and More Proof that JP Morgan *is* the Fed

Same thing nowadays
except they conspire on BlackBerry

Sorry to disappoint you, G. Edward Griffin, I know you worked hard to write Creature from Jekyll Island and I even recommend it as required reading for my "friends" from across the line. It's one of the absolute must read Fedbashing handbooks so I shouldn't have to recommend it to friends who claim to want to kill the Fed. Duh. Anyway, Jekyll Island is no longer what it once was. Though it's the place the Fed was hatched nearly a century ago, I've got the term on loan. Just know that. So where's my damn tennis court?

(don't look at me, it's Sunday, news is slow and I have shit to do, ok?)

A plan to convert a historic indoor tennis court into a temporary convention center gained a business partner this month.

Managers of the Jekyll Island Club Hotel will assume half or more of the $3 million cost to rehabilitate the Landmark Historic District's Morgan Tennis Building.

The governing Jekyll Island Authority plans to use the building and two additional large tents to host conventions during construction of its new convention center, which is expected to take two years. The hotel's owners will cover any unforeseen costs, ensuring the authority's share will be no more than $1.5 million.

Both the authority and Club Hotel officials are calling themselves winners in the deal.

"This is a very good example of a public-private partnership, which is something we've been doing ever since we came here," said Kevin Runner, general manager of the Club Hotel. "We hope and feel it will create a lot of interest."

Since the Fed is now in the real estate business (see also my October 22 The Fed's Real Life Zombie Movie), why don't they just buy the whole thing? It'll be totally sentimental. I'd love to cut them a check for a romantic week's vacation, rubbing myself down with crisp $20 bills in the same bed where JP Morgan plotted the birth of the dirty Fed.

Come on. It's history, not porn:

While the mainstream media is thoroughly distracted by what they term to be the “historic” and “unprecedented” events of the day – like the wild swings of the markets, the midnight deals worth billions, and the political circus that is Washington DC’s inherent ineptness – little attention is being paid to the well documented and eerily similar events of only 100 years ago.

Many of the corporate players were – not so surprisingly – the same as those who are at the center of our present “crisis.” Many of the same threats and socially extortive methods are being employed today to force public and legislative support for draconian changes to our free market system, and there is no shortage of lies and misinformation being propagated as truth.

After years and years of credible warnings that the lack risk abatement in lending and the over-abundance of inexpensive money of the Greenspan Era would lead to a financial disaster, the mainstream media finds itself running form fire to fire reporting the resulting damage while completely missing what is the real story: There are arsonists on the loose, and they are burning down our Nation’s financial house.

Ron Kirby notes: “I wrote about a very strange occurrence – the reporting of J.P. Morgan “transferring” 138 billion dollars to Lehman, after Lehman had already filed for Chapter 11 bankruptcy early last Monday morning…It is highly likely [or a certainty on my planet] that J.P. Morgan was INSOLVENT and was “BAILED OUT” last Monday, September 15, to the tune of 138 billion dollars. This would explain why the Fed and Treasury dictated that Lehman fail – to disguise or otherwise obfuscate the recapitalization of or illicit transfer of 138 billion to A MUCH SICKER, TEETERING ENTITY, J.P. Morgan Chase.”

The really funny part is that you're still taking it. Your parents took it. Your grandparents took it. My great-grandfather was born just before it but he took it for most of his life.

My kid has been to an End the Fed rally, that doesn't mean he won't have to take it for the remainder of his life as well. Just sayin.

There is no separation between regulator and regulated. One need not visit Jekyll Island and channel the ghost of Paul Warburg with a FRN rub-down to realize as much. But I hear it's nice this time of year.

The funny part is watching them pretend as if they aren't one in the same.


Ben Bernanke's Milton Friedman Moment... via Hong Kong

Sunday, December 27, 2009 , , , 0 Comments

Krupo informs me that my boy Bernanke is global, yo. So what, he's big with overworked bankers in Hong Kong, my boss is big in Japan so suck it.

Did Ben Bernanke ever dream about this? Did he kiss a picture of Milton Friedman that he kept stashed under his pillow? (Don't trip, ZB, I had a Jeffrey Lacker moment once, I know how it is) Rub his weird stubby fingers together plotting for the day he'd be in the newspapers for his incredible knowledge of the Great Depression?

LMFAO, nahhhh, not ZB. That fucker hates every second of this attention. Personally I love when I show up in the Netherlands on pages I can't read so maybe I need to demand a birthday recount, he's diverging from the blueprint.

Thanks for thinking of me, Krupo. I think.


Hey What's China Up To?

Sunday, December 27, 2009 , , , 0 Comments

Which monkey chose this tie first?
Barney Frank votes our buddy Timmy

Monkey see monkey do. China doesn't have a choice.


China's Premier Wen Jiabao said Sunday despite growing calls from trading partners for the yuan to appreciate, China won't succumb to any such pressure.

Demanding a stronger yuan while adopting trade protectionism at the same time by some foreign countries is meant to arrest China's development, Wen told the official Xinhua News Agency in an interview.

"Keeping the yuan's value basically steady is our contribution to the international community at a time when the world's major currencies have been devalued," Wen said.

Separately, Wen also said the government is highly concerned about excessive rises in property prices in some Chinese cities.

He repeated the pledge that the government will boost the supply of cheap public housing and clamp down on speculation in the real estate market.

Uhhh... clamp down on speculation in the real estate market except when they are doing it?

As I said, monkey see monkey do.


NY Fed Paper Reveals the Fed's Elusive "Exit Strategy": Paying Banks to Sop up the Liquidity

Pic credit: David Dees

It isn't bad enough that the Fed has essentially expressed a desire to keep interest rates low until aliens come to Earth and the Mayans are reborn as the "chosen" people on December 21, 2012 or whatever the hell is supposed to happen on doomsday. A reasonable person might think that's the worst the Fed can do but if you know the Fed, you know that for every boneheaded trick they've got up their sleeve lie two more just-as-if-not-more boneheaded tricks just waiting to be hatched into action.

Like this winner.

I have looked at the concept of negative interest rates before. But this is really pushing it and I don't understand how NY Fed thinks paying banks interest on deposits held at the Fed will work in concert with a plan to gradually crank up interest rates to 2%. I'm lost. Can one of those Fed brainiacs please get in touch and explain this? I'm no idiot, I get it 99% of the time, this scheme is just so off-the-wall that even after three Racer 5s I still don't get it.

Someone get me a shot of tequila or something.


A new paper by the Federal Reserve Bank of New York offers some empirical support to the view among senior Federal Reserve officials that they do have the technical means to raise interest rates when needed, despite some naysayers who caution there is too much money in the system to do so effectively.

The Fed has pumped $1 trillion into the banking system in the past year, which in theory means all of that cash floating around in the financial system puts downward pressure on bank lending rates, interfering with the Fed’s ability to raise rates as the economy improves to fend off inflation.

But there is a way around it: The Fed can pay banks interest on bank reserves of unused cash.

That puts the Fed in a position to bid up rates if and when it chooses to, even if there’s a lot of cash in the financial system. The New York Fed paper argues that the Fed could get its target fed funds rate to 2% or higher even if there were $800 billion of extra cash in the banking system.

I'm going to stop this right now. The Fed needs to admit the raging conflict of interest that comes into play when it starts manipulating banks in a last ditch effort to stave off the inflationary monster they have created.

Up until this point, the Fed has used the banks as a vehicle to advance its agenda whether or not the banks wanted to play. Because of TARP, they may have had a little more room to negotiate ("Sorry, Ken, Tim says you have to buy these Treasurys, there's no if about it..."), all the while still claiming to "regulate" the very banks they rely on to get them out of this mess. If that doesn't make sense to you, don't worry, you aren't alone. It probably doesn't make sense to the Fed either but we all know they don't necessarily operate with both feet planted firmly in financial reality.

The Fed is drinking their own Kool-aid, they'll never make it out of there alive.

And more importantly, do they have a plan to tame mortgage markets once their asset purchases finally end?

(the answer is no. In fact, the answer is hell no, they didn't even think about that part of the plan and are pretty much doomed. You're welcome)


Timmy Gets a Raise for the Treasury

Saturday, December 26, 2009 , , , 1 Comments

CNN Money:

With the federal government inching close to the debt ceiling, the Senate on Thursday passed a $290 billion increase to the amount of debt the Treasury is allowed to have.

The 60-39 vote follows House approval earlier this month of the same measure. President Obama is expected to sign the bill soon.

The new law raises the debt ceiling to $12.394 trillion from $12.104 trillion.

As of Tuesday, the amount of debt subject to the limit on Treasury's books was $12.04 trillion, just $64 billion below the limit.

The increase is estimated to cover Treasury's borrowing needs through mid-February.

And then?


Don't Throw the Fed in the Briar Patch!

It's over. Just stop already. There's no use continuing on unless we can get real about the sorry ass situation we are in.

But let's carry on in an overdramatic manner as if somehow that might help, shall we?


"This should not be allowed to happen in America" (from The greatest outpouring of money and credit from central banks and governments in history):

We see $12.7 trillion donated without their consent of the lender taxpayers to the top world economies, or about 20% of world GDP. These funds, a good part of which will never be retrieved, have been stuffed into the pockets of bankers, Wall Street, insurance companies and GM and AIG. 80% of the problems we have had to face were caused by these very same entities, which along with the Fed, propose to solve the problem they created. It is as if they are the only ones in the world who know best what is good for our system and for us. They as well continue to play in the giant casino as if nothing ever happened. While this transpires there are still trillions of dollars in bad debt and impaired assets on the books that have to be written off. The solution to that is to not truthfully report companies’ financial conditions. If you can believe this, the Chairman of the Board of the Financial Accounting Standards Board, the FASB that sets American accounting standards has called for the “decoupling” of bank capital rules from normal accounting standards. His proposal would encourage bank regulators to make adjustments as they determine whether banks have adequate capital while still allowing investors to see the current fair value. In order words it is ok to have two sets of books and to mark assets to model, which is marking assets to fantasy. Telling investors the truth is secondary. For almost 20 years banks have had to use GAAP for the basis for capital rules. If banks had their way there would be no rules. The FASB has been compromised and resides in the back pocket of the bankers. There you have it. Bankers are more equal than others. Their balance sheets are worthless. This should not be allowed to happen in America.

FASB is only a small fraction of the problem. There may have a been a point (in the time before GD II) that FASB was both independent and viable. The crisis robbed what credibility they have remaining and at this point, they may as well throw in the towel. Financials in the United States are garbage. Suddenly the forced conversion to IFRS makes sense, but why would foreign investors believe our financials are any more believable even if we translate them into the universal accounting language of the world? Bullshit is bullshit and it is universally understood that our financials, markets, and regulatory structure are not only damaged but abused, distorted, and not at all to be taken at face value.

The larger problem has been obvious for nearly a century. A Skeptical CPA commenter calls out the Fed's game on What Danger, Cut Off the Fed's Hands!:

The banks say "make a great theatrical fuss over stripping consumer oversight from the Fed... we'll moan and scream in public". Then pretend to give ground and compromise by allowing the Fed to remain bank holding company supervisor.

Exactly. No, no, Chris Dodd! Don't throw us in the Briar patch!

Meanwhile, the Fed remains dominant on both supply and demand side, pumping in the cash Tim Geithner needs to engineer backdoor deals on GSE debt and buying up whatever has been laundered through. I used to giggle when I read "the Fed is a Ponzi scheme", now I shake my head and wonder how long until the greater fools at the bottom of this scam realize they are being ripped off.


The Federal Reserve bought $15.0 billion net of agency mortgage-backed securities in the latest week, the New York Fed said on its website on Thursday.

That is down from the previous week's net purchases of $16.0 billion.

The purchases brought the U.S. central bank's purchase of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae to roughly $1.102 trillion since January.

The Fed said it bought $17.430 billion gross of agency MBS from December 17 through December 23. At the same time, it sold $2.430 billion in mortgage securities.

The Fed aims to buy $1.25 trillion of agency MBS in a bid to bring down mortgage rates and to stimulate the battered housing sector and the overall economy.

Is that really the Fed's goal? I know it was claimed to be when they announced this scam in March but is it really still their goal to stimulate the battered housing sector? They will eventually have to admit that they are still buying Treasurys as this is a hand-in-hand sort of scheme, and minus moronic foreign investors to buy Treasury debt, it doesn't make sense to monkey around with MBSs. You can't tell me they aren't, it is one of the last tools they have remaining to keep up appearances until they come up with a viable exit strategy. I honestly believe they believe they will eventually come up with one, hopefully before anyone notices what they've been up to. Too late.

NY Fed hacks might sneer at this and go "stupid tattooed hipster girl, we're allowed to buy Treasurys."

Shut up, Brian Sack, this isn't about you, it's about the Fed as the largest supplier and purchaser of US debt. That is most certainly not authorized anywhere in the Fed's sneaky little deal with Congress. If it is, someone please point me directly to it and I'll retract that statement immediately.


That's what I thought.

If you ask me, Congress poking around in the Fed's regional structure is a straw man. Throw the unwashed masses a bloody piece of meat to satiate their appetite for a violent circus (surely an adjustment to the regional banks won't hurt the money-printing maniacs on 20th and Constitution Ave) and maybe they'll accept "new normal". As a wise person once taught me, sometimes you've got to toss a virgin into the volcano lest you appear as a heretic. The Fed can moan and groan in agony all it wants, a regional shake-up isn't the equivalent of a visit to the financial proctologist.

And in hypocritical statements of the decade, NY Fed's former fearless leader (and, as pointed out above, the asshat who gave Fannie and Freddie an unlimited bailout on a slow news day) Tim Geithner is all about busting down the Fed and shaking things up over there. STFU:

U.S. Treasury Secretary Timothy Geithner broke ranks with his former central bank colleagues and said he would support moves by Congress to take a look at how regional Federal Reserve bank presidents are appointed.

“I think it is very appropriate, and I would be completely supportive of the Congress taking a look at that broader governance structure” of regional Fed banks, Geithner said yesterday in an interview for Bloomberg Television’s “Political Capital With Al Hunt,” airing this weekend.

“You do not want to have any public institution in the position where its judgments, the judgments of their executives, are viewed through the prism of concern they are subject to influence of the financial community,” Geithner said. While that was “never the case,” he added, limiting such concerns would help protect the Fed, he said.

No. Start with the Board of Governors and work your way down.

In zombie movies, how do they take them out? Do they lop off limbs or do they go straight for the brain?

That's what I thought. Get 'em in the head.