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?

Bullshit.

"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.

Reuters:

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.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

2 comments:

gene said...

Nicely thought out and presented. But let me give you one modest counterpoint.
Thiry, forty, fifty years ago, it was generally understood that there was monetary policy (Fed) and fiscal policy (Congress). Congress abandoned its fiscal responsibility with unimaginable debt. While I'm very conservative, I lay the blame at the Bush administration, which failed to veto any spending bill or set any spending restraints whatsover. The Obama administration has further accelerated this craziness.
Therefore, too much responsibility has been thrust upon the Fed as Congress has revealed themselves to either be financially stupid, or financial cowards...

Gene,

Thank you and even though you are playing Devil's advocate by defending the Fed, you are absolutely right. The other problem now is that because of that, Congress could easily bastardize the Fed, pull the plug, claim victory, and then set the stage for this country's fourth and worse central bank comprised of the same characters, all without the unwashed masses even knowing what happened.

It is certainly a mess. There's really no other way to put it.

thanks for swinging by and you're welcome to counterpoint me *any* time ;)

AG