Richmond Fed on Fractional Reserve Banking: And the Largest Cojones of the Year Award Goes to... RFRB!

Read it and weep, America,
here is the dollar's last hope


Several months ago, Richmond Federal Reserve President Jeffrey Lacker first appeared on my radar. We had the private Fed, we had deceptive Fed tactics, and we had the questionable position of our favorite central bank dictating the comings and goings of our increasingly distraught economy in the heady days of Bernaulson on Capitol Hill begging for TARP. And of course we had the Board of Governors in D.C. pushing for quantitative easing and a monetary policy which led to little more than dollar debasement on the Fed's watch. And then we had Jeffrey Lacker, who appeared to be the sole voice of reason in the murky smoke and mirrors of the entire Federal Reserve System; a canary in the coal mine? Or a genius stuck in a school of complete idiots standing by as the world economic system went plummeting towards absolute ruin? What can one man possibly do? FOMC vote or not, it takes a lot to overcome nearly 100 years of ass-backwards, ignorant economic "reason" at the Fed's table.

Gentle Ben (Zimbabwe Ben as he is known amongst the Austrian school) trained his entire life for a crisis of this magnitude but finds himself entirely unprepared in the face of total economic failure. So which direction does our darling Dr. Bernanke turn? That which has been dictated by his keepers. Print the money, bail out the Wall Street Mafia, don't ask questions. The free market has been murdered on the Fed's floor and Bernanke can do little but say "oops! sorry!" and keep cranking out the funny money.

Months ago, before I started Jr Deputy Accountant and started crawling further down the Fed rabbit hole, I might have been lost on the concept of "Fed independence" or even the intimacies of the regional Fed banks. Richard Fisher? Skeezy. Eric Rosengren? Square. Janet Yellen? A moron. Did I know any of this when I started this little project? No. Hell, I barely realized that the Creature from Jekyll Island consisted of much more than the worthless FRNs swelling in my back pocket on payday. Surely I was not the only American who confused an image of Fort Knox with the obscure Fed - the system is designed as such and no one is supposed to understand. As G. Edward Griffin points out in his epoch on the Creature, it is so simple that we are not supposed to understand. Having dated a Fed employee once upon a time, I assure you that even their own people are misguided to say the least. And that is exactly how they want it to be. Do not delude yourself into thinking otherwise.

Richmond Fed has always stood out to me, even before the days when I languished over Fed speeches and FOMC minutes and strange tales of Alan Greenspan evangelizing the benefits of a gold standard. Might I be so bold as to remind you, dear reader, that the homicidal maniac who created the greatest unsustainable bubble of all time once said "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves."

Oh Alan, where did you lose your way? "Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

The poetry of economic sanity is now lost among Goldman Sachs' market manipulation, China's raging gold habit, and an ever-weakening dollar.

I assure you, dear reader, that not all is lost. Though it may appear so on the surface, not all of the war against economic sanity's soldiers are so transfixed by their own central banker code that they themselves cannot comprehend their own lies. Trust me on this one. If I ever believed one of the bunch could press for economic clarity, Richmond's Lacker is it. I joke with MS Paint pics and declarations of "I love you, Jeffrey Lacker! SAVE US!" but what I mean to say is that if ever a sane mind existed in the sea of propaganda and central banker code, Lacker and Richmond are it.

1 out of 12 ain't so bad after all.

Proof of this lies in Richmond's own publications. Who of the Federal Reserve System in their right mind would publish a piece like George Selgin's recent article on the farce of fractional reserve banking knowing that this might mean their end? Richmond, that's who.

I have not switched sides. I am still adamantly opposed to the Fed as a whole. But a glimmer of hope isn't such a bad thing, is it?

Richmond gets it. If only "getting it" were enough to topple the Board's insistence that we fully debase the dollar on the way down...

RFRB's article starts out with a bang saying "To many, the idea that an economy can function without a central bank to issue currency or serve as a lender of last resort will seem bizarre. To economist George Selgin, the idea is one that needs to be taken more seriously." Whazzat? Am I really on a member of the Federal Reserve System's website?!

Arguably, Selgin is lost in the anti-Austrian argument, implying that we are incorrect to direct our frustrations at the fractional reserve system as a large part of the problem. But beyond that small discrepancy, and as much as I as a Fedwatcher and known End the Fed strategist hate to admit, he is right. More astonishingly, a Federal Reserve bank published such truths on its own site.

Richmond! WTF are you doing?!

"I think a distinction needs to be made between the banking regime on the one hand and the monetary base regime on the other," says Selgin when evangelizing his "free banking" concept. The Federal Reserve System as a whole would do well to listen to its colleagues at Richmond when President Lacker insists on the importance of Fed independence - lest the Fed forget its ultimate goal. It may be there to rob wealth via the most insidious tax of all (inflation) or expand the money supply in the same fashion using its questionable position at the top of the economic food chain but the reality remains that it has thus far enjoyed some level of independence from the wonky politics of D.C.

No longer. Those days have passed for the Fed, though surely I imagine President Lacker (and a handful of his smarter colleagues) understand what this means for their organization and for the economic framework of the United States as a whole.

"What I just described is exactly the sort of thing that triggered many of the financial crises of the 19th century. The irony is that people now see these periodic crises, especially in England, as proving the need for a central bank and a lender of last resort. Walter Bagehot, on the other hand, recognized that the boom-and-bust cycles were a product of a monopoly in currency issuance," says Selgin. What?!

Listen, Jeffrey Lacker, I am not kidding. We need you. I joke about being in <3 with you but I mean it, you might be our last hope in the fight for the dollar.

Jr's thoughts on JL may be found: here, here, and here (don't miss my exceptional MS Paint skills on that one)

Save us, Jeffrey Lacker. And I mean that this time.

Disclaimer: none. Jeffrey Lacker is just awesome and that's that.

Lender of Last Resort Coughs Up Big $ to Banks, Investment Firms Not So Much



I can't believe investment firms are biting at all, actually. And where-oh-where is all of this money going?

No wonder people believe in such off-the-wall (!) ideas as the PPT and a vast global conspiracy to prop up a flawed economic system running its last lap around the track. The jig is up, I don't know what all this posturing and fluffing is about. Give it up already.

By the way, anyone remember when the Fed used to be lender of last resort? Those were the good old days. Now it is the only lender. It's not really all that odd that Paul Volcker would express concern over the Fed's increasingly dangerous position. More government money. More bad assets. More putting its neck on the line.

Personally, I highly recommend that the Federal Reserve continue full steam ahead down this path. Independence? Meh. Who needs it?! Independence is for losers. Keep going, boys, you're so close...

AP:

WASHINGTON (AP) — Commercial banks borrowed more over the past week from the Federal Reserve's emergency lending program, while investment firms borrowed less.

The Fed reported Thursday that commercial banks averaged $44.8 billion in daily borrowing over the past week that ended Wednesday. That was up from $43.1 billion in the week that ended April 22.

Investment firms drew $5.5 billion over the past week from the Fed program, down from an average of $9.2 billion the previous week.

The identities of financial institutions are not released. They pay just 0.50 percent in interest for the emergency loans.

The report also showed that the Fed's net holdings of "commercial paper" averaged $222.9 billion over the week ending Wednesday, a decrease of nearly $18 billion from the previous week.

Commercial paper is the crucial short-term debt that companies use to pay everyday expenses, which the Fed began buying under the first-of-its-kind program on Oct. 27, a time of intensified credit problems. The central bank has said about $1.3 trillion worth of commercial paper would qualify.

The Fed also said its purchases of mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae averaged $367.7 billion over the past week, up $5.1 billion from the previous week. The goal of the program, which started on Jan. 5, is to help the crippled mortgage-finance and housing markets. Mortgage rates have dropped since the Fed announced the creation of the program late last year.

MSM Agrees With Sane Financial Bloggers: Goldman *DOES* Rule the World



Well, it's official. Goldman fever has gripped the mainstream media in a flurry of finger-pointing, conspiratorial bemusement, and oftentimes goofy postulating. Connect the dots, MSM, you're oh-so-close.

Salon.com on the call from Congress that America is now owned by the bankers. Shouldn't that be the other way around? TARP? TALF? PPIP? That's our money, you know. Or need I remind anyone of that?

Sen. Dick Durbin, on a local Chicago radio station this week, blurted out an obvious truth about Congress that, despite being blindingly obvious, is rarely spoken: "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place." The blunt acknowledgment that the same banks that caused the financial crisis "own" the U.S. Congress -- according to one of that institution's most powerful members -- demonstrates just how extreme this institutional corruption is. The ownership of the federal government by banks and other large corporations is effectuated in literally countless ways, none more effective than the endless and increasingly sleazy overlap between government and corporate officials. Here is just one random item this week announcing a couple of standard personnel moves:

Former Barney Frank staffer now top Goldman Sachs lobbyist Goldman Sachs' new top lobbyist was recently the top staffer to Rep. Barney Frank, D-Mass., on the House Financial Services Committee chaired by Frank. Michael Paese, a registered lobbyist for the Securities Industries and Financial Markets Association since he left Frank's committee in September, will join Goldman as director of government affairs, a role held last year by former Tom Daschle intimate, Mark Patterson, now the chief of staff at the Treasury Department. This is not Paese's first swing through the Wall Street-Congress revolving door: he previously worked at JP Morgan and Mercantile Bankshares, and in between served as senior minority counsel at the Financial Services Committee.

So: Paese went from Chairman Frank's office to be the top lobbyist at Goldman, and shortly before that, Goldman dispatched Paese's predecessor, close Tom Daschle associate Mark Patterson, to be Chief of Staff to Treasury Secretary Tim Geithner, himself a protege of former Goldman CEO Robert Rubin and a virtually wholly owned subsidiary of the banking industry. That's all part of what Desmond Lachman -- American Enterprise Institute fellow, former chief emerging market strategist at Salomon Smith Barney and top IMF official (no socialist he) -- recently described as "Goldman Sachs's seeming lock on high-level U.S. Treasury jobs."

So, can we put aside this nonsense about a "Goldman Conspiracy" and call it what it is? "The Goldman Reality" is a farce (though all too real), one which will doom any chance we have at economic recovery. In fact, the Goldman Reality's business model ensures economic failure since the cancer is so all-encompassing that it must at some point devour the host to stay alive.

All Goldman all the time. Keep that in mind and you'll do fine.

Careful, there be sharks in them there waters...

Tim Geithner: Not So Beautiful After All - But Still Scandalous!




Mr Geithner, it is now painfully clear that you, sir, are an idiot. Not only are you an idiot, but you're not very good at being one. Tax problems, economic bumbling, and now scamming your ugly mug onto People's most Beautiful People list? Shame on you, you big ole douchebag.

From NY Mag (and OMG LMAO at this):

Yesterday, when People revealed that Tim Geithner made their list of Beautiful People, we were happy that the Treasury Secretary was finally getting some positive attention. But today comes the shocking revelation that his election to the list might not have been genuine. It might have been influenced by nepotism! Clusterstock reports:

Geithner's brother David Geithner, is a People executive, having been at Time Warner (TWX) since 1992. This 1992 wedding announcement confirms they have the same father. And they look similar!

This is an outrage. It totally undermines our faith in People's Most Beautiful brand, which we have long regarded as the gold standard among listicles. Someone needs to look into their selection process, and make sure they are doing their research! For instance, what if they're not actually sending reporters out into the field in order to inspect everyone in America and scientifically determine who the 50 Most Beautiful People are? And if they're not, who was that guy that came into our cubicle last week and measured the distance between our nose and chin, then asked to stroke our raven tresses "for research purposes"??!!

Good one, NY Mag. And I have those guys who come into my office all the time too - they told me it was for a "Sexiest Girls of Economics" calendar but then they wanted me to slip down into our basement with them for some "candid" shots and I had to decline...

WHAT A MORON. BTW, Geithner could have, in theory, gotten on the list using his mug as an excuse. However, being as I am a girl and I tend to skeeze on banker/finance types, let me say in my independent opinion that Geithner is one ugly mofo. Remember that beauty is not only skin deep - and Geithner is fugly from the inside out.

This is such a scam.

He is better looking than Paulson, I'll give him that. But you, sir, are no Jeffrey Lacker.

SEC: Disclose Your Shorts, Ignore the Bloodbath to Your Left (That's Just Goldman)



Am I the only one who finds this silly?

Reuters:

WASHINGTON (Reuters) - A top U.S. securities regulator on Wednesday advocated some public disclosure of short-selling positions, information which could give a rare glimpse into big money managers' trading strategies.

The U.S. Securities and Exchange Commission will meet as early as May to finalize an interim rule that requires large investors and hedge funds to reveal their short positions to the agency. "Some public disclosure of short (positions) is appropriate," SEC Commissioner Luis Aguilar told the Reuters Global Financial Regulation Summit. Aguilar, a Democrat, is one of five SEC commissioners who make decisions on federal securities rules.

The interim rule, which expires at the end of July, requires money managers to reveal the number and value of securities sold short. But that information is only disclosed to the agency, not made public. The SEC imposed a number of interim measures to restrict short selling last autumn when markets were dropping precipitously and there was a fear that rumor-mongering and stock manipulation would decimate Wall Street.

Meanwhile, there's blood in the water and Goldman Sachs fingerprints all over the crime scene. But go ahead and keep going after the little guys, SEC, it's so cute when you try to act so bad ass...

Same old same old... *yawn*

Why Gold Isn't $1500 an Ounce, China's Sneak Tactic, and How Much Longer This Fake Rally Can Stand



"In supposing it to be a bug of REAL GOLD." He said this with an air of profound seriousness, and I felt inexpressibly shocked.

"This bug is to make my fortune," he continued, with a triumphant smile; "to reinstate me in my family possessions. Is it any wonder, then, that I prize it? Since Fortune has thought fit to bestow it upon me, I have only to use it properly, and I shall arrive at the gold of which it is the index. Jupiter, bring me that scarabaeus!" - Edgar Allen Poe, "The Gold Bug"


I mentioned this briefly late last night/early this morning without giving it all that much thought. China's announcement that it has been stockpiling gold since 2003 is an absolute blockbuster. All tin foil hattist gold bugism aside, this is a critical move. Don't get lost in the obvious; China isn't merely buffing up its gold holdings knowing that the collapse of the US Dollar is eminent based on recent events (quantitative easing, anyone? Bernanke? Perhaps you'd like to chime in if your money printing arm isn't too tired?). China has been doing this for 6 years and did not report the activity until just now.

Financial Post:

SHANGHAI/BEIJING - China revealed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes - or a pot worth about US$30.9-billion - and confirming years of speculation it had been buying.

Hu Xiaolian, head of the State Administration of Foreign Exchange, told Xinhua news agency in an interview that the country's reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing's ability to buy secretly and its ambitions for spending its nearly US$2-trillion pile of savings. And not just in gold: copper and other metals markets are booming thanks to China's barely-visible hand.

That's nearly $31 billion dollars worth of gold. At current prices, of course, since we all know both gold and the USD are experiencing their own turmoil independent to and directly because of each other.

China produced 282 tonnes of gold last year, meaning the state bought around one quarter of domestic production, assuming 454 tonnes increase in state purchases were spread out over the six years since China last reported a change in its holdings.

Despite the rumours, buying by the state was partially obscured by soaring demand for gold as an investment, especially after the bursting of the Shanghai stock market bubble last year.

The reality is that China has been happily buying gold leaked from central banks and the IMF around the world for 6 full years entirely under the radar. Or is that too conspiratorial for you? The last time we saw a great central bank sell-off in the late 90s, gold plummeted to $250/ounce. But a trickle? Much like fraudsters who know that if they repeatedly try to cash checks in amounts larger than $100,000 they'll trigger the warning alarms, so then might China have tried to take advantage of its foreign reserves without setting off a panic.

Patrick Heller has some thoughts via GATA.org (Gold Anti-Trust Action Committee in case you aren't one of the crackpots who believes in whacked out concepts like "hard assets" and "value in the face of a fiat collapse") worth reading. It turns out the DJIA isn't the only place manipulation is running rampant:

The impact of this announcement has ramifications far beyond that fact that China has been buying gold without reporting it. The World Gold Council and major precious metals consultancies such at GFMS regularly report gold supply and demand statistics that are widely quoted in the financial press. None of their reports include the Chinese central bank gold purchases as part of gold demand. Even more damaging to their reputations, these reports do not show any gold supply to cover what the Chinese have purchased.

Let me make this explicit. The gold purchased by the Chinese could not have come from mine production, recycling, investor liquidation, or announced government sales. Almost certainly the gold bought by the Chinese had to come from other central banks that secretly sneaked these supplies on the market.

In other words, the supply-and-demand statistics used by the mainstream financial press have been wrong for years. The question is how large are the errors. GATA researchers assert that the annual supply and demand statistics reported by the World Gold Council and GFMS could easily be off by 50 percent. With GATA's enhanced credibility confirmed by China's admission of their gold purchases, the mainstream financial press should seriously examine their data.

The difference between the gold situation and the fake rally we've been seeing pathetically propped up by the same economic hitmen who demolished the market in the first place (speculation of course) is that a reasonable person would expect China to behave this way. It may not be right or fair or any of those vague terms which dictate how one assumes humanity should feel compelled to act but it certainly makes sense given the United States' rampant currency debasement via the Fed's ever-expanding balance sheet.

But the market is a bloodbath of speculators, novices, and cutthroats all vying for prime space in the bear's mouth. Charts don't make sense. Logic is gone. Even investors normally known for their giant low-hanging balls are threatened by this market madness (unless they are named Goldman and/or Sachs, in which case it's do or die).

Remember that bit about Tim Geithner being put in place to confuse?

So is this rally.

China's gold move, however, is very real. And were the United States smart enough to stop guaranteeing all $52 bazillion of Goldman's counterparty losses, it might do itself wise to follow China's lead.

Think the all-in short selling at the end of each day is just a coincidence?

This is a global plague on a system already at its breaking point. How much longer can this be propped up? We managed to weasel our way through Q1 with rosy pictures of profitability thanks to FASB and some QE magic wand (amazing what a little fake paper can do) but this is certainly not sustainable. Nor will it be pretty once it all comes crashing down.

GoldSeek:

While fair-value lying may help the stock prices in the short term; the fundamentals are horrific for value investors. Most likely the longer the information is delayed and the less details the Treasury provides then the worse the true results are regardless of the faux official numbers.

The new FASB changes may enable profitability for a quarter, or even a few, but those profits are bogus. What purpose do these FASB changes and bailouts serve? To funnel bailout money through AIG to Goldman Sachs, JP Morgan, and European banks like Deutsche Bank. After all, Deutsche Bank, assisted by the ECB, has most likely been extremely helpful in perpetuating the gold price suppression scheme.

Why else would the ECB sell 35M ounces of gold the exact same day Deutsche Bank had to deliver 850,000 ounces of gold or risk a failure-to-deliver on the COMEX (Part 1 and Part 2)? The gold and silver markets, along with their shadow of the interest-rate market, are enveloped by the thickest part of the derivative illusion. As securities attorney Avery Goodman observed, “But, simply put, you cannot legitimately or legally hedge against another hedge, which is what the derivatives dealers appear to be doing, and which CFTC seems to be allowing them to do.”

The day of reckoning is upon us, kids, and it isn't going to be pretty.

JS Kim has an explanation of how disinformation works in manipulation via Seeking Alpha - if Kim is correct, it would explain quite a bit.

Paul Volcker: Moral Hazard's Favorite Cheerleader on Fed Independence, Inflation, and Dangerous Behavior

Volcker could kick Bernanke's ass
on Fed Chair rad factor alone


Yes, kids, you read that correctly. While Paul Volckerism is popular among the econ blogger set, you should know me well enough to get that I don't just jump on the bandwagon that easily.

There is nothing funny about Paul Volcker. And I'm not going to be the girl juggling his balls over the noble thing he did in his long gone Fed Chairman days. Pfft. Those days are over and one might argue that he was simply doing his job.

Bloomberg on Volcker's promise to make sure banks are rewarded for their reckless behavior (and some crap about "recovery" which I've conveniently disregarded and recommend you do as well):

“I do not think there are grounds for great optimism,” Volcker said. “It is going to take a while, I think, to have a strong recovery.”

That will keep the government involved in the financial system, and the administration will provide the capital needed to keep banks afloat, he said.

“There’s a visible commitment by the government to support these so-called systemically important institutions at this point,” said Volcker, 81, who was Fed chairman from 1979 to 1987. “So they’re not going to go under in the sense of ceasing operations or even interrupting operations. It’s a question of how much support they’re going to need.”

The administration’s plans to help private investors remove distressed assets from banks’ balance sheets will work “to some extent,” Volcker said. “How quickly we deal with the system that is, as I say, still in intensive care, is the question.”

Did you hear that, Citigroup? The government stands behind you 100000% percent so go ahead and keep making boneheaded moves - who cares?! Your portfolio is backed by the full faith and credit of the United States of America! That's pretty damn gangsta if you ask me!

Volcker, like every other American with two brain cells to rub together, is also concerned about the Fed's balance sheet expansion magic but doesn't blame Ben Bernanke for this mess. As much as I love to trash our buddy Zimbabwe Ben, I suppose Volcker makes a good point. Much like President Obama, Bernanke took over the reigns right as the shit was hitting the fan so to put it entirely on his shoulders would be unfair. Besides, there are 16 other Fed targets to point the finger at (might I suggest Janet Yellen for starters?) and 2010 is a long way off.

“The Federal Reserve is going beyond the traditional role of central banks here or abroad,” Volcker said. “At some point it’s reasonable to ask should this particular institution, with its independence very well protected, be allocating so much of what is essentially government money.”

Volcker said Fed Chairman Ben S. Bernanke is “doing a great job” and he declined to speculate on whether Obama will reappoint Bernanke when his term as chairman ends in 2010. “It’s not a situation where any of this problem reflects shortcomings on Mr. Bernanke’s part.”

Volcker agreed with economists who say the expansion of the Fed’s balance sheet, to more than $2.2 trillion as of last week, might pose an inflation danger at some point.

“The inflation problem, which should be a real threat for the future, is not right on the doorstep,” he said. “But two or three years from now that may be the critical problem, how that’s handled. Because, given what the Federal Reserve has been doing, it’s going to be harder to retrace their steps, so to speak, than it ordinarily would be.”

You know, for a diabolical old bastard Volcker isn't all that bad. Did I catch that right? Is Volcker questioning the Fed's declared independence too? Bout time you jumped on board, old man, now what're you going to do about it?!

Ken Lewis... Still BFFs with BofA. Sorta.



What. the. hell. isthisshit?!

I can't watch.

Meanwhile, Bernaulson are awfully quiet while this BofA mess goes down. I might say that's awfully suspicious but I'd hate to point fingers. Yeah right.

FT:

Bank of America chief executive Ken Lewis was stripped of his role as chairman on Wednesday after a rebellion among shareholders forced BofA’s normally quiescent board to replace him with long-time director Walter Massey.

Mr Lewis will remain as BofA’s chief executive but the passage of a shareholder proposal to separate the dual roles he has held since taking the helm eight years ago is a blow to his standing and will loosen his grip on the company.

The result of the ballot, which was delayed for hours while BofA scrambled to count the votes after heavy turnout, is a high water mark for the corporate governance movement in the US. It is extremely rare for investors to win votes on proposals that are opposed by management, because institutional investors and mutual funds are reluctant to go against companies’ recommendations.

Blah, blah, blah...

Investors are F&^$ing Dumb, More Market Manipulation, and the Sideways Speak of the FOMC

Sometimes all you can do is say...
WTF.


Really? Really?

FT: US stocks rally on renewed bank confidence

US stocks rallied strongly, taking the S&P to a three-month high on Wednesday, as optimism from the Federal Reserve on the economy added to renewed confidence over banks’ balance sheets.

Shares gained as the Fed said the contraction in the economy “appears to be somewhat slower”, and held off from ramping up quantitative easing.

“People are seeing the Bloomberg report as a positive, as it adds clarity to banks’ capital positions,” said Alan Ruskin, strategist at RBS.

Investors also looked beyond a sharper contraction in the US economy than analysts had predicted, and took confidence from an unexpectedly strong rise in personal consumption.

Bloomberg: U.S. Economy: GDP Shrinks in Worst Slump in 50 Years

In the same breath, Bloomberg: Fed Keeps Purchase Targets Unchanged, Sees Stability

Am I the only one who sees the problem with this? Or am I just out of my mind? It's starting to feel that way.

Meanwhile in other WTF news, Citigroup has a hot date tonight and wants to make sure it reeks of Drakkar Noir instead of garlic and failure. Keep those vampires away, Pandit!

I'm speechless. I think this flu is starting to get to my brain...

A Sucker Born Every Minute Or in This Case 100 of Them


they were all fulsome
with hatred,
glossed over with petty
grievances,
the men I fought in
alleys had hearts of stone.
everybody was nudging,
inching, cheating for
some insignificant
advantage,
the lie was the
weapon and the
plot was
empty, darkness was the
dictator.
"Let it Enfold You" - Charles Bukowski



The FOMC is treading carefully so as not to disturb the "recovery" but the Treasury's PPIP is still PPlugging away? Is someone banking on this scheme to work in their projections? If so, we're far more screwed than even I realized.

MarketWatch:

Over 100 private institutions have sought government approval to join the Treasury's program to clear $1 trillion in so-called toxic mortgage securities and other assets from banks, the Treasury Department said Wednesday.

Treasury expects to identify which applicants have been pre-approved to participate in the program on May 15.

Under the so-called public-private program, private investors and the Treasury would put in equal amounts of money backed by a loan guarantee from the Federal Deposit Insurance Corp. to buy troubled loans and mortgage-backed securities from banks. The purchases would be made through auctions.

The Treasury plans to pick five large private investors to bid on illiquid securities sold by banks. Under pressure from consumer groups, Treasury on April 6 expanded the program to allow smaller firms run by women, minorities and smaller funds to participate. The Treasury is seeking to "facilitate" having these funds partner with larger, more established funds to apply, an endeavor that the agency believes is working.

"We are pleased to see a number of creative partnership proposals among the applications we are currently evaluating," Treasury said in a statement.

Funds that have been approved on May 15 will then be required to start raising the $500 million in private capital needed to participate. Fund managers are required to seek out retail investors to participate in the program. Treasury plans to match the private capital raised with taxpayer funds to participate in the program.

And here I thought FAS 157-e had cleaned everything up?

Grab your quarantine suits, kids!

Bank of America's Not-So-Sexy Circus Sideshow: Ousting Lewis Becomes Photo Finish

I hope LOLFed didn't beat me to this caption...
too. freaking. easy.


"How long will you defend the unjust and show partiality to the wicked?" - Psalm 82

I am not kidding you - the annual BofA shareholder meeting opened with a reading of Psalm 82. That says something, I'm just not sure what.

Really, Bank of America shareholders? Really? It's Bank of fucking America! You had to see this coming! You weren't chasing Ken Lewis around the conference room with flaming pitchforks last year now were you? All the sudden the guy is an idiot who led BofA right into the lion's mouth; sure, he should have grown a pair and told Bernaulson that he was going MAC on Merrill like it or not but you have to realize that it takes a special kind of balls to take on Hank Paulson. Hello! Goldman! You don't fuck with the Sachs. I'm just sayin...

TheDeal.com on Bank of America's hilariously Jerry Springer-esque annual shareholders meeting (I know *I* am LOLing over here):

Bank of America Corp.'s (BAC) annual meeting is turning out to be a raucous affair as Ken Lewis and the board of directors are getting an earful from shareholders who are indulging in their opportunity to rail against the directors and management.

"I don't understand how you can stand up here and say that you should keep your job," one woman told Lewis, after reading him a sarcastic poem about his $50 million in compensation.

Numerous shareholders also accused Lewis of driving the bank into insolvency.

In an answer to one question, Lewis also said that management considered executing a MAC and killing the Merrill Lynch & Co. deal, but decided that it wasn't in the best interests of the shareholders, eliciting sighs from the audience.

Another shareholder vented about Treasury Secretary Tim Geithner and the stress tests, demanding that Lewis explain what the tests were and how the bank performed on them.

"Let's all be buddies here," he said. "Come clean; this is America, not a banana republic. We want to know if the preferred are going to become common."


You know what, Ken Lewis? I think you deserve a hug.

At least one shareholder still <3s Lewis, telling the room "You are the right man, at the right time for this bank. If others don't like it, sell the stock and move on, because this is all about growing Bank of America."

LOL! This just keeps getting better and better...

FOMC Acknowledges Inflation Concerns, Goes Limp

Swine flu got to the FOMC too?!


Well wtf. I waited around 25 minutes for this?!

No < ZIRP, no additional Treasury purchase announcements, no nothing. What the hell did they talk about for two days? Swine flu and the weather?!

MarketWatch compared the FOMC to the parent tiptoeing around a sleeping newborn but I'm liable to compare the Fed to the cougar tiptoeing through the brush so as not to startle the deer feeding at the stream. Maybe that's just me.

Nothing to see here... FOMC disappoints, the economy is still a wreck, and now we get to hold on for the afternoon's sell off. It's an FOMC tradition, after all.

Zzzzz, I'm going back to bed now.

Call me crazy but I don't think the Fed is all that worried about waking the sleeping baby. I'm inclined to say the problem is that it realizes just how impotent it is.

Shootin' blanks in the open market - good times!

In World WTF News This Morning 4/29/09

Voltaire's prayer: "O Lord make my enemies ridiculous."


Being in California is good for one thing; I might miss the East Coast wake-up bell but if I stay up late enough, I get to hear how bad it sucks around the world while New York is still asleep. Except for the rats plugging away in the Goldman dungeon surely.

Since I've been sent home from the CPA Factory for a cold or flu or whatever (don't panic, people get sick - it does make for great zombie jokes though) and took a nap, guess I'm awake for this.

A quick peek at Europe this morning is depressing (The Credit Crunch is Coming):

In Germany concern is rising about a credit crunch for small and medium sized companies; Ackermann warns that recession will lead to large credit losses; money market interest rates keep on falling; reform of the EU working time directive fails; Sarkozy will unveil €35bn transport investments; in Ireland, meanwhile, peak-to-trough economic growth is forecast to fall by 14%.

Conveniently, China has increased its gold holdings in time for stress test madness and the conclusion of the FOMC. That's fucking adorable.

NEW YORK & LONDON--(BUSINESS WIRE)--News that China has increased its gold holdings by more than 75% is a clear indication of the critical role that gold plays in central bank reserves, World Gold Council said today.

Welcoming the announcement by China’s State Administration of Foreign Exchange (SAFE) that the country’s official gold reserves have risen from 600 tonnes in 2003 to 1,054 tonnes, the CEO of World Gold Council, Aram Shishmanian, said:

“The Chinese government’s decision further demonstrates the leadership it is increasingly taking and its public recognition of gold’s proven role as a store of value and portfolio diversifier. We are closely monitoring developments at other central banks to determine whether they will follow China’s bold and thought-leading move, particularly those in Asia.

”This news is also further evidence of the growing recognition of gold’s growing prominence in providing stability in the uncertain financial markets, not only as a reserve asset but in the investment markets also.”


Here's to hoping I don't have to explain what that means for the dollar.

Wednesday is going to be a ride.

Goldman's Market Stranglehold, PPT Paws in the Snow, TBTF, and the Fed's (Other) Dirty Little Secret

Good predators
don't get red
on their pristine coats



It makes sense that Goldman Sachs would have the audacity to say it is perfectly hedged if it knew in advance which way the market were moving using not some sinister insider trading (that's for amateurs, this is $GS we're talking about here, they don't play the peasant manipulation games) but its sheer size to shove them in the desired direction.

Mish's assessment on the Goldman game is much kinder than mine, or rather he's just a little nicer to them than I care to be. Mish (with a little Zero Hedge thrown in for good measure) on The Goldman Problem:

It's time to breakup Goldman Sachs, Citigroup, and for that matter any bank or holding company deemed too big to fail. It's not just the "too big to fail" hazard that is troubling, it's also the power these corporations have and the potential to abuse that power that is also troubling.

Please consider the article Incredibly Shrinking Market Liquidity as posted on the Zero Hedge blog.

A very interesting data point, also provided by the NYSE, implicates none other than administration darling Goldman Sachs in yet another potentially troubling development. The chart below demonstrates the program trading broken down by the top 15 most active NYSE member firms. I bring your attention to the total, principal, customer facilitation and agency columns.




Key to note here is that Goldman's program trading principal to agency+customer facilitation ratio is a staggering 5x, which is multiples higher than both the second most active program trader and the average ratio of the NYSE, both at or below 1x. The implication is that Goldman Sachs, due to its preeminent position not only as one of the world's largest broker/dealers (pardon, Bank Holding Companies), but also as being on the top of the high-frequency trading/liquidity provision "food chain", trades much more often for its own (principal) benefit, likely in tandem with the other top dogs on the list: RenTec, Highbridge (JP Morgan), and GETCO.

In this light, the program trading spike over the past week could be perceived as much more sinister. For conspiracy lovers, long searching for any circumstantial evidence to catch the mysterious "plunge protection team" in action, you should look no further than this.

Readers know that I am not a subscriber to Plunge Protection Team (PPT) theory. However, I am open to the idea that it is possible for Broker Dealers or Bank Holding Companies to be trading their own accounts ahead of customer accounts and/or advising clients (or the public) one way (and trading the other), on purpose. [my emphasis]

Mish may not subscribe to PPT but I'm happy to strap on my tin foil hat and say if the PPT is hard at work trying to keep this up, they should be fired for ineptitude.

Transparency? There it is.

Mish has some great thoughts on The OhMyGoldman Conspiracy and more boneheaded Citi moves at the above post if you'd care to read more.

Debunking the PPT theory in 2003, Safe Haven calls it impossible based on multiple factors. The fact that "politics" is referenced as one such reason PPT is unlikely goes to show that SH wasn't thinking straight in writing this.

PPT would take several bazillion dollars to pull off:

* The amounts of money required to attempt such a manipulation would be huge. We are talking tens of billions of dollars if there was a true collapse going on. The collective size of the trading community in the world (hedge funds and "prop" desks - a prop desk is a proprietary desk for an investment bank or broker-dealer) is in the multiple hundreds of billions. It would require the willingness to lose billions of dollars every time you took the plunge, so to speak.

Well wait a second! Who cares about losing billions of dollars? We have proven by their risk exposure that JP Morgan, Citigroup, Bank of America, Wells Fargo, and of course Goldman Sachs don't mind being all that exposed.

Secondly, PPT would require some "creative balance sheet usage" on the part of the Fed (that sounds familiar?):

* If the Fed or Treasury or some slush fund did buy stocks, it would inject liquidity or more total money into the financial system or money supply. Since the Fed openly manipulates the money supply every day in transactions that everyone can see, in order for the Fed to hide the activity of the PPT, they would have to take out liquidity by selling treasury notes. Otherwise, the numbers at the end of the day or week would not add up, and someone would notice. But if they were taking out liquidity and the money supply did not go down, then someone would know something was up. You can't hide these numbers, unless you can get a lot of clerks at the Fed and elsewhere to agree to lie.

Yes, mmkay. But the Fed could announce Treasury purchases to prop up the economy and...?

Though the existence of an insidious government arm put in place to prop up the markets might be a bit of a stretch (there are no black Fed helicopters either, I have been informed by a source who shall forever remain nameless *cry*), I think entirely debunking the PPT theory is unwise.

It's not PPT, per say, just Goldman on another raid again... move along, nothing to see here...

Oh, and LOL at Safe Haven's other "PPT is a myth" point:

* If you believe in the PPT, it probably would do no good to mention that the rules under which the Fed operates makes it illegal for them to participate in such an operation, since you would assume they would not follow their own rules.

Yes, because surely the Fed follows the letter of the law exactly in every single move it makes. We don't know this, of course, since the Fed is not audited. It just checks in with Congress every now and then and gives the "all clear!" - it's OK, we can trust them, right? Even if the Fed were audited, who would do it? The same firms which allow debacles like Satyam and Enron to slip? Or how about the agency that allowed Bernie Madoff to make off with millions after 10 years worth of warning signs?

That's what I thought.

So what have we learned this time kids? The Fed lies, Goldman has patented back-stabbing in the bazillions, PPT or not something's fishy about this market (still), and did I mention the part about Goldman slitting throats? Oh yeah.

What in the Hell Happened To Dendreon Today?

Sifl and Olly have nothing to do with this.
But Dendreon pics? zzzz


[update 5.25.09: the offending Yahoo Finance post has since been removed. Hmm]

Since I'm likely dying of zombie flu right now, I missed this. What the hell happened?

Only in Bizarro World can positive pharma results equal behavior like this, I suppose.

24/7 Wall Street on the $DNDN debacle (which I totally slept through):

15:05:01 EST NASDAQ has reviewed the transactions under rule 11890 (b) on its own motion filing involving the security Dendreon Corp. (NASDAQ: DNDN) executed between 13:25:00 and 13:27:02 ET today and has determined that all trades will stand. This decision cannot be appealed.

In short, if you got stopped out or shaken out of or into the stock, NASDAQ is telling you “Tough Cookie!”

[by JON C. OGG]

A call into NASDAQ Marketwatch has confirmed that the NASDAQ is looking into erroneous trading in Dendreon Corporation (NASDAQ: DNDN). As the NASDAQ has posted:

* NASDAQ MarketWatch is investigating potentially erroneous transactions involving the security Dendreon Corp. (DNDN) executed between 13:25:00 and 13:27:02 ET today. MarketWatch will advise with details as soon as available. Participants should review their trading activity for potentially erroneous trades and request adjudication through the Clearly Erroneous process within the applicable timeframe for filing pursuant to the rule.

Who knew cancer drugs in the midst of a pandemic could be so much fun?

Shameful?

A bear raid?

How'd this guy call it on Yahoo! Finance an hour before it happened?

Screw it, I'm sticking with the Fed and going back to bed...

Oh, and though Dendreon's performance is just dripping with signs of manipulation, the SEC is likely still busy rearranging those deck chairs. Run!

Please Sir I Can Has More Bonus? - Citi Grows a Pair, Still Sucks




In case you weren't already painfully aware, Citigroup is a mess. So much so that Vikram Pandit has balls large enough to hand over to the Treasury. "Asking permission" for bonuses? Surely you jest. There's a rat in here somewhere, and most likely it lies in Citi needing more government money to stay afloat.

Reuters:

NEW YORK (Reuters) - Citigroup Inc has asked U.S. Treasury for permission to pay special bonuses and is looking for ways to free an energy-trading unit from government restrictions, the Wall Street Journal reported on its Website on Tuesday.

Citigroup Chief Executive Vikram Pandit asked Treasury Secretary Timothy Geithner earlier this month to be allowed to pay stock-based bonuses to employees but the government has not made up its mind yet, the paper reported.

Citigroup executives are describing these as retention bonuses, but the bank is still considering several options of how to structure any bonuses, the paper said.

In one plan the bonus would be largely stock that vests over some three years and be worth at least half the employee's cumulative pay over the last three years, the paper reported.

Citigroup is also dealing with people threatening to leave from its energy-trading unit, Phibro, because of pay restrictions, the paper said.

Citigroup is looking into possibilities, including either spinning off Phibro into an independent hedge fund or bringing in outside investors, the paper said.

A Citigroup spokesman could not immediately be reached.

In other WTF developments, Citi will also need more capital after failing preliminary "Stress tests" - how in the hell do you FAIL an open book test?! THEY GAVE YOU A SHEET TO FILL OUT, PANDIT!! WTF!

Psst: that's when you know it's bad, in case you didn't get that memo.

Zombie Flu of the Treasury: Shoots the Market in the Head

Pic credit: ME!
"The Bunny Hole"


And now, I said, let me show in a figure how far our nature is enlightened or unenlightened: --Behold! human beings living in a underground den, which has a mouth open towards the light and reaching all along the den; here they have been from their childhood, and have their legs and necks chained so that they cannot move, and can only see before them, being prevented by the chains from turning round their heads. Above and behind them a fire is blazing at a distance, and between the fire and the prisoners there is a raised way; and you will see, if you look, a low wall built along the way, like the screen which marionette players have in front of them, over which they show the puppets.
- Socrates via the allegory of Plato's Cave

True, he said; how could they see anything but the shadows if they were never allowed to move their heads?


Hat tip to reader CK for that lovely little bit of enlightenment - thank you!

America is in a coma waiting for that "recovery" we've been promised, holding out for a return to the days of fat credit card balances and shiny new trinkets. Good morning, America, and welcome to your new reality. Wake up now or wake up later, it's entirely up to you. I know on which side I will happily be standing in the meantime.

From the Heritage Foundation, an interesting take on the Treasury and the "market flu" infecting all of our brains:

Markets are weighed down by worries over the new swine flu and the ongoing stress flu; the former from Mexico, the latter from the Treasury Department. Recently, Treasury added markedly to market uncertainties by suggesting it would convert federal capital injections from preferred shares of banks to common shares. This makes little sense unless Treasury’s goal is to unsettle markets further and dilute the holdings of existing shareholders.

Treasury’s stress test examinations of the nation’s largest banks to determine if they have the capital to survive a major economic downturn should ultimately provide some assurances to the stock market. Until then, the stress tests are destabilizing markets by injecting extraneous uncertainties regarding the tests themselves, the process, and the implications for banks that are found to be short of capital.

The Treasury then doubled down on market fears through its equity conversion proposal. Treasury currently owns billions in preferred shares of the major banks. These shares plus its supervisory powers mean the most troubled banks have already been effectively nationalized through the backdoor. The banks are still learning what this means in practice, and its not pretty – threatened pay caps, CEO firings, etc. Converting the preferred shares to common shares takes this nationalization one small step further.

What the conversion does not do is make the banks any healthier. Banks that are light on capital remain so. And because it has so little concrete meaning, the conversion to common shares raises serious questions about Treasury’s real intentions. Giving the Obama team the benefit of the doubt that in fact they don’t want to run these banks on a day-to-day basis, this peculiar conversion proposal has left markets wondering what Treasury really is thinking. Consequently, this proposal only adds to the market’s worries. Upsetting them further is no way to restore credit markets to normalcy. It’s time for Treasury to step back and let markets heal.

Leave. The. Market. Alone.

The Treasury will not get that. The ruse will continue. Anything to keep the scam going, right? Would love to get Bernie Madoff's thoughts on this........

Strategists Say FOMC Won't Have Much of an Impact on US Dollar

Your turn to roll, FOMC...


No comment. Still wondering how likely a negative interest rate will be tomorrow...

ForexTV:

(CEP News) - The FOMC interest rate decision on Wednesday won't have a major impact on the U.S. dollar, according to currency strategist.Most strategists agree that the Fed won't be making any major announcements Wednesday afternoon following their meeting, despite the fact that U.S. treasury prices are creeping higher.

At the last FOMC meeting on March 18, the Fed announced it was expanding its balance sheet by $1.2 trillion. The announcement included the purchase of $300 billion in longer term treasury securities.

Following the announcement, the U.S. dollar index dropped 3.6%. The session following the meeting, the index found support at a three-month low of 82.6.

"I think we have seen some relative stability since the Fed's last meeting," said Jamie Coleman, currency strategist from Forexlive.com. "I think that means there is very low risk that the Fed makes any major changes."

Coleman added that if the Fed comes out with another purchase announcement it could sound panicky, and could spook financial markets.

Coleman said he is watching some of the other releases to determine future direction. He pointed out that if the U.S. government releases the results of the bank stress tests, it could cause a spike in risk aversion and spook the markets.

Although the Fed is unlikely to announce another expansion of its balance sheet, there is a risk that they "tinker" with the plan outlined on March 18. Richard Franulovich, senior currency strategist from Westpac, said there is a risk that the Fed accelerates the purchasing of U.S. treasuries.

He added that any talk about adjustments to the purchase program would cause a significant sell off in the euro.

I concur with the article's sentiment. I can't imagine the FOMC will actually be able to come up with anything all that jolting to the market. Though less than ZIRP would certainly accomplish as much...

Tim Geithner's Big Fat Mouth, Financial Sector Lies, Fun with $FAS and the Citi/BofA Capital Problem



On April 22nd, just a little under a week ago, Tim Geithner told the world (likely in response to a claimed "stress test" leak) that "the vast majority of our banks are well capitalized."

Now, perhaps by "vast" Timmy meant "in regards to the number of banks tested" and not to the significant positions of the banks in question. For two of the largest stress tested banks, Citigroup and Bank of America, to now require additional capital to stay afloat, a reasonable person may be inclined to say Timmy the Two-bit Tax Cheat was wholly full of shit for making such a claim last week.

I, being a reasonable person, am inclined to say that Timmy is wholly full of shit not just for that claim but for 98% of what he has said and done in his short tenure at the Treasury. But that's just me.

Ready for more under-capitalized awesomeness? Well here we go. (via MarketWatch):

Federal regulators in the U.S. have told Bank of America Corp. and Citigroup Inc. that, based on early results of the government's so-called stress tests of lenders, the banks may need to raise more capital, according to a U.S. media report Tuesday.

The report sent shares of both banks falling, and helped drag down the broader financial sector Tuesday.

However, the report is not a total surprise, as it is well known that capital levels at both banks have been an issue in the markets, and recent price activity in the banks' shares and the spreads on debt derivatives have expressed that concern.

"With stress tests underway and the CDS market deteriorating, it is hard not to think that Bank of America may be highlighted as an entity that currently has insufficient capital which could trigger a significant move lower in the stock," Ariel Securities analysts wrote in a Tuesday research report.
Let us now recall that of the $800 gazillion in exotic credit instruments floating around in the financial sector (ok, more like $800 trillion at last count, no?), "five large commercial banks represent 96% of the total industry notional amount and 81% of industry net current credit exposure" according to the OCC. JP Morgan, Goldman Sachs (and seeing as how the United States government is a wholly-authorized subsidiary of GS, they will be fine), Citigroup, Bank of America, and Wells Fargo.

Where's JPM in this mess?

Oust Pandit already!

Once again, I smell a rat. The Ken Lewis/Bernaulson/John Thain disaster is almost too much to take. And as long as Citi is still headed up by Vikram Pandit, the taxpayer is the one who comes out looking like the bitch.

This is just a little more bullshit than I can handle.

Thankfully Pandit may not be around too longer if, you know, Citi and BofA can't come up with that "private" infusion of cash the Treasury is "encouraging" them to find in lieu of yet another taxpayer bailout. (via TheStreet.com):

[A] report says senior officials at the Federal Deposit Insurance Corp. privately have discussed who might replace CEO Vikram Pandit if the bank needed more government aid.

"It is unthinkable that Vikram could stay on if Citi requires more federal funds," a person familiar with the matter said, the Financial Times reports. "It is prudent to be thinking about different scenarios."

The FDIC is one of the regulators that has a say on whether Pandit steps down if the government bails out the bank for the fourth time in six months following completion of the "stress test" of Citigroup's health, the newspaper notes. Any decision on Citigroup's leadership will be led by the Treasury Department, which is about to take a 36% stake in the bank and must approve further capital injections.

People close to the situation said FDIC officials had discussed successors to Pandit, who was named Citigroup CEO in December 2007.

The possible successors include Ned Kelly, chief financial officer; Gary Crittenden, his predecessor and chairman of the division containing Citigroup's non-core assets; and one of Citigroup's new board members. The new directors include: Jerry Grundhofer, former CEO of U.S. Bancorp; Michael O'Neill, former head of the Bank of Hawaii; Anthony Santomero, former head of the Philadelphia Federal Reserve; and William Thompson, former co-head of bond group Pacific Investment Management.


Great. As if any of those asshats will fare any better than our conniving little friend Pandit. FAIL all around.

Federal Reserve v Congress: Time to Expose the Ruse?



The Fed is in a precarious position these days what with $14 bazillion in commitments, Bear Stearns write downs, the dollar problem (need I elaborate?), and all that stuff about being a private agency masquerading as a federal one (hellllo, the name alone is intentionally confusing wtf). Poor Fed. Whatcha gonna do, guys?

The Federal Reserve has two options:

If the Fed chooses to take the red pill, it can expose itself for what it truly is (what does it have to lose at this point? I think we're all hip to the scam, aren't we kids?) and come clean about the quasi-private position it has. This will likely mean surrendering its declared "independence" to some level - which should not be too much of a concern these days as the Fed has pretty much abandoned that whole sham long ago. The Fed in turn can then make a Congressional power grab, put itself at the head of the pack as the regulator of both banks and non-banks (AIG anyone?) and live happily ever after turning our lives into an inflationary nightmare.

If the Fed chooses to take the blue pill, it remains where it is, continues to deny what it really is at its core (seriously, who decided to put Federal in its name?!), and shirks away to go print money in the shadows. This will also mean the Fed has to unwind many of its current commitments, inviting a growing sentiment of resentment towards our central bank for the creative use of its balance sheet - the consequences of which always land in the American taxpayer lap.

So which will it be, guys? The Fed is effectively backed into a corner on this one.

CNNMoney on TBTF, regulation, and the Fed's tricky "truth" problem:

WASHINGTON (CNNMoney.com) -- A major Obama administration plan to deal with financial companies too big to fail is becoming too big to zoom through Congress.

Top White House and Treasury Department officials have been working behind the scenes for weeks to push lawmakers to start tackling legislation aimed at rescuing giant financial companies on the brink of failure -- like American International Group (AIG, Fortune 500).

But the legislative effort has gotten bogged down and made little progress over the past month, because it's tied to bigger, controversial questions. One of the big ones: Whether the Federal Reserve's regulatory role should be expanded.

My vote? Squeeze the Fed into exposing itself, pass HR 1207, force them into some level of transparency (not central banker transparency, which is entirely different from the true sense of the word of course), and then maybe mull over extending them additional powers.

How do you treat an institution which has already abused its power to the tune of $14 trillion or whatever it is we're up to in Fed liabilities?

You tell them to STFU, show their cards and stop playing around.

Once the Fed understands this, perhaps Congress can then reasonably consider this. Until then, they've got enough power as it is. And look what a wonderful job they have done thus far!

South Korean "Financial Doomsday" Blogger Acquitted

This post has nothing to do with Goldman
but it's all Goldman all the time
in Bizarro World


Sorry I'm late on this. Little too much has been going down at home for me to keep up...

After catching this in January, several other "blogger under fire" stories have popped up (most notably, Mike Morgan of GoldmanSachs666.com and his continuing battle against the Supreme Bastards of Finance) but this story out of South Korea remained one of the strangest, especially for a self-proclaimed armchair economist like myself. Guess it's over?

From HuffPo (shush, Team GOP - independence means using multiple sources, not just Fox News!):

Park Dae-sung, the South Korean blogger who was arrested in January and accused by the government of spreading false information about the worsening global economy, was found not guilty on Monday, Reuters reported. Mr. Park called his blog "Minerva" after the Greek goddess of knowledge, and prosecutors thought his negative comments about the government's handling of money were leading to the decline in value of the South Korean won. But for an unemployed 30-year-old, who lived with his father and had no formal economics education other than from books he ordered online, his posts appeared to be prescient.

Last week I wrote about Park Dae-sung, a blogger that falsely reported that the country of South Korean banned banks from purchasing U.S. currency. Park Dae-sung also known by his online alias Minerva was arrested in January and it was heavily debated how much freedom of expression should be tolerated online. Dae-sung is an unemployed 31 year old that predicted the collapse of Lehman Brothers, the crashing of the South Korean currency, and the effect of the American subprime mortgage crisis in South Korea. He heavily criticized the government's actions in responding to the financial crisis and often times was mistaken in the facts.

It doesn't take a genius to figure this shit out you know. In fact, it's so obvious at this point my 6 year old could call himself Mr Cleo of Economics.

Give me a break. Score one for the truth, I suppose.

John "Radioactive" Thain, Bank of America's Bull, and the Continued $FAS Clusterf%^k


Buh bye $BAC.

It's going to be a busy week for financial clusterfucks: "Stress test" farce on Friday, the conclusion of FOMC (will this mean the Fed goes negative or addresses the pending CRE "problem" proactively?), and Cuomo going after $BAC/Merrill/Bernaulson?! This is going to be fun to watch. Don't forget John Thain "firing back" at Bank of America. What in the high holy hell is going on here?!


Yahoo! Finance (yeah sorry it's Yahoo, some of us have to WORK all day you know) on the $BAC drama (told you it beats reality TV):

This Wednesday brings two events with big implications in normal times: the Bank of America shareholders' meeting and the conclusion of the FOMC's two-day confab.

Of course, these are not normal times, particularly for Bank of America, whose shareholder meeting is likely to be a highly contentious affair.

John "Radioactive" Thain's lashing out at Bank of America chairman Ken Lewis in The WSJ over bonuses at Merrill Lynch is a minor skirmish compared with what Lewis is likely to face from shareholders. Long-suffering owners of the stock are irate after last week's revelations that Lewis succumbed to pressure from then Treasury Secretary Hank Paulson to not disclose the huge losses at Merrill Lynch to BoA shareholders, or use them as a rationale to scuttle the merger.

Certainly it would have been hard for Lewis to resist pressure from Paulson and, by extension, the Federal government. But if Lewis really felt the Merrill losses - which eventually totaled $15.8 billion - were a material enough event to back out of the deal, didn't he have a fiduciary duty to disclose it to shareholders, no matter what Paulson said?

That's a legal question likely to be settled in the courts as the shareholder lawsuits against Lewis and the board proceed. But what about the moral issue? Did Lewis even consider taking a stand and defying Paulson, by stepping down or calling his bluff?

Blah blah blah blah blah...

Don't watch. You're missing the good part if you are.

Global Economic Hole Sets the Stage for Bloodless Coup: Part 2



If you doubt for one second that there is a global power grab in the works, I plead with you to consult that inner voice which tells you from the time you are a curious toddler to keep your hand out of hot stoves, not talk to strangers, and avoid stepping off of curbs without looking both ways first. I'm not talking about what your parents told you, I'm referring to the evolutionary advantage we as human beings have that allows us the clarity to see danger before it is in our direct line of vision.

You hear me on this one?

Fucking danger.

No tin foil hat necessary.

Via WSJ, more on the convergence towards globalization. After all, why waste a good crisis, right? They may not have planned for things to fall apart this way but they certainly are taking advantage of the mess:

NEW YORK -- Policy makers around the world are "united in purpose" to restore confidence in the global financial system, but the threat of further turmoil remains, European Central Bank President Jean-Claude Trichet said on Monday.

"We are in uncharted waters, and there are still risks of a sudden emergence of unexpected financial turbulence," Mr. Trichet told guests at a luncheon at the New York Federal Reserve hosted by the Foreign Policy Association.

The central banker, fresh from a meeting of financial officials in Washington for the Group of 20 and International Monetary Fund talks, also urged "effective, efficient, convincing, as well as quick implementation" of the decisions made.

The G-20 is pursuing discretionary spending of $820 billion this year, up from an estimate of $780 billion, or 1.8% of gross domestic product, in early March.

IMF member countries agreed on an immediate increase of $250 billion for the institution's war chest, and reached broad consensus on the need to pursue stimulus measures and shore up financial systems.

Mr. Trichet urged reformers to ensure a level playing field in financial markets to prevent future crises.

"Regulatory arbitrage across countries and across continents would be a recipe for catastrophe," Mr. Trichet said.

The ambush is underway. It is no wonder that countries are seeking to close down their borders and cut themselves off from the United States' viral economic cancer.

Well... that and swine flu, of course.

Is the World Running Out of Capital?


Strange suggestion from the UK Telegraph via Ambrose Evans-Pritchard - as you might recall, the last time I picked up an Evans-Pritchard story, I was slightly concerned that one of my favorite across the pond reporters (of the "tell it like it is" school) had been dosed on the Kool-aid that seems to be rotting most logical minds on the economic map. There is little sanity left in financial reporting these days (financial journalism, that is, not the good old accounting kind - though that could likely use a tranquilizer injection as well) and Evans-Pritchard was one of the few left who seemed to "get it."

Perhaps Evans-Pritchard just had a momentary lapse of reason back in March when he implied that the EU had waited too long to join the Bank of England and the Federal Reserve in jumping on the quantitative easing bandwagon. I'm willing to give him the benefit of the doubt.

AEP on the capital well running dry across the globe:

The world is running out of capital. We cannot take it for granted that the global bond markets will prove deep enough to fund the $6 trillion or so needed for the Obama fiscal package, US-European bank bail-outs, and ballooning deficits almost everywhere.

Unless this capital is forthcoming, a clutch of countries will prove unable to roll over their debts at a bearable cost. Those that cannot print money to tide them through, either because they no longer have a national currency (Ireland, Club Med), or because they borrowed abroad (East Europe), run the biggest risk of default.

Traders already whisper that some governments are buying their own debt through proxies at bond auctions to keep up illusions – not to be confused with transparent buying by central banks under quantitative easing. This cannot continue for long.

Which traders and what government bonds are we referring to here? It isn't all that unlikely of a scenario; if Wall Street does it to prop themselves up before a massive pump and dump, why wouldn't governments participate as well? Hell, is there really a difference between the two anymore? Perhaps things are different in the UK but somehow I'm inclined to believe they are just as bad if not worse than here at home. Except we have a raging pandemic to deal with on top of an explosion of financial incest.

Good call, AEP, and glad to see you were able to shake off the delusional Kool-aid high long enough to come to such a conclusion. Though saying that "the capital well has run dry" might be a bit quirky of a claim - with central banks cranking up the presses around the world, I think the more fitting description might be "the capital well is finally being exposed as the ruse that it is."

US hedge fund Hayman Advisers is betting on the biggest wave of state bankruptcies and restructurings since 1934. The worst profiles are almost all in Europe – the epicentre of leverage, and denial. As the IMF said last week, Europe's banks have written down 17pc of their losses – American banks have swallowed half.

"We have spent a good part of six months combing through the world's sovereign balance sheets to understand how much leverage we are dealing with. The results are shocking," said Hayman's Kyle Bass.

Capital? No thank you.

And what is so shocking about a global economy propelling itself to the point of implosion like a goose farmer conjuring up foie gras? *BOOM*

Lights out, global economy. No encore, no second act, no great rally. Just one explosion after another until there's little left but dust and ash.

Oh I am so overdramatic. Keep holding out for your "recovery," America. I'll be here when you're ready to get realistic.