Bank of America's Ken Lewis to Retire by End of 2009


MarketWatch:

Ken Lewis, chief executive and president of Bank of America Corp., will retire at the end of the year, the bank said Wednesday. Bank of America has not named a successor. Lewis joined the firm in 1969, and has been chief executive and president since 2001. In a statement announcing his retirement, the 62-year-old Lewis said: "The Merrill Lynch and Countrywide integrations are on track and returning value already. ... We are in position to begin to repay the federal government's TARP investments." Following the announcement, shares of Bank of America were up 1.1% in after-hours trading, at $17.10.

Via Going Concern: Michael Panzner Wants You to Do It Like an Eagle Scout



GC:

I recently had the absolute honor of interrogating Michael Panzner, 25-year veteran of the global stock, bond, and currency markets who has worked in New York and London for such leading companies as HSBC, Soros Funds, ABN Amro, Dresdner Bank, and J.P. Morgan Chase.

If you are familiar with Panzner, you know that to call him a doom and gloomer might be a tad of an understatement. Besides his body of literary work which includes Financial Armageddon and most recently When Giants Fall, he maintains blogs by the same name (Financial Armageddon and When Giants Fall), documenting each stage of our continued unraveling.

What struck me upon first finding his work was that though he wasn’t exactly subscribed to the “unicorns and rainbows” school of thought for our inevitable future, he managed to present his vision for our destiny in a way that even the most misguided sheep among us could understand.

If you want to read the rest of part 1 of my epic Panzner brain-picking, I invite you to head on over to Going Concern to check it out and stay tuned for tomorrow's wrap-up.

Thanks go out to Panzner for taking the time to be interrogated by yours truly and to Breaking Media for letting me use my 3x weekly column over at Going Concern as an excuse to sit on the phone with people I admire under the guise of "interviewing." Win!

Now if only I could convince Lacker's people to let me pick his brain and get paid to do so... oh well. Baby steps.

The FDIC Can't Make It Til Payday


Whatchu talkin bout, Sheila?


Listen, Sheila, I've been there and feel your pain. Did you try shaking out the piggybank? Or trading in your unused DVDs? If that doesn't work, there's always the whole yard sale idea a la California, maybe you can start pawning off all that seized equipment you've gotten over the years? 120 some bank failures since this began should make for a pretty lucrative pot of crap and I hear Ebay is still doing okay, maybe try that?

NYT:

Acknowledging that they had greatly underestimated the problems plaguing the nation’s banks, federal officials on Tuesday proposed a $45 billion plan financed by the industry to rescue the ailing insurance fund that protects bank depositors.

They also announced that the fund, which had more than $50 billion before the crisis began last year, had been so battered by bank collapses that it would be in the red this week.

The plan proposed by the Federal Deposit Insurance Corporation would, in effect, have the industry lend money to the insurance fund by ordering banks to prepay their annual assessments that would otherwise have been due through 2012.

If adopted, the proposal, the agency’s third restoration plan for the fund in a year, would raise $45 billion from the banks to replenish the fund.

That would almost certainly wipe out the industry’s earnings for this year — in the first half of the year the banking industry reported $1.8 billion in income.

Regulators have told the banks that they will not have to record the prepayments as an expense until the fees would ordinarily have been due, postponing the hit to balance sheets until a time when officials believe the industry will be better able to weather the costs.

Senior officials emphasized that the plight of the fund would have no impact on insurance for bank deposits. Accounts are protected up to $250,000.

With nearly 100 bank failures so far this year, the fund has encountered its greatest crisis since the savings and loan debacle of the 1980s and ’90s. In May, officials projected $70 billion in losses to the fund to rescue failed banks. That estimate was a $5 billion increase from earlier in the year.

On Tuesday the F.D.I.C. increased that estimate by more than 40 percent, to $100 billion in total losses — mostly over this year and next. That would be on top of the nearly $20 billion in losses to the fund last year, when the crisis began and 25 banks failed.

Officials said that as of this week, the fund, which began the year at more than $30 billion and had about $10 billion over the summer, would have a negative net worth.

Well hell, where's that loan shark Bernanke when we need him?

I smell a rat. This is what will wipe out bank earnings? While it's sheisty to say the least (whatever happened to that $500 billion line of credit from the Treasury? Or are we having a little trouble unloading our worthless paper these days?), two things to keep in mind on bank "earnings" in the first two quarters of 2009: A) they were always made up thanks to FASB's black magic accounting voodoo and B) it doesn't take a financial genius to understand that surging unemployment + continued economic contraction = defaults up the ass. What's complicated about that equation?

Jr Deputy Accountant's humble suggestion is to pull your money while it's still worth something before you start getting assraped by the banks to cover the additional fees. What, you didn't think they were going to pony this shit up themselves, did you?

Though I'm the incendiary type, I would never ever suggest something like a coordinated, calculated nationwide bank run where we all pull our loot at once but were something like to happen, I'd certainly be the one LOLing all the way to the bank - simply because I don't use them. You can do it and surprisingly, it's really not all that difficult.

Take back your economic freedom or keep getting terrorized by these asshats, your choice. But if you're at the back of the bank run line crying, I will be happy to say I told you so. Just sayin.

IMF Cuts Worldwide Debt Estimate From Horrible to Less Horrible



Here's the silver lining kids: it's all made up anyway. Can you truly justify all these trillions in made up losses? Mix in some accounting magic and securitization and you have not a recipe for disaster but a crisis built upon a tower of paper. That's it. So stop freaking out and kick up your feet to watch it all go up in flames.

Good. We needed to lever it down just a tad. Keep going, we might be on a roll with this. It's probably a good thing that we don't listen to the IMF anyway, right?

Reuters:

The International Monetary Fund on Wednesday lowered its estimate for global writedowns for banks and other financial institutions to $3.4 trillion but warned that loan losses were set to rise as unemployment grew.

In April the IMF estimated in its Global Financial Stability Report that global bank losses could reach $4 trillion but said it cut the figure by $600 billion to reflect rising securities values and new methodology for calculating writedowns.

"Global financial stability has improved, but risks remain elevated and the risk of reversal remains significant," the IMF said. It added that the economic downturn was troughing but the recovery in advanced economies would be extremely slow.

The report said that while banks have enough capital to survive, their earnings are not expected to fully offset writedowns expected over the next 18 months.

It said stronger action was needed to bolster bank capital and earnings capacity to ensure banks could support a recovery.

So that must be why the FDIC is tapping banks' asses for additional premiums? Bend over, Sheila promised just the tip. Relax, you'll only make it more painful if you clench up.

Bob Dylan Supports Economic Terrorism



Filed under: WTF

Reuters:

The times they are a-changin', and Bob Dylan's surprise decision to release his first Christmas album next month now comes with a banking tie-in that would have been unimaginable during the singer's 1960s protest years.

Citibank said on Tuesday that "Christmas In The Heart" will be available for Internet download to 13 million customers enrolled in the company's rewards program, during the week before it hits stores on October 13.

Nancy Gordon, executive vice president of Citibank's rewards program, said she expects the album will have "high appeal" to customers, who mainly get points by using their credit or debit cards. The CD will not be sold in branches of the Citigroup Inc unit.

Dylan, 68, will donate his proceeds from the Columbia Records release to charities that feed the needy. Columbia is a unit of Sony Corp.

Oh, Bob. Suddenly I don't feel like such a musical miscreant for not having a single one of your songs mixed in among my 10,000 indie tracks.

FAIL has a new soundtrack and apparently Bob Dylan is more than happy to be the one with the violin on the deck of the Titanic. Shame on you, homie, shame on you.

$C U Next Tuesday, Bob!

CIT In Death Throes: It's Either $C U Next Tuesday or Bankruptcy Now




Citigroup? Really? That was the best they could do? A bailout by any other name is still a bailout and last time I checked, $C U Next Tuesday was in absolutely no position to extend the bailout pail to toss water from anyone else's sinking ship.

Bloomberg:

Citigroup Inc. and Barclays Capital are offering to provide financing to CIT Group Inc., the commercial lender that’s struggling to avert bankruptcy, according to people familiar with the situation.

The 101-year-old company’s bondholders are also seeking to provide about $2 billion in loans as a restructuring deadline approaches tomorrow, said the people, who declined to be identified because the negotiations are private. New York-based CIT may choose other options, the people said.

CIT said in July it may seek court protection from creditors after Chief Executive Officer Jeffrey Peek failed to win a second government bailout and had to turn to bondholders for $3 billion in rescue financing. The company said in an Aug. 17 regulatory filing that it has to come up with a plan “acceptable” to the majority of a bondholder steering committee that provided it with the emergency cash by Oct. 1.

“Some sort of secured financing is a likely component of the company’s restructuring plan, launched in conjunction with a debt exchange,” Brian Charles, a debt analyst at brokerage firm RW Pressprich & Co. in New York, said in a telephone interview. CIT needs to raise $5 billion to $6 billion in financing to be able to make loans, he said.

Paging Dr Bernanke! I believe this is your cue!

Reuters says otherwise:

CIT Group Inc is nearing a plan that likely would hand the commercial lender over to its bondholders, sources familiar with the matter said on Tuesday.

CIT was preparing an exchange offer that would eliminate up to 40 percent of its more than $30 billion in outstanding debt, said the sources, who did not wish to be identified because they were not authorized to make public comments about the deal.

The plan would offer bondholders new debt secured by CIT assets, as well as nearly all of the equity in a restructured company, one source said.

If not enough bondholders agreed to the plan, the company could seek to restructure in bankruptcy court, the source said. This would result in one of the largest Chapter 11 bankruptcy-court filings in U.S. history.

There, now that sounds more like it.

Die already!

I can't claim to care about this but thought, you know, maybe dear reader might give half a rat's ass about CIT. You're welcome. Now back to the Fedbashing...

How to Fail Completely at Audits: Sponsored by the DCAA



Damn, I'm going to get in trouble for covering this for reasons that I can't get into here so let's remind JDA readers of the disclaimer, shall we? Just in case. I'm all about covering my ass, you know, I didn't sail on up the corporate ladder of the accounting fringes for nothing!

Anyway, that disclaimer:

Disclaimer: This blog is the author's opinion and based upon independent analysis of current events as experienced and researched by the author, entirely independent of professional and/or personal affiliations. The author's goal is to educate, not offend, but sometimes you've got to rile people up to get them to pay attention. If you are offended, the plan is working.

None of this should be construed as investment, tax, life, accounting, money, or financial advice. No financially-inclined hipsters were hurt in the writing of this blog


Now, let's get into the chewy nougat center of accounting failure, shall we? Entirely independent of personal and/or professional affiliations, that is.

h/t Going Concern. See? I don't just write over there, I actually read the God damn shit too.

WebCPA:

As part of the probe of DOD contracting audit snafus, the GAO reviewed 69 separate audit assignments designed to support contract awards and administrative decisions affecting billions of dollars in Pentagon expenditures.

The problems uncovered by the investigation included waste of time and resources by the audit agency. As an example, the GAO noted that DCAA auditors spent 530 hours to support an audit of the cash management system at a research and development grantee, only to discover that the billing system was non-existent.

During a separate billing system audit of a supplier of combat systems, "Auditors deleted key audit steps related to the contractor policies and internal controls over progress payments without explanation." One DCAA auditor told the GAO he did not perform detailed tests because, "The contractor would not appreciate it."

Even more red flags were raised when a military contractor involved in the Iraq reconstruction project objected to a draft of a DCAA audit report that cited eight significant deficiencies in the firm's accounting system.

In response, "Auditors dropped five significant deficiencies and downgraded three others to suggestions to improve without performing new work," the GAO told Congress.


"The contractor would not appreciate it" huh? Does that actually work? Because the auditors I know would be inclined to say "fuck the client" and that's why no one wants to hang out with them in the first place. It's not about making friends, it's about tracking down the deficiencies and identifying the abuse, right? Or maybe I'm overdue for an audit refresher, it has been several months since I've sat through 24 hours of Audit class.

Whatever.

FAIL.

Hey Bloomberg, I Saw What You Did There


Nice try but you aren't going to find any of those here. Move along now.

Suffice to say, the girl who does things like this is not at all interested in criticizing the man. Now Bernanke criticisms? You might have found the right place.

Auditing the Fed: Redux



Strap on the tin foil hat, kids, we're delving into some lovely Ron Paul goodness.

RonPaul.com:

The witness testifying in favor of HR 1207 made some very strong points, which was no surprise considering the bill is simply common sense. It was also no surprise that the witness testifying against the bill had no good arguments as to why a full audit should not be conducted promptly. He attempted to make the case that the fed is already sufficiently accountable to Congress and that the current auditing policy is adequate. The fact is that the Fed comes to Congress and talks about only what it wants to talk about, and the GAO audits only what the current laws allow to be audited. The really important things however, are off limits. There are no convincing arguments that it is in the best interests of the American people for anything the Fed does to be off limits.

It has been argued that full disclosure of details of funding facilities like TALF and PDCF that enabled massive bailouts of Wall Street would damage the financial position of those firms and destabilize the economy. In other words, if the American people knew how rotten the books were at those banks and how terribly they messed up, they would never willingly invest in them, and they would fail. Failure is not an option for friends of the Fed. Therefore, the funds must be stolen from the people in the dark of night. This is not how a free country works. This is not how free markets work. That is crony corporatism and instead of being a force for economic stabilization, it totally undermines it.

If the Fed gave its actual arguments against a full audit, they would not have mentioned anything about political independence or economic stability. Instead they would admit they don’t want to be audited because they enjoy their current situation too much. Under the guise of currency control, they are able to help out powerful allies on Wall Street, in exchange for lucrative jobs or who-knows-what favors later on. An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law. An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money. An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore.


Sorry, Dr Paul, but an audit would expose nothing.

See, this is how accounting works:

If the rules say 1 plus 1 equals 15 bazillion, then 1 plus 1 equals 15 bazillion, even if logic dictates that 1 plus 1 should be 2.

So in the case of Federal Reserve accounting, you have a demonic hybrid of governmental, GAAP, and Bizarro World reconciliation. How in the hell could any auditor make sense of this labyrinth of madness? (see also my July 15th You Want to Audit the Fed. But Why?)

And then there's this:

In traveling around the great wide Intarwebz chasing around the CPAs (since that's my job and all), I found the greatest, most enlightening document evar.

And I thought government accounting was confusing! No, dude, you haven't seen Federal Reserve accounting.

WTF doesn't even do it justice. It's 325 pages of pure unadulterated what.the.fuck.OMG and if you've got an extra 14 hours to blow, take a peek!

Jr Deputy Accountant humbly presents for your reading pleasure:

Financial Accounting Manual for Federal Reserve Banks

Xanax recommended prior to reading. Of course, we already knew the Fed prefers the "WTF method" of accounting (see my April 24 Stress Test Paper Shows Fed Prefers "WTF" Accounting Rules, Dropping LSD) but wow. Just wow.

Hey, Fed boys, I hope you've got some truly special CPA savants on your squad because this is an absolute load of bullshit.


It doesn't stop at the Fed either, I mean, that's sort of what one would expect when the agency in question is the one issuing the money that the regular old vanilla accountants need to account for, right?

Research papers your thing? Great, mine too:

This paper addresses whether Federal Reserve Board accounting requirements are sufficiently pervasive to create regularities in government overnight repurchase agreement (repo) rates. US bank settlement regulations allow overnight government repos as substitutes for Federal (Fed) funds. We find that overnight government repos exhibit rate changes and variance regularities consistent with regularities identified in the Fed funds market, which have been shown to result directly from the Federal Reserve regulations and accounting policies governing the US bank settlement process. Thus, we conclude that the overnight government repo rates are influenced in a similar manner by regulatory rules. However, since the rate changes are not large economically, the influence of regulatory accounting practices does not violate the premise of an efficient market.

Oooh, great read.

Anyway, point being, it's bullshit. We're going to have to borrow Hank Paulson's bazooka if we're going to get anywhere with this thing.

Money laundering is still money laundering whether or not the ones doing the laundering are in charge.

I also recommend my July 24th Leave the Federal Reserve Alone (No, Serious). Why leave them alone? Because they are pretty much going to end up tearing themselves up if they keep it up at this rate. Go, boys, go!!

Allen Stanford Goes to Jail... And Gets His A$$ Kicked


LOLOLOLOLOLOL anyone else out there a fan of Oz? Allen Stanford is in for one hell of a reality check if this keeps up, and he better hope Christopher Meloni is the one doing the assraping. Hasn't he ever seen MSNBC's Lockup?

Keep that shank handy, Al, you're going to need it!

TPM Muckraker:

Allen Stanford's jail woes continue. The accused $7 billion Ponzi schemer sustained minor injuries after getting into a fight last week, reports the Houston Chronicle.

It's not clear how the fight between Stanford and the other inmate got started. But the one-time billionaire banker looks to have gotten the worst of it -- he was the only one taken to the hospital, with bruising and other superficial injuries.

Stanford was returned to the Joe Corley Detention Facility in Conroe, Texas around noon yesterday.

Since going to jail in July, Stanford has complained about the conditions, including the heat, and has now twice been hospitalized, the first time because of an elevated heart rate. In addition, his one-time defense lawyer, the heavy-hitting Dick DeGuerin, has quit the case because Stanford, with his assets frozen, could not guarantee that DeGuerin would be paid.

Can I offer a tip here? Head down and mouth shut, Al, your golden toilet is gone and you are now in the domain of child molesters, murderers, and of course scandalous thieves like yourself.

Don't cry, with that pretty moustache of yours, I'm sure you'll make a great prison bitch.

The FDIC as Mafia Enforcer



You know how, like, the mob collects "premiums" from local business owners for "protection"? That's what we've got.

Undercapitalized? Fuck you, pay me.
Weighed down with writedowns and defaults? Fuck you, pay me.
Drowning in toxic assets? Fuck you, pay me.

I am not sure when our financial system became a gang war but it is fairly clear at this point that it has and JDA's professional suggestion is that you stay the hell out of the line of fire whenever possible.

Bloomberg:

The Federal Deposit Insurance Corp., seeking to replenish its fund as banks fail at the fastest pace in 17 years, today proposed that lenders prepay fees through 2012 and shelved any further special assessments.

Lenders would prepay their FDIC premiums for the fourth quarter and next three years on Dec. 30, generating about $45 billion, according to an outline of the staff’s recommendations. The agency raised its estimate for bank-failure costs to $100 billion through 2013, from $70 billion, according to the staff.

“Prepayment of assessments ensures that the deposit insurance system remains directly industry funded,” the FDIC said.

The board backed prepayments over alternatives such as borrowing taxpayer dollars from the Treasury Department, charging the banking industry a special fee in addition to levies they already pay and borrowing directly from the banks.

The fund, drained by 95 bank failures this year, had $10.4 billion as of June 30 and the staff estimated the fund will have a negative balance at the end of this quarter. The agency is required by law to rebuild the insurance fund when the reserve measured against insured deposits falls below a certain level.

Under the proposal, the FDIC wouldn’t impose another special assessment this year. The agency would raise assessments by 3 basis points in 2011.

The FDIC will seek public comment until Oct. 28.

The banking industry lobbied against a special fee that would be added to the regular annual premium paid by banks, telling the FDIC and Congress such a levy would hurt their ability to raise capital. Banks paid a special assessment in the second quarter that raised $5.6 billion. The agency also has authority to impose fees in the third and fourth quarters.

Banks backed prepayment because the premiums are classified as an asset when the payment is made, becoming an expense during the quarter in which the obligation is due.


OK, so they are classified as an asset (there goes that wonderful bank accounting magic again!) but the money is gone and the FDIC will have spent it long before the payment actually moves to the liability side of the balance sheet. If this makes sense to anyone, do let me know.

The irony of the FDIC picking 2012 is not lost on your girl Jr Deputy Accountant and I sincerely hope dear reader is in on the pure LOLZ of that too.

We're doomed!

Public comment, you say, eh FDIC? Oh you're asking for it. My letter-writing trigger finger is just itching to tell you what I really think, you sure you want that?

The worst part of all of this is that the FDIC already encourages moral hazard. But by hatching this crackpot scheme, it is doubly encouraging moral hazard - instead of addressing the Congressional rule that forced them to skip taking in premiums for 10 years, we are saying here that none of that matters, it's just about keeping up appearances. Moral hazard on moral hazard? Christ, what sort of Bizarro World reality warp have we stumbled into here?

Pull the plug already, the FDIC is a vegetable.

What's a Couple Trillion Among Friends When it Comes to Fed Funny Money?




Uncommon Wisdom:

It’s starting to look like the Fed’s going to need a skyscraper-full of new printing presses …

In a statement released yesterday, the Federal Reserve said,

“To provide support to mortgage lending and housing markets, and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.”

That’s a total of $1.45 trillion! Where’s the Fed going to get the money? Simple: They’ll have to PRINT it — create it out of thin air!

Plus, even former Fed Chairman Alan Greenspan is beginning to panic about the dollar’s decline, warning that total U.S. private and public debt — now at 84% of GDP and still soaring — is “very dangerous” and threatens both long-term Treasuries and the dollar.

Thank you, Mr. Greenspan!
I couldn’t have said it better myself!

This is precisely what I’ve been warning you about: Bernanke’s secret war on the dollar. One of the greatest explosions in the supply of unbacked paper dollars in history.

The really bad news? Bernanke’s inflationary chickens are just BEGINNING to hatch. History shows us that it takes months — sometimes years — for the full impact of an explosion in the money supply to be felt.

That means you can look forward to many more months of a collapsing dollar … and many more months of evaporating buying power.

Economic Policy Journal also covered this little announcement.

The Fed has purchased $857 billion of their scheduled $1.25 trillion in mortgage-backed securities, according to Morgan Stanley. It's also bought $129.2 billion of the planned $200 billion in so-called agency debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks, which finance mortgage purchases.


Bernanke's secret war on the dollar? What's secret about it? The dude is out of his damn mind and still believes in the bullshit he learned in academia that works well on paper but fails miserably in practical application. I hate to break it to Dr Bernanke but this is no thesis, it's our God damn livelihood he's playing with and until he gets that, we're just as doomed as ever.

So is Richmond Fed's fearless leader the only one with the balls large enough to say enough is enough or would any of the rest of the Fed's cast of characters care to weigh in and cut off the financial crack pipe?

Anyone? Fisher? Plosser? Someone? Please?! Lord knows that psychotic funny money-loving nutjob Yellen isn't going to promote financial responsibility. What's her incentive to do so? She's too busy riding bitch in Bernanke's inflationcopter to care.

I think I've just about lost my faith in the Fed at this point. Once upon a time I believed one reasonable head at the FOMC table was enough to save us but the longer I watch, the less I can believe that one voice will be able to rise above the insanity to bring reason to the monetary madness.

Sorry, Jeffrey Lacker. I still love you but damnit, you just can't do it alone and your people are out of their damn minds. I mean your friends over at Dallas get it but that isn't enough either.

We really are doomed.

I'll be curled up in the corner bawling like a little bitch if anyone needs me.

JP Morgan Wants Your Art. Oh Wait, No They Don't


Hey JPM, want some JDA art as collateral?
$50 million sounds about right



Taco Dibbits? You really can't make this stuff up LMFAO!!!

AFP:

US bank JP Morgan Chase has renounced a claim to an artwork that Amsterdam's Rijksmuseum bought from a Dutch multimillionaire who had used it as loan collateral, the two parties said Monday.

The Dutch state, which owns the museum's collection, "concluded an accord with JP Morgan a few weeks ago," Taco Dibbits, the museum's head of collections, told AFP.

JP Morgan Chase "renounced its claim to the piece", he added. "There is now nobody who claims the rights" to the work.

"The bend in the Herengracht" (after a famous canal in Amsterdam), a 17th century work by Dutch painter Gerrit Adriaensz Berckheyde, was acquired by the Rijksmuseum from Louis Reijtenbagh, a wealthy art collector, last September.

After JP Morgan went to court to lay claim to the painting in April, the Rijksmuseum insisted it was the rightful owner of what it described as a "masterpiece of national importance".

The bank confirmed in a statement on Monday that "the legal dispute ... has been resolved and that all claims raised in the lawsuit have been dismissed with prejudice."

Reijtenbagh is reported in the local media to have used the painting with other works of art as collateral for a 50-million-dollar (38 million euro) loan from JP Morgan in 2006 before selling it to the museum for several million dollars last year.

Some 27 million dollars is said to be outstanding on that loan, which has run full term.

Dibbits has said that Reijtenbagh had signed a sales contract that indemnified the museum against any third party claims.

Still LOLing about Taco, frankly. Does this mean JPM is out $27 million? Oh well, I'm sure the taxpayer will be happy to cover that little writedown if need be.

The Fed's "Hands Off" Subprime Policy, a Regulatory Failure to Beat all Regulatory Failures


caption not necessary
if you are paying attention,
you know what comes next


Ooooh, really?

WaPo:

The visits had a ritual quality. Three times a year, a coalition of Chicago community groups met with the Federal Reserve and other banking regulators to warn about the growing prevalence of abusive mortgage lending.

They began to present research in 1999 showing that large banking companies including Wells Fargo and Citigroup had created subprime businesses wholly focused on making loans at high interest rates, largely in the black and Hispanic neighborhoods to the south and west of downtown Chicago.

The groups pleaded for regulators to act.

The evidence eventually led Illinois to file suit against Wells Fargo in July for discrimination and other abuses.

But during the years of the housing boom, the pleas failed to move the Fed, the sole federal regulator with authority over the businesses. Under a policy quietly formalized in 1998, the Fed refused to police lenders' compliance with federal laws protecting borrowers, despite repeated urging by consumer advocates across the country and even by other government agencies.

The hands-off policy, which the Fed reversed earlier this month, created a double standard. Banks and their subprime affiliates made loans under the same laws, but only the banks faced regular federal scrutiny. Under the policy, the Fed did not even investigate consumer complaints against the affiliates.

"In the prime market, where we need supervision less, we have lots of it. In the subprime market, where we badly need supervision, a majority of loans are made with very little supervision," former Fed Governor Edward M. Gramlich, a critic of the hands-off policy, wrote in 2007. "It is like a city with a murder law, but no cops on the beat."


Listen, if this isn't enough evidence by itself to warrant a full investigation into the Federal Reserve's blatant failure in its supposed regulatory duties I'm not sure what is. Why are we looking at handing them the keys again? Can someone remind me?

I hate to say this but that's what you get when you put a psychotic libertarian in charge of the Fed (emphasis on psychotic). Granted, Greenspan is also a homicidal maniac but is it really wise to put the guy who thinks regulation is ridiculous in charge of regulation?

Bank of America Finally Gets One right and Backs Away From ACORN... Slowly


It's not dirty
since, you know, the "nut" got busted...
*cough*



BAC! I'm so proud of you!!

Reuters:

Bank of America Corp has suspended its current commitments to ACORN Housing, an affiliate of Association of Community Organizations for Reform Now (ACORN), a scandal-hit U.S. liberal grassroots group, the Wall Street Journal said on Monday.

The banking company "will not enter into any further agreements with ACORN or any of its affiliates," pending assessments of the organization's operations, the paper quoted a Bank of America spokesman as saying.

ACORN Housing has worked with Bank of America and other large banks on foreclosure-prevention efforts, the Journal said.

Earlier this month, both houses of the U.S. Congress passed legislation that would cut off federal money to ACORN, after a conservative activist secretly filmed Acorn employees giving tax and housing advice to a couple who said they wanted to set up a brothel.

"Bank of America takes recent allegations made against ACORN and ACORN Housing Corporation employees very seriously," the paper quoted bank as saying in a statement.


I mean really, if anyone needs to avoid another scandal right about now...

Via Going Concern, Let's Rag on the PCAOB Some, Shall We?




Fun with the PCAOB? We has it.

Maybe the problem here is not that the audits are not being performed correctly but that the PCAOB has no idea what it’s doing in the first place.

WebCPA:

Many accounting firms are doing a good job of following new standards for conducting risk-based audits of internal controls, but others are not applying the standards properly, according to a new report by the Public Company Accounting Oversight Board.

The PCAOB examined portions of approximately 250 audits of internal control over financial reporting by the eight largest domestic registered firms in 2007 and 2008. The report assesses the first year of implementation of the risk-based Auditing Standard No. 5.


Listen, internal control isn’t like sex education, you can’t just say “listen, kids, be careful out there lest you end up with a funny rash on your cash flows” and leave a jar of condoms on the desk hoping management uses them. How does the PCAOB hope to be taken seriously when it slashes the minnows to death and leaves the sharks patrolling the waters for oblivious swimmers?


If you want to read the rest, you're just going to have to skeeze on over to Going Concern and check it out.

The Fed's Latest (and Totally Unlikely) Critic? World Bank's Zoellick



No way, someone please pinch me as this cannot possibly be real.

WSJ's Real Time Economics:

“Central banks failed to address risks building in the new economy,” Zoellick says. “They seemingly mastered product price inflation in the 1980s, but most decided that asset price bubbles were difficult to identify and to restrain with monetary policy. They argued that damage to the ‘real economy’ of jobs, production, savings, and consumption could be contained once bubbles burst, through aggressive easing of interest rates. They turned out to be wrong.”

Zoellick is a veteran U.S. economic-policy official who served at the U.S. Treasury from 1985 and 1993 where he was, among other posts, deputy assistant secretary for financial institutions policy under then Secretary James A. Baker III.

It is unusual for the head of an international organization like the World Bank to inject himself into the middle of U.S. bureaucratic fight. But Mr. Zoellick does just that, as he goes on to say that the Treasury, which is more accountable to Congress, should get additional authority to regulate big financial institutions, not the Fed.

“It will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority. My reading of recent crisis management is that the Treasury Department needed greater authority to pull together a bevy of different regulators. Moreover, the Treasury is an Executive department, and therefore Congress and the public can more directly oversee how it uses any added authority.”


Wait a minute, what in the hell is going on here? Can anyone explain Zoellick's logic? Because as far as I am concerned, he's no better than the best of them and we all know what sort of cloth he is cut from. So what gives?

Apparently Zoellick's noticeably anti-Fed commentary was released ahead of time and available on the World Bank's website but the link listed on WSJ leads to a 404. Frankly, so does JDA's "financial bastard" decoder ring, sorry.

I do, however, know a power grab when I see one and I am not at all surprised to see Treasury call in a few favors as it presses for increased oversight over our little Fed friends, which means someone is feeling a tad butthurt about the fact that Treasury is little more than a money-laundering operation for US debt. Oh Timmy, don't you pf all people know what you can't fuck with the Fed and win? See also my September 23rd Fed to Treasury: Mind Your Own Damn Business for more LOLZ along these lines.

Personally I am thrilled at the idea of a bad guy showdown, which is why I suggested the following via Going Concern recently (and would like to take back the White House bikini car wash suggestion... realizing the Wicked Witch of the Far Left loves to get her face time, seeing Skeletor in a 2 piece might be too much for our delicate countenance):

FOMC cage match fights at Fedquarters - We’ve all heard about dissent at FOMC meetings but what if we kill two birds with one stone - bring new transparency to the monetary policy-setting process AND pull in $75 a ticket to see “El Jefe” Jeff Lacker take on “Helicopter Ben” Bernanke in spandex and Luchador masks? I know I would pay to see that.

Richard Fisher v Janet Yellen mud wrestling?

Tim Geithner v Chuck Plosser kung fu?

Think about it. Zoellick v Elizabeth Warren would be priceless. And pretty awesome. My money is on the prick with the silly moustache, sorry EW.

OMG Obama! Not the Bloggers!




h/t reader BK

Hey, Obama, my body, my blog, keep your greasy little paws off. It's bad enough OMG Obama's Cybersecurity Act seeks to give the President legal authority to declare a state of emergency on the Internet but this? This is just offensive.

Reality Check:

The Hill is reporting that Obama is now “open” to a newspaper bailout. Well, welcome to the state run media.

[I]n a recent appearance with the editors of the Pittsburgh Post-Gazette Obama seemed to say he’s open to the idea saying, “I haven’t seen detailed proposals yet, but I’ll be happy to look at them.”

Now, let’s be clear, here. Obama did not say he’d support a bailout of the media. He simply paid lipservice to “look at” any such proposal. Obama constantly uses this line without meaning it at all… yes, he’s lied like this before.

However, one other thing he said in the interview with the paper is a frightening [sic].

Mr. Obama said he noted the trend. “I am concerned that if the direction of the news is all blogosphere, all opinions, with no serious fact-checking, no serious attempts to put stories in context, that what you will end up getting is people shouting at each other across the void but not a lot of mutual understanding,” the President said.


This is a far different thing than an offhanded claim that he’ll “look at” any newspaper bailout plan. This quote represents a more thought out concept. What Obama is saying here is that he believes the “blogosphere” has “no serious fact-checking.” He is saying that he wants someone to somehow make sure that “facts” are relayed properly. But who should do this? One might presume that he thinks that government should be the media’s fact checker.

This seems a step toward control of the media by government and a bailout would be the first step in that sort of control. After all, once government gives funds government takes control. The question is do Media outlets want the government to tell them what to do? That is what will happen if they take government money, to be sure.

While I'm not entirely sure if Reality Check's take on the matter is appropriate, I don't like to hear this dude mentioning the blogs. You know, personal interest in the matter and all. I've seen his track record thus far and it isn't pretty.

Oh and psst, Reality Check, it isn't government control over the media that you have to worry about. Just sayin.

Tampering with Evidence, Countrywide Edition




Hey, remember when being a VIP was considered an honor? Yeah, um, those days are gone. Lucky for the VIPs, Countrywide has your back and taped over phone calls that might paint said VIPs in a not-so-pretty light (and point directly to potentially incriminating behavior on the part of Countrywide, naturally). Not so lucky, my favorite California Republican Darrell Issa is comin' for dat ass anyway.

WSJ:

The discovery that Countrywide Financial Corp. recorded phone conversations with borrowers in a controversial mortgage program that included public officials -- and that those recordings have been destroyed -- has prompted new congressional calls for more information about the program.

Rep. Darrell Issa of California, the ranking Republican on the House Oversight and Government Reform Committee, is trying to subpoena the remaining records of Countrywide's VIP loan program. So far, the committee's chairman, New York Democratic Rep. Edolphus Towns, has turned down that request.

The committee's Republican staff investigators have spent months looking into the VIP program, and learned of the call-recording system from a former Countrywide employee in June, according to a spokesman for Mr. Issa.

The Issa spokesman said that earlier this month Bank of America Corp., which purchased Countrywide in July 2008, confirmed the existence of the recording system, but said all the VIP program-related calls had been disposed of.

A Bank of America spokesman said in a written statement that the VIP recordings "were retained only for a limited time or until available recording space was utilized. Due to these limitations, we have no recordings from before July 2008 when Bank of America assumed management of Countrywide and terminated the VIP program."

Many companies routinely record phone conversations with customers, both for internal-training purposes and to help resolve disputes over what was said during a call.

On Thursday, Mr. Issa sent a letter to Bank of America Chief Executive Kenneth Lewis with a dozen questions seeking more information on what happened to the recordings. Arguing that those call records could have shed light on what public officials were being told by Countrywide personnel about the favorable treatment they were receiving, Mr. Issa wrote that Bank of America's "refusal to fully explain" what happened to the recordings "raises important questions."

Mr. Issa's letter noted that the VIP program began receiving widespread media attention in early June 2008, nearly a month before Bank of America's Countrywide takeover. Articles focused on prominent individuals who received loans through the program, which often gave lower fees and interest rates and faster service than could be obtained by the general public. Among the prominent VIP program borrowers were two Democratic senators, Chris Dodd of Connecticut and Kent Conrad of North Dakota. Both men have denied wrongdoing, and said they never asked for favorable loan terms from Countrywide.


I'm just stoked I didn't run up a huge phone bill chatting away on the Friends of Angelo Party Line. As for these bastards? Go get 'em, Darrell.

Bank of America bwhahahahaha, Christ, Ken Lewis will never get a break.

WaPo: Night of the Living Stocks


Oh too freaking hilarious not to share. Seriously.

WaPo:

To prove how astonishingly easy it is to make a dimwitted investing move, I logged into my online brokerage account the other day and bought stock. I have made dumb buys before -- who hasn't? -- but this time I was practically betting on a horse that could no longer gallop.

It's not like I didn't know a lot about this company, a common investing sin. Actually, I do. I have been reading about this company for months. I studied its history in college. Like millions of other Americans, I once even owned one of its products.

I invested in General Motors. Well, not the new General Motors I keep hearing about in TV commercials -- rather, what's left of the bankrupt GM, now known as Motors Liquidation Company. Ticker: MTLQQ. Buying a share in Motors Liquidation took fewer steps than ordering a book from Amazon.com. I paid 75 cents.

A few clicks and my experiment made me the rather unproud owner of a zombie stock -- so known because its shares are almost certainly headed to zero due to bankruptcy proceedings or insolvency. Once bankruptcy is complete, zombie shares almost always vanish, meaning the right price on them is zero. Any bet on them at a higher price would be better spent searching for ghosts.

"What people really need to understand with these stocks is that they are speculating, they are not investing," said John Gannon, senior vice president for investor education at the Financial Industry Regulatory Authority, also known as FINRA. "They are simply taking a bet." Asked which was a bigger bet -- a zombie stock or the lottery -- Gannon said, "With the lottery you know the odds."

My question is this: when are we going to decapitate Citigroup? [legal disclaimer for idiots who take things too literally: Jr Deputy Accountant never ever encourages violence of any sort and in fact is all about the love when it comes to just about everyone, except maybe Vikram Pandit, who deserves to be kicked. But not literally.]

Fedbashing With a Smile: Does the Fed Manipulate Markets? Well, Um...



I mean really? Must there be commentary on this? Isn't Alan Grayson's Cheshire grin enough?

(h/t WC Varones and @numbersnerd for sending this my way, you guys know what makes my heart go thump-thump-thump, don't you?)



You would really think the Fed would send their best soldiers to Congress for their now all-too-frequent grilling but apparently this guy was the only one available for grilling that particular day. PPT, sir? Pfft! The Fed doesn't manipulate markets, except the stuff we do over at the NY Fed which, you know, is totally allowed... we think.

I am compelled now to borrow the parlance of the Fed's own here and apologize in advance for tying Richmond Fed's ex general counsel into all of this. Lord knows if they'd have been able to send McAfee to the Hill he'd not only have deflected Grayson's grinning grilling but done so in a way that would have left everyone in attendance thinking "Gee, those Fed people aren't so terrible after all" but that's attributed entirely to the Richmond Fed way of thinking and has nothing to do with the Federal Reserve System as a whole which remains diabolical, scandalous, and probably entirely criminal. After this pathetic performance, there's little evidence remaining that declares otherwise.

But I digress. Jr Deputy Accountant has revisited this speech more than once simply because it is one of the most brutally real accounts from the Fed we might ever see. Not to mention the fact that McAfee is my favorite Fed bank alum, of course, and perpetuates the Richmond mentality perfectly. You wonder why they are my favorite Fed bank? Well that should be painfully obvious if you're paying the least amount of attention.

Historical Perspectives on Form and Function (remarks made to the Conference of Federal Reserve Bank Chairmen and Deputy Chairmen in Washington, DC, June 3, 2004):

[A]s a way of harmonizing contradictory views, Congress often embraced vagueness on many important questions, leaving a lot to the imaginations of the men and women who have operated the Reserve System and a lot to negotiations among them. The history of the past 90 years is a history of strong personalities inventing and reinventing important aspects of the Federal Reserve and the relationship among its constituent parts. In this enterprise, congressional vagueness has been the reinventors' best friend. Indeed, the one time nobody stepped up to reinvent the Fed was in the Great Depression, and it would have been far better for our parents and grandparents if somebody had.


Now that's how we want to see our Fed general counsel, not this mumbling, stumbling, sneering, absolutely bullshitting crap in the video above.

Perhaps Mr McAfee is available in his retirement to give the Board of Governors' counsel some lessons on how not to suck ass and be totally fucking sheisty? Christ, I've gotten less of a creeped out feeling walking used car lots in inappropriately short skirts than I got from watching this damn video.

Just sayin.

China Cockblocks American Chicken


Wow, sir! That is a giant cock!



Protectionism has a new face: chicken!

(Can I actually get away with that "cockblock" headline? Let's hope so. I mean, you know, it's chicken...)

AP:

China on Sunday started investigating complaints that American chicken products are being dumped in China and are unfairly benefiting from subsidies, adding to a string of trade disputes with Washington.

The Commerce Ministry said the probe was launched Sunday on broiler products and chicken products, following requests by Chinese companies to investigate the U.S. imports they say are hurting the domestic industry.

The investigation comes at a time of mutual finger pointing Washington and Beijing accusing the other of protectionism, which both say will hurt efforts to end the global economic crisis.

A U.S. labor union and three paper companies announced last week they had filed a new trade complaint over imports of Chinese paper. The move came a week after Beijing filed a World Trade Organization challenge to Washington's decision to raise tariffs on imports of Chinese-made tires.

The two governments also are involved in disputes over access to each others' markets for steel pipes, music and movies. On Tuesday, China appealed against a U.S. victory in a trade dispute over restrictions on the sale of U.S. music, films and books in the Chinese market.

This can't possibly end well.

Fed's Warsh: Hell Yeah We're Swapping Gold, But it's None of Your Business


If this information is on a need to know basis, file this under need to know and now.

GATA:

The Federal Reserve System has disclosed to GATA that it has gold swap arrangements with foreign banks that it does not want the public to know about.

The disclosure contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund's treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.)

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see http://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President's Working Group on Financial Markets, detailed the Fed's position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.

Warsh wrote in part: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."

When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve's Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See http://www.gata.org/node/1181.)

The Fed's September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

While the letter is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see http://www.gata.org/node/6242 and http://www.gata.org/node/7096), it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.


Um... I'm no expert but this might not bode well for that whole "transparency" scheme. There's an awful lot of scheming going on over there, isn't there?

Fed General Counsel: Stay Out of Our Business. Srsly.



Gotta love the Fed logic.

WSJ:

Legislation giving U.S. government investigators broader authority to audit the Federal Reserve could erode confidence in the central bank’s independence and ability to conduct monetary policy, a top Fed official will tell lawmakers Friday.

Fed General Counsel Scott Alvarez, in testimony prepared for a Friday hearing, said legislation in the U.S. House of Representatives giving the Government Accountability Office greater leeway to examine the central bank could have a detrimental effect.

“These concerns likely would increase inflation fears and market interest rates and, ultimately, damage economic stability and job creation,” Alvarez said in the prepared remarks for the House Financial Services Committee hearing.

In addition to potentially undermining public and investor confidence in the Fed’s setting of monetary policy, Alvarez said the legislation could hurt the U.S. government’s relationships with other countries.

“Foreign central banks and governments likely would be less willing to engage in financial transactions with the Federal Reserve if these transactions were subject to policy review by the GAO,” he said.


O rly? And why is that? Could it be because foreign central banks are just as scandalous as our friends at the Fed and therefore would prefer not to be exposed?

Pfft.

Ben Bernanke, Cold Blooded Killer?



h/t to my dear MC for this and yes, I am being careful, thank you for your concern. I always keep the Infantry Journal line "If your attack is going too well, you're probably walking into an ambush" in mind when carefully skipping along on my Fedbashing adventures.

Listen, we know certain other Fed Chairmen have homicidal tendencies (hello Greenspan Body Count!) so this really isn't a stretch.

Census worker hanged with 'fed' on body (AP):

The FBI is investigating the hanging death of a U.S. Census worker near a Kentucky cemetery, and a law enforcement official told The Associated Press the word 'fed" was scrawled on the dead man's chest.

The body of Bill Sparkman, a 51-year-old part-time Census field worker and occasional teacher, was found Sept. 12 in a remote patch of the Daniel Boone National Forest in rural southeast Kentucky. The Census has suspended door-to-door interviews in rural Clay County, where the body was found, pending the outcome of the investigation.

Investigators are still trying to determine whether the death was a killing or a suicide, and if a killing, whether the motive was related to his government job or to anti-government sentiment.

Investigators have said little about the case. The law enforcement official, who was not authorized to discuss the case and requested anonymity, said Wednesday the man was found hanging from a tree and the word "fed" was written on the dead man's chest. The official did not say what type of instrument was used to write the word.

FBI spokesman David Beyer said the bureau is helping state police with the case.

"Our job is to determine if there was foul play involved — and that's part of the investigation — and if there was foul play involved, whether that is related to his employment as a census worker," said Beyer.

Beyer declined to confirm or discuss any details about the crime scene.

Lucindia Scurry-Johnson, assistant director of the Census Bureau's southern office in Charlotte, N.C., said law enforcement officers have told the agency the matter is "an apparent homicide" but nothing else.

Shit, good thing they have no idea where I live, eh?

Man Sues Bank of America for 1.784 Billion, Trillion dollars



(h/t Cl5v5r and uh, to answer your question, dear, I'm not sure if this is more than a bazillion $ or not. I'll have to get back to you on that)

CNBC:

Dalton Chiscolm is unhappy about Bank of America's customer service—really, really unhappy.

Chiscolm in August sued the largest U.S. bank and its board, demanding that "1.784 billion, trillion dollars" be deposited into his account the next day. He also demanded an additional $200,164,000, court papers show.

Attempts to reach Chiscolm were unsuccessful. A Bank of America spokesman declined to comment.

"Incomprehensible," U.S. District Judge Denny Chin said in a brief order released Thursday in Manhattan federal court.

"He seems to be complaining that he placed a series of calls to the bank in New York and received inconsistent information from a 'Spanish woman,"' the judge wrote. "He apparently alleges that checks have been rejected because of incomplete routing numbers."

Chin has experience with big numbers. He's the judge who sentenced Bernard Madoff to a 150-year prison sentence for what the government called a $65 billion Ponzi scheme.

"If he thinks Bank of America has branches on every planet in the cosmos, then it might start to make some sense." Judge Chin gave Chiscolm until Oct. 23 to better explain the basis for his claims, or else see his complaint dismissed.

Aww Snap! The Ticker Takes on the Fed... and Um, Kicks Their A$$ets




Holy shit, Market Ticker tore the Fed a new one today and it's so good that I can't resist pointing you there (in case having the Ticker directly to your right isn't obvious enough).

The Federal Reserve appears to have been involved in a pattern of conduct in its decision-making and lending that has favored certain institutions over others, rather than acting as a neutral arbiter and "policeman" of Congressionally-enacted mandates and regulations.

The Federal Reserve has willingly acted in concert with Wall Street to blow financial asset bubbles that, mathematically, could not possibly lead to sustainable economic growth in an environment of price stability, in direct contravention of its charter. This conduct has spanned nearly three continuous decades and is a matter of mathematical fact and record.

The Federal Reserve's current lending and other programs have been executed in an environment of intentional secrecy while it is clear "on its face" that The Constitution provides Congress with the exclusive right to regulate all of the functions that The Federal Reserve currently engages in.

While Congress is empowered to delegate it's authority, it is inexcusable for The Federal Reserve to resist or otherwise attempt to obstruct any desire by Congress (or the people, under the general standard of a representative republic in which government must take place "in the sunshine") for a full and complete audit of The Federal Reserve's activities.

I therefore call for HR1207 to pass in the House, be taken up and pass unaltered by The Senate, and to be signed by The President of The United States.

In addition I call upon Congress to hold The Federal Reserve to account for its outrageous dereliction of duty toward its stated goal, that of promotion of sustainable economic development in an environment of price stability, over the previous 30 years.

To the extent that these actions have taken place in concert with private actors, including Fed District Banks, and have involved the willful and intentional hiding of losses, misrepresentation of credit quality, or other acts that can be reasonably construed as a separate and distinct offense under existing law I call for immediate investigation and prosecution of those criminal offenses, irrespective of the identity of the actors involved.

JDA has done HR 1207 to Audit the Fed before and while I commend Denninger for his stellar Fed ass-reaming skills, an audit is useless. If any Big 87654 (tm Skeptical CPA) auditor cares to tell me how they would perform a useful non-GAAP audit using the client's own rules as a gauge, I would love to hear it. Until then, useless. Beyond useless.

That being said, if you had any doubt in your mind as to the Fed's culpability in the brazen murder of the dollar's purchasing power and potentially criminal activity in financial markets not at all cleared by any system of checks and balances (you know, there's that whole Constitutional argument but that's nothing new), this should offer some insight into the matter.

As in... holy fuck. Why are we even debating this? The financial ATF needs to strap on the riot gear and raid the joint already.

Watch that Debt Ceiling Now, Kids



I'm not sure if this makes me want to cry or throw up. Maybe both.

Bloomberg:

A legal limit on U.S. debt may put pressure on the Federal Deposit Insurance Corp. to replenish its coffers by assessing fees on banks rather than borrowing.

The FDIC board is set to meet next week to decide how to refill funds depleted by 94 bank failures this year. The options include new assessments on banks, tapping a $100 billion line of credit with the Treasury Department, or borrowing money from banks or debt markets.

One scenario the FDIC says it is considering would involve asking banks to pay future insurance fund assessments in advance. Banks could pay upcoming fees now, while they are holding cash anyway. Later on, banks would receive credit for fees already paid, which could free up more cash for lending in the future.

“Pre-paid assessments would allow the FDIC to replenish the Deposit Insurance Fund in a way that does not permanently damage banks’ financial viability,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York.

Any new government borrowing brings the outstanding U.S. government debt closer to the $12.1 trillion limit. Tapping the FDIC’s line of credit or borrowing through the Federal Financing Bank or from private banks also would have implications for the debt limit, Treasury spokesman Andrew Williams said in an interview.

The Obama administration has been pressing lawmakers to lift the debt cap, which Treasury Secretary Timothy Geithner warned last month may be reached later this year.

Umm... shouldn't we take this as a sign? Or is that too obvious?

The Fictional Accounting of the FDIC: Revisited




After a JDA reader pointed out to me (thanks, RS, spot on as usual!) via yesterday's The FDIC Is Going to Have to Figure Out Where to Get Some Cash From and Quick, it isn't entirely fair to blame them for that whole didn't collect insurance premiums for 10 full years thing since it was Congress, not the FDIC that dictated those rules. Since the "fund" was apparently well-capitalized by Congressional standards (*cough* 1.5%? My grandma gets better returns on her damn CDs, even with Zimbabwe Ben's ZIRP of Doom), no one thought it might be a good idea to sock a little extra away for the future just in case Greenspan's easy money scam ever ran out.

Bwhahahahahahahahahaha!!

Anyway. I wrote this in December of last year and it is appropriate to address once again. You don't care if I recycle content, do you? Sorry kids but JDA is, uh, afk for a few days.

[A]pparently, the Federal Deposit Insurance Fund is just one more liability on the United States' statement. If you believe a former chairman of the whole shebang, that is. Sorry, but, uh, I'm more likely to believe it if it comes directly from a source like that.

Isaac goes on to sum up a discussion between he and former U.S. Treasury Secretary Don Regan thusly:

Isaac: Don, I'd like to come over to look at the money.
Regan: What money?
Isaac: You know . . . the $11 billion the FDIC has in the vault at Treasury.
Regan: Uh, well you see Bill, ah, that's a bit of a problem.
Isaac: I know you're busy. I don't need to do it right away.
Regan: Well . . . it's not a question of timing . . . I don't know quite how to put this,
but we don't have the money.
Isaac: Right . . . ha ha.
Regan: No, really. The banks have been paying money to the FDIC, the FDIC has
been turning the money over to the Treasury, and the Treasury has been
spending it on missiles, school lunches, water projects, and the like. The
money's gone.
Isaac: But it says right here on this financial statement that we have over $11 billion
at the Treasury.
Regan: In a sense, you do. You see, we owe that money to the FDIC, and we pay
interest on it.
No money. Not a penny. You know, like, the FDIC just kind of writes it off as a liability and hopes for the best. Not a single God-forsaken dime.

So what happens when 25 failed financial institutions are tapping the vein for relief?

Bailouts.
Panic.
Scramble.

Everyone saw this coming. Sadly our government didn't want to give us the heads up before it did, cuz, you know, we've been real busy fighting a fake war in Iraq. Among other sins of the current administration. Surely it must have just slipped their minds.

So the "insurance" premiums are nothing more than taxes by a different name.

The FDIC is just one more Fiduciary Unicorn placed in front of us as a fictional entity to soothe fears that, perhaps, things may not be as under control as we've been told they are.

"It is important for people to understand that the deposit insurance fund, like all federal trust funds, is simply an accounting entry with the US Treasury." said the Institutional Risk Analyst after posting a story based on available Associated Press documents on the FDIC, "However, we need to make clear that the US Treasury will advance whatever cash is needed by FDIC to address bank failures and make good the deposit insurance guarantee."

Whatever cash is needed. Your retirement. Your tax money. Fuck it, let's just throw your Christmas bonus in there too - oh wait, you don't GET ONE because you, like 8.2 million Americans, don't have a job any longer.

Accounting fiction? This isn't Harry Potter, you can't just make up a story!

But wait, moral hazard gets worse. Yeah, I know.

CNN Money:

One of the fundamental tenets of a free market is that in an auction the rules of the game should not give one bidder a fundamental advantage over another bidder. Sadly, that may not have been the case last month when the FDIC oversaw the sale of Texas-based Guaranty Bank. On August 21, Sheila Bair, the chair of the FDIC, declared Spain's second-largest bank -- Banco Bilbao Vizcaya Argentaria SA -- the winner of a spirited auction to buy Guaranty Bank instead of a consortium of U.S. investors including Blackstone Group and TPG.

The deal was yet another reminder of Bair's bias against private equity firms buying failed banks. Certainly, there are cases where private equity investors have made a hash of the banks they have acquired and of course private equity firms may not make the highest bid in a given situation, but it appears Bair is tarring an entire industry with a wide brush. It would seem the FDIC is being less than accommodating to an important potential source of funding for struggling banks at the very moment when the FDIC's own insurance fund is running low given the 94 bank failures so far in 2009.

Ooh, now that could totally be the FDIC's fault.

End the Fed? We might not get there so why don't we start with the FDIC instead? You know, test run. Pull the plug already, they are done. And it only took 76 years!

Dollar Dead in 2010?



Hey Web Bot, what happened to "Dollar Dead in 2010"?

Go on, Google it. They're all gone. Every single one.

What the heck did the Web Bot predict that could have been so terrible? Oh nothing, just the collapse of the dollar and a monstrous hybrid double whammy of hyperinflation in the things you need and deflation in the things you don't.

You can't eat a fucking big screen TV, you know.

Anyway, if you are not familiar with the Web Bot project, it is essentially a Google spider on crack, crawling the Internet to tap directly into the collective conscious of humanity. Its track record is fairly impressive, having predicted both 9/11 and the financial collapse of late 2008. So I wouldn't really brush it off that easily, though it does tend to get evangelized by, um, alternative alternative media

If you really want to delve in to the Web Bot's world, I suggest you strap on your tin foil hat and keep your calendar free for December 2012. And look up so you don't miss the aliens.

But it might be onto something with this whole dollar collapse thing...

(h/t my darling M for texting me on my day off with the wonderful news)