The Real Mortgage Fraud: GSEs and Government Accounting, Duh

As many of you already know, JDA is no mathlete (don't let the name fool you; I am not an accountant, I just play one on TV. Don't ask me to help you with your taxes because I own this shirt) but these numbers just don't check out. And I have sat through several hours of government accounting classes. And I've even contemplated this at the bar loopy on Racer 5. Still, I can't figure out how this adds up. Can one of you fucking math whizzes help a sister out on that? Grab the waterproof calculator, kids, you're going to piss yourselves when you realize how deep in the hole we really are.


Fannie Mae reported a staggering $72 billion net loss for 2009, underscoring the challenges that still face the nation's largest mortgage financier and offering more grim news for taxpayers who may ultimately pick up the bill.

The Washington-based company posted a $15.2 billion fourth-quarter loss and said it asked the U.S. Treasury for another $15.3 billion to stay afloat, bringing its total bailout tab past $76 billion. The quarterly results were an improvement from the year-ago period, when Fannie reported a $25.2 billion loss, but the annual loss surpassed the year-earlier loss of $58.7 billion.

The Fannie Mae earnings release came days after Freddie Mac, its smaller competitor, reported smaller losses. Freddie Mac posted a fourth-quarter net loss of $6.5 billion, didn't ask for more bailout cash and posted a $21.6 billion loss for 2009, down by more than half from a year earlier.

Unfortunately, the GSEs' plan to squash competition (see what happens when things get nationalized? It isn't pretty to watch) by strong-arming independent AVM providers out of the loan modification fun isn't quite working out for them. Aww, now that isn't nice.

The CATC wrote an angry letter that you can find here:

In this era where there is a renewed interest in fair, open and honest dealings we felt it appropriate to communicate that members of the Collateral Assessment and Technologies Committee (CATC) of the Real Estate Information Professionals Association (REIPA) believe that the independent providers of residential real estate automated valuation models (AVMs) have been unfairly excluded by FHLMC and FNMA (collectively the “GSEs”) from participating in the Home Affordable Modification Program and we have a recommendation to rectify the situation.

The Home Affordable Modification Program (“HAMP”) guidelines released by the cosponsors on March 4, 2009 specifically provide for the use of non-GSE AVMs. Contrary to the Treasury’s directives, however, the GSEs made it abundantly clear that for this program only the GSE’s proprietary AVMs could be used for valuation purposes if the lender wanted to receive a waiver of representations and warranties1. While a lender could choose to use a non-GSE AVM, it was clear that they use it at their own peril because representations and warranties would not be relieved. As a result, all private sector AVM providers are effectively “locked-out” of participation in this program. The fact that no AVM other than those owned by the GSEs, can be used for the HAMP creates the appearance of an endorsement by the Federal Financial Institutions Examination Council (FFIEC) and sends a loud message to the lender community, that GSE AVMs are the best from the GSE perspective and unfairly suggest that there are no acceptable substitutes.

But wait, that's not all! Fannie and Freddie lined up for what must be their 9th bailout by now (is that how many quarters deep into this thing we are?) and little Timmy Geithner kept his unlimited bailout promises but failed to deliver on that transparency he's been pushing from the gate:

“The Administration is in the process of reviewing issues around longer term reform of the federal government’s role in the housing market.” Treasury also said that President Obama would provide a “preliminary report” in his fiscal 2011 budget in February 2010.

That report did not happen. On the contrary, this week Treasury Secretary Timothy Geithner told Congress a plan for the reform of Fannie and Freddie would not be offered until next year.

On Friday, Fannie Mae asked to tap into its Treasury credit facility for an additional $15.3 billion, bringing its bailout total to more than $75 billion.

China is holding a lot of this crap, so if they dare grow a pair and dump more Treasurys, Timmy won't be able to fund his unlimited bailout and therefore the Chinese paper will be worthless (oops it already is) and they'll end up screwing themselves. So? Do it already, China, just grab one end of the bandaid and yank. There's a gaping sore underneath it so you might want to look away.

BUT IT GETS WORSE! I know, right? How is it possible? Somehow it is.

GSEs get the most magical accounting treatment of all, somehow counting as their own entity in the debt sense and quarantined from the United States' "budget". That and China dumping the garbage is only slightly disconcerting.

Based on data from TIC and other U.S. sources, it is possible to construct a profile of the owners of U.S. government debt held by the public, which stood at $7.8 trillion at the end of December 2009. China’s share of total outstanding U.S. government debt held by the public has risen steadily over the years, but fell slightly in the latter half of 2009 and now stands at 10 percent (or about one-quarter of all U.S. debt held by foreigners). This represents a one percentage point reduction relative to the share in August 2009, consistent with the fall of about $45 billion in China’s overt holdings of U.S. Treasuries from August to December 2009. Debt issued by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, which amounted to about $7.2 trillion as of September 2009, represents a liability of the U.S. government as well. China’s share of outstanding U.S. agency bonds was 6.4 percent in 2007 but fell below 6 percent in 2009.

Wait. So they are nationalized and a pretty fucking large liability (again, I suck at math so if I'm over-reacting by over-adding or something, please let me know) and we're on the hook for an unlimited bailout because Tim Geithner is a debt hack but GSEs aren't counted in our overall debt?!

Like the Social Security "Trust" we've been looting for years?

Government accounting. It's a miracle. And we truly are screwed.

If the government would really like to be proactive in attacking mortgage fraud at the root, JDA humbly suggests they bust themselves and let competent entities (like the markets) figure out how to put the pieces back together as they have failed miserably. Good luck with that.


A Lesson in Inflation from Scrooge McDuck

Saturday, February 27, 2010 , , 1 Comments

(h/t House of Duck)

Perhaps little elementary school JDA saw this episode of Duck Tales after school one day and knew in her still-sweet future Fedbashing little heart that something was amiss with our monetary system. One can only wonder.

Anyway, a lesson in inflation from Duck Tales. I'll let Scrooge McDuck explain the rest:

So was anyone else paying attention?


TLP: Time to Start Planning the Next Grand Old Party Party

Saturday, February 27, 2010 , , , 4 Comments

Obama has a year under his belt. The challengers are lining up on the Republican side, elbowing each other a little bit now, but definitely scoping each other out for the bitch-slapping to come. So it makes sense that GOP leaders are doing some scoping out of their own and looking for a city to overwhelm for a few drunken days and pick a nominee.

The Republican National Committee has weeded out convention applicants and come up with three finalists. Hookers of Phoenix, Tampa and Salt Lake City – OK, maybe we'll need some girls who like to travel for work – it's time to brush up on your kinky. You can guess how Republicans like to get down and summer 2012 will be here before you know it.

From the CNN Political Ticker:

"These cities submitted three very strong bids, so all three are in contention," Holly Hughes, an RNC member from Michigan who chairs the RNC Site Selection Committee, told CNN. "Hosting a convention is a huge deal. A city has to raise multiple millions of dollars, but they also get the benefit of showcasing their city and bringing in revenue."

A 12-member RNC Site Selection Committee will visit the cities in late March and early April to meet with local officials and evaluate the potential sites - and will then make their final recommendation to the RNC. The full 168-member committee will vote to select the host city at the RNC's summer meeting in July.

"Phoenix, Tampa, and Salt Lake City are all amazing American cities and I wish them the best of luck with their bids," RNC chairman Michael Steele said in a statement.

Sounds so exciting and an opportunity for civic pride, showing off the best a city has to offer and all of that bullshit. The Lazy Paperboy covered politics once he finally shed his delivery bag and grabbed a reporter's notebook. So he can tell you first-hand that conventions, at their heart, are massive whorefests. And that's not even counting the girls staking out the hotel bars.

From the candidates and their hangers-on, to the delegates so fucking delighted to have a chance to cut loose out of town, to the corporate sponsors giving away truckloads of swag and the biggest sluts of all, the look-at-me-me-me media ... it's a non-stop circle jerk wrapped in red, white and blue.


Whatever it Takes

Friday, February 26, 2010 0 Comments

WaPo said it, not me.

Clearly, the Fed chairman recognizes the severity of the problem and has decided to do whatever it takes to prevent anything like the Great Depression from happening again. Given where we are today, that means printing money, even if that runs the risk of creating a serious inflation problem. 

In totally unrelated news, I should announce that I've resigned from my job to write full time (some of you already know this) and won't be talking much about that for now out of courtesy, just note it somewhere and let's go back to being on Bernanke's nuts. Hopefully Zimbabwe Ben is ready for what happens when JDA is chasing his ass for a living all day long.

Whatever it takes.


Fed Financial Reform B*tch Fighting Rages On

No more slogging through long rambling speeches to get to the meaty parts, kids, the Richmond Fed has taken a proactive stance in the project to save the Fed's ass and wants you to know how it feels about important Fed "responsibilities" like bank supervision, governance, Fed audits and of course the all-important "whatever it takes".

Take it away, JDA's favorite Fed bank (and if you really have a whole day to waste, you can click through to see all the awesome, non-nuclear financial favors the Fed does for you at that link):


Several regulatory reform proposals under consideration would change or eliminate the Federal Reserve’s supervisory responsibilities.


The structure of Federal Reserve Banks has been questioned by some who have said that the independent nature of the Banks does not provide sufficient public oversight. Proposals have been introduced to change the process for appointing directors and presidents of Reserve Banks to increase the influence of the federal government.

GAO Audits

Congress has considered several measures that would expand the authority of the Government Accountability Office to review certain operations of the Federal Reserve System. These proposals would remove exceptions from existing law and allow for frequent and ongoing GAO reviews of the Fed’s deliberations, decisions and actions on monetary policy.

Resolution Authority

Proposals for regulatory reform include changes to the responsibilities of the Fed and other agencies, new regulations for “systemically important firms” and new procedures for handling failures of those firms. One important aspect to any change in the regulatory environment is the extent to which it provides clear and credible limits to the federal financial safety net.

The federal financial safety net – the protection, both explicit and implicit, afforded to firms in danger of failure – arguably has increased risk-taking among many institutions and reduced the incentive for creditors to appropriately assess risk and related costs. In addition, the likely provision of federal financial assurance may have reduced the incentive of an institution to hold adequate reserves in the case of a liquidity crisis.

While Richmond was putting together its views (personally I would have liked more details like Jeff Lacker's favorite color or whether or not Sally Green likes long walks on the beach to go with her central banking), the rest of the Federal Reserve System has been out cheerleading this anti-financial reform agenda that leaves the Fed with little to do except take the blame. Seriously.

Case in point, our favorite arsonist.


A senior Federal Reserve official on Thursday repeated earlier comments that U.S. regulatory reform proposals before Congress probably won't prevent a future crisis and could hamper the central bank's ability to deal with one.

St. Louis Federal Reserve Bank President James Bullard told a business group that a plan for a multi-member financial system watchdog is unlikely to prevent a future crisis because it was unlikely to act decisively.

It doesn't end with Bullard. Minneapolis Fed's fearless new leader said last week “stripping the Federal Reserve of its supervisory role would needlessly put a Great Depression on the menu of possibilities for our country,” as if GD II wasn't engineered by the Fed in the first place.


Kocherlakota told the bankers that in a financial panic the Fed’s role is “to ensure that illiquid but solvent firms survive and ... to make sure that truly insolvent firms do in fact fail.”

He argued that a shrunken role for the Fed could limit its ability to act in that dual role in the future. “In the politically charged circumstances of a financial panic...the Federal Reserve would have no way to obtain reliable information... and would have no way to make appropriately targeted loans” to threatened banks.

Man, by the looks of things you'd think these guys were scared to lose their jobs or something, what gives?

You may have sat by and let your job get vaporized, America, but the Fed isn't about to go down like a bitch and will certainly keep swinging. Swinging like a nerd getting his lunch money beaten out of him, not like the large, low-hanging pair they used to possess before they let Hank Paulson loot the Treasury in the name of systemic risk management and financial doomsday, naturally. Those balls are long gone and all that's left is this declaration of war.

Seriously though, what are they afraid of? This legislation comes from Chris Dodd, how hard can it possibly bite?


Goldman Sachs vs the Fed? Yeah OK

Friday, February 26, 2010 , , , 1 Comments

And? The Fed is looking at the Goldman/Greece deal. Big whoop. Were the Fed to slap all of their collective balls on the table they still wouldn't have a pair amongst them as large as Goldman Sachs'. Sorry to say it. GS isn't afraid to perform their extensive manipulation maneuvers in broad daylight while the Fed operates in the darkness behind some obscure curtain of "independence" or whatever their argument is this week.

I vote the guy with the neckbeard gets (figuratively) teabagged if he even tries.

Business Week:

Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank is reviewing derivatives contracts arranged between Goldman Sachs Group Inc. and investment banks with Greece.

“We are looking into a number of questions related to Goldman Sachs and other companies and their derivatives arrangements with Greece,” Bernanke said yesterday in testimony before the Senate Banking Committee in Washington.

Bernanke was responding to a question from Senator Christopher Dodd, a Connecticut Democrat, who asked if there should be limits on the use of credit default swaps to prevent “runs against governments.” Greek bonds slid yesterday amid concern the country’s credit ratings may be cut.

Would we like to guess what happens next? If Goldman Sachs chooses, it will admit no liability, accept some kind of "settlement", make a nice scene, cry "oh, oh no, please, don't cut off our self-regenerating, massive nuclear testicles" (for a great time, try "Matt Taibbi on Lloyd Blankfein's Balls" via Dealbreaker but WTF, you can't give me a headline like that and then not deliver a picture, DB) and then go about its business.

Like this:

Goldman Sachs Settles with State Regulators and Offers to Repurchase Auction Rate Securities Sold to its Private Clients

August 21, 2008

New York, August 21, 2008 - The Goldman Sachs Group, Inc. (NYSE: GS) today announced that Goldman, Sachs & Co. has entered into a settlement in principle with the Office of the Attorney General of the State of New York and the Illinois Securities Department (on behalf of the North American Securities Administrators Association) regarding auction rate securities (ARS). Under the settlement, Goldman Sachs will offer to immediately repurchase at par the outstanding auction rate securities that are held by its Private Wealth Management clients and were purchased through the firm prior to February 11, 2008. Goldman Sachs has informed the Securities and Exchange Commission (SEC) of the agreement and intends to fully cooperate with the SEC’s ongoing investigation. The terms of the settlement include:

• Goldman Sachs will pay a $22.5 million penalty.

• Goldman Sachs neither admits nor denies allegations of wrongdoing.

• Effective immediately, Goldman Sachs will offer to repurchase at par approximately $1 billion of ARS still held by private clients that were purchased through the firm prior to February 11, 2008, with the exception of those ARS where auctions are clearing. Clients who are eligible for this offer include individuals, all charities and non-profits, and those businesses with accounts of $10 million or less. The firm will complete all buybacks no later than November 12, 2008.

• Goldman Sachs will compensate private clients who purchased ARS through the firm before February 11, 2008, and sold such securities at a loss between that date and the date of this announcement.

• To the extent that a private client has incurred consequential damages beyond the loss of liquidity in the private client’s holdings of ARS, Goldman Sachs will participate in a special arbitration process in which Goldman Sachs will be precluded from contesting liability from the sale of the ARS.

• Goldman Sachs will endeavor to continue to work with issuers and other interested parties, including regulatory and government entities, to expeditiously provide liquidity solutions for institutional investors.

• Goldman Sachs will refund financing fees that it received from all municipal ARS issuers that issued ARS in the primary market through Goldman Sachs between August 1, 2007 and February 11, 2008, and refinanced those securities after February 11, 2008.

Awww, isn't that sweet of them?

And on to the next carcass...


As This Monetization Comes to a Close...

Jim Willie seems to believe that the sovereign debt crisis is just around the corner, after test runs like Iceland, Dubai, and of course Greece. He also believes that the Treasury and Fed have worked together to create an obscure illusion of demand for US debt using creative accounting and a catch-all category called household debt. Yeah, like as in all those unemployed people who can't afford to pay their mortgages nor credit card bills nor health care premiums. Those households. And just about anyone else they can conjure up.

One more time, say it with me, kids: foreign central banks LOL!

JW via Kitco:

The foreign accumulation of new USTreasury debt is tiny compared to what official USTBond debt is issued and auctioned. Nobody seems to be capable of primary school mathematics, once graduation to Wall Street and USGovt service is achieved. If new debt is five times what foreigners are buying, then after factoring the domestic bond fund absence like PIMCO (they detest bonds nowadays), one can quickly conclude that the USFed/Treasury tarnished tagteam is monetizing 60% to 80% of all new debt issuance. Isolation is here, but must be more fully recognized.

The Greek tragedy has an American conclusion. It is written in stone, but US leaders and the US population are blinded by a generation of dominance and privilege. Like a tsunami, the tragedy will strike the WashingtonDC shores and shred its financial seawalls. A sequence is at work, with Southern Europe next in line, then England, finally the United States. The financial foundation data demands it. The denials ignore reality. The isolation of the USGovt debt finance machinery, and exposure of its abused Printing Pre$$ assure a default event, or at least a path to such a default. It will probably not be properly recognized.

To ask the United States as a collective entity to embrace its fate is nearly as mad as the very behavior that we see in bond markets.

Manipulation? The Fed? Surely you jest. No, actually you don't, and you need look no further than this September 2009 piece by Zero Hedge in which former Fed chairman Arthur Burns actually has the audacity to say that a truly free relationship between gold and "money" (I use the term loosely) in the global economy "could easily frustrate our efforts to control world liquidity".

A gem from ZH:

Aside from the gratuitous observation that even 34 years ago it was painfully obvious how "massive" liquidity could and would result in runaway inflation and the Fed actually cared about this potential danger, what highlights the hypocrisy of the Fed is that when it comes to drowning the world in excess pieces of paper, only the United States should have the right to do so. 

Exactly. And apparently we should also be allowed to monetize everything that isn't nailed down.

While it would be quite easy to strap on the tin foil hat tight and claim the Fed and Treasury are in bed together on this jerk off, I can't quite believe they can even play well enough with each other long enough to come to some sort of manipulation agreement.

So? Who will snitch on whom? Keep in mind that one entity is the addict and one is the pusher, who do you think is in a better position to walk away?


TLP: Nice Work If You Can Get It, Because You'd Have To F&%k Up Bad To Lose It

Friday, February 26, 2010 0 Comments

The Lazy Paperboy's first job was as an independent contractor. Up every morning, except Sundays – blessedly, those belonged to the kid down the street who delivered the afternoon paper – my continued employment depended on that rolled-up broadsheet making a solid fap on the doorstep before the customer came looking for it. As you can imagine, laziness was a huge obstacle in that line of work, which led to the recruitment of the younger brother.

Bottom line: the job was mine only as long as I got it done. Otherwise, the surly district circulation manager would replace me. (OK, that happened. No surprise, right?)

How much better to be a government contractor.


The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan.

By altering how it awards $500 billion in contracts each year, the government would disqualify more companies with labor, environmental or other violations and give an edge to companies that offer better levels of pay, health coverage, pensions and other benefits, the officials said.

Because nearly one in four workers is employed by companies that have contracts with the federal government, administration officials see the plan as a way to shape social policy and lift more families into the middle class. It would affect contracts like those awarded to make Army uniforms, clean federal buildings and mow lawns at military bases.

Although the details are still being worked out, the outline of the plan is drawing fierce opposition from business groups and Republican lawmakers. They see it as a gift to organized labor and say it would drive up costs for the government in the face of a $1.3 trillion budget deficit.

Granted, getting caught pushing through hedges, cutting across pristine suburban lawns and winging the paper into the bushes may qualify as "other violations." Plus, my later experience at the front end of the news distribution chain proved that government has every reason to not give a shit about whether people get their papers or not.

The Obama Administration sees an overhaul of the government procurement process as a way to prevent contracting scandals involving cost overruns and no-bid contracts, Steven Greenhouse reported in the Times.

“The president made it clear that he is committed to reforming government contracts to save taxpayers money while protecting workers and the environment,” a White House spokesman, Bill Burton, said. “The administration is currently gathering data and examining the best ways to do this.”

Sounds like a bit of a clusterfuck, wrapping up efforts to improve wages, improve working conditions and enforce environmental regulations in one huge package. How about just enforcing those things on their own when they arise? A company violates employment law, it gets a hard smack. It tries to squirm out of pollution standards? Tighten the grip. It won't be long before we hear squeals.

Look, I was not a bad paperboy. Lazy is different. But still, the job didn't last forever, the newspaper found someone else to do my route and I moved on to selling sporting goods. Everybody was happy, especially me. After-school work allows for sleeping later. And do you know how long it can take to find a pair of Adidas shelltops in the stockroom?


Convert Your Tax Refund into More Debt for the Treasury

Friday, February 26, 2010 , , , , 2 Comments

Pssst, taxpayer, come sit down on JDA's lap for a moment. Get nice and comfy, I'll pet you on the head and you can listen to my very important story. Don't try to pull any funny stuff, I'm not trying to put a broken heart icon all up in my Facebook status.

First of all, little taxpayer...


... you realize that a "refund" is really just an interest-free loan that you provided to the government, right? Worse, they've spent the year inflating the currency so you actually lost some of the buying power you had at the beginning of the year when you kept your exemptions low and loaned them the cash.


... so why on Earth would you then decide to convert your tax refund - that you already foolishly loaned to the government for a negative return - into bonds?


... it's OK, I know, I know. 


The Treasury Department and the IRS have joined forces to allow you the ability to buy Series I Bonds directly with your tax refund. Series I bonds are thirty-year bonds that accrue interest based on a fixed rate, associated with the time you buy the bond and never changes, and an inflation rate, which changes every May and November.

How do you buy the bonds? Fill out IRS Form 8888, Direct Deposit of Refund to More Than One Account, and put 043736881 as the routing number and BONDS as the account number. If your refund is in exact multiples of $50, you don't need Form 8888, just put those details directly into your tax return.

Seriously, you can't make this up (directly from our friends at the IRS):

Starting in January 2010, you can buy Series I U.S. Savings Bonds with a portion or all of your tax refund. Issued by the Department of the Treasury, Series I bonds are low-risk bonds that grow in value for up to 30 years. While you own them they earn interest and protect you from inflation.

Just tell your tax preparer you want to buy savings bonds with part or all of your refund! If you prepare your own return, file Form 8888, Direct Deposit of Refund to More Than One Account. The instructions explain what you need to do.

In any single calendar year, you can purchase up to $5,000 of I bonds under this program. If you purchase bonds with your tax refund, the amount you request must be divisible by 50. If you don’t buy I bonds with 100 percent of your refund, you will need to have another account in which to deposit the remaining amount of your refund. For example, if your refund is $280; you can direct $250 to I bonds and the $30 balance to your savings account.

When you purchase savings bonds with your tax refund, you will receive paper bonds, issued in your name. If you are married and filed a joint return, the bonds will be issued in your’s and your spouse’s name. You cannot designate a beneficiary under this option.

Anyone else smell the overwhelming stench of desperation?

So? I invite Ben Bernanke, Tim Geithner, Chris Dodd, and the rest of the asshats running this thing into the ground to convert their refunds into Series I Bonds. You first, boys.

Assuming the US government can keep it together for 12 months, these aren't all that bad an idea for parking $5,000 (equivalent to a 1 year CD but with a slightly better rate should inflation run hot and interest rates stay low... uhhh...) but that doesn't make them smell any less desperate.

Anyone remember Liberty Bonds? Don't look at me, I'm 29 but fuck, crack open a book and read a little history for Christ's sake (sorry, Wikipedia. I'm being lazy. TLP must be rubbing off on me):

The first three bonds were retired during the course of the 1920s but the fourth Liberty Bond lasted into the 1930s leading to a technical default on the bond the terms of which were for payment in gold. The fourth Liberty Bond had the following terms:

Date of Bond: October 24, 1918
Coupon Rate: 4.25%
Callable Starting: October 15, 1933
Maturity Date: October 15, 1938
Amount Originally Tendered: $6 billion
Amount Sold: $7 billion

The U.S. Treasury called this bond on April 15, 1934, but refused to redeem the face value of the bond in gold as required by the terms of bond which read:

The principal and interest hereof are payable in United States gold coin of the present standard of value.

The legal basis for the refusal of the U.S. Treasury to redeem in gold was House Joint Resolution 192, dated June 5, 1933. This resolution was later held to be unconstitutional by the U.S. Supreme Court.

Since the United States had devalued the dollar from $20.67 per troy ounce of gold (the 1918 standard of value) to $35 per troy ounce in the preceding year the 21 million bond holders lost $2.866 billion dollars, approximately 41% of the bond's principal.

But governments don't do that, do they? For the love of God, America, it wasn't all that long ago, how gullible are you?


Dallas Fed's Fisher: The Crack Stops Here


Holy crap! Now I remember why Richard Fisher is one of my favorite Fedheads: his large, low-hanging central banker cojones, obviously!

WSJ's Real Time Economics:

The Federal Reserve has provided all the support it can to the economy, and now is the time to allow those supportive policies to bear fruit, Bank of Dallas President Richard Fisher said in a Dow Jones Newswires interview Thursday.

“I would expect rates to stay low for an extended period…given the current forces acting on the economy,” he said. But Fisher added that putting a time frame on the continued maintenance of a near 0% fed-funds rate can’t be done. “People want specificity. You can’t provide specificity here,” he said.

Fisher stressed that when the Fed’s mortgage-buying program ends in March — it will have purchased $1.25 trillion in securities — it will be definitively over. “There may be some real demand for some of this paper” by private investors once the Fed is out of that market, so the exit could be a positive for investors, he said.

Fisher said he couldn’t envision the Fed re-entering the mortgage bond market “unless we have some ungodly crisis I cannot imagine.”

I don't want to ruin the squishiness of this moment by pointing out that he and his Federal Reserve System colleagues missed the last ungodly crisis too so I will keep my pierced little mouth shut.

While Bernanke may still believe in whatever it takes, Fisher is no crack pusher. The Fed will do "whatever is most practicable and efficient" to withdraw unprecedented liquidity from the system, he said, leaving the details of the Fed's proposed exit strategy (which yours truly still doesn't believe in) to some other Fed official. Classy, Dick, real classy.

And hey, if that doesn't work, they can just run up inflation, burn out savings, get the crack REALLY flowing and give us all good government jobs with bloated pension plans. Sure, a loaf of bread will cost you $50 but what will it matter?

Here's to hoping Fisher steps up to the plate and bitch slaps Janet Yellen at the next FOMC over boneheaded statements like these. Just say no, Janet. Seriously.


Hypocrite of the Week: Treasury's Wolin on the Sustainable Track for US Debt

Thursday, February 25, 2010 , , , , 2 Comments

Treasury's #2 had some lovely thoughts to share on globalization from Saudi Arabia last week:

The other session of the day witnessed interesting deliberations on the need for global economic governance after the crisis and rebuilding faith in financial institutions.

In the morning session, US Deputy Treasury Secretary Neal S. Wolin said the G20 had now become the premier forum for more diverse and balanced coordination of the global economy and had responded quickly to help restore the global financial system. There is growth now in many parts of the world but a number of challenges still exist — market turbulence is still there and as yet, there is no significant job growth.

Wolin acknowledged that in the past, the United States had bought too much and saved too little. This was no longer an option. In addition, US public finance must be put on a sustainable track.

"The US can no longer be the single driving engine of the world economy. The crisis has shown that the economies of all countries are intertwined and that all nations must do their part to build the new financial system, which must be stronger, safer and sustainable," he said.

I agree with the last point but am not sure who Wolin thinks he is fooling when he declares the obvious. Isn't it his job, as Treasury hack, to make that happen? Or is that the Fed's job? Who is keeping track?


Sketchy Dodd/Geithner Meeting Ends in... No Deal

Thursday, February 25, 2010 , , , , 0 Comments

 I can't remember who I stole this picture from
if it was you, let me know (!)


Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and Sen. Bob Corker (R., Tenn.) met for roughly an hour Wednesday evening with Treasury Secretary Timothy Geithner to discuss the financial regulatory overhaul in Mr. Dodd’s Capitol Hill office. Talks are intensifying as Messrs. Dodd and Corker try to craft a bipartisan deal, and a bill could be introduced soon.

Messrs. Geithner and Corker had little to say after the meeting (Geithner simply muttered “OK” to the Secret Service detail waiting for him outside and then turned quickly down the hall flanked by senior Treasury officials Kim Wallace and Michael Barr), but Mr. Dodd stopped for a moment to chat.

“We had a good meeting, continue working. No deadlines, no time. Obviously a lot of conversation…we’re just talking through various issues and we respect Tim’s knowledge amd ability so we’re anxious to hear points of view. There’s no deal tonight. We’re working on the bill.”

If you have to point it out, Mr Dodd, you're probably 97% full of shit. "Conversation" LOL is that what they are calling it these days?

It's excellent that the man who engineered one of the most subversive, obscure transfers of wealth in history (Tim Geithner, I'm talking about you, AIG, and the NY Fed in case you aren't paying attention) is now in charge of "rehauling" the very system he assraped from behind closed doors.

I suppose it is appropriate to put the criminal in charge of building the prison. If you were trying to shank a guard in the cafeteria, where would you hide your shank? In the case of Tim Geithner, the shank is hidden on Maiden Lane and the bloody footprints numerous. But let's hold a bunch more hearings to come to obvious conclusions, that should give them plenty of time to sterilize the crime scene.

I'm not really sure what we think we're doing or what we think the rest of the world thinks we're doing but it's just silly at this point.


I Got 99 Weeks of Unemployment But a Job Ain't One

Thursday, February 25, 2010 , , 1 Comments

Unemployment can be a "lagging" indicator all it wants to be, this isn't your average passive blip. Need I point that out? Obviously. The headlines hit repeatedly: "Unexpected Drop in..." unexpected hahaha. To whose expectations are we referring?

As always, yours truly wants just one answer: how can we possibly keep this up?

Apparently as long as our left hand can keep furiously jerking off (um, right hand for Jeff).


The latest extension of unemployment benefits couldn’t come at a better time, it seems; President Barack Obama signed legislation into law Friday providing an additional 14 to 20 weeks of benefits for those who have already exhausted theirs or will do so by year-end.

The extension comes on the same day the Labor Department announced the U.S. unemployment rate hit 10.2% in October, crossing into double-digits for the first time in 26 years as the nation’s jobless swelled to 15.7 million.

The bill, passed earlier this week by both the Senate and the House of Representatives, extends federal jobless benefits by 14 weeks for Americans in all 50 states who face exhaustion before year-end, and by 20 weeks for those living in states where the unemployment rate is 8.5% or higher.

The additional 20 weeks in hard-hit states means the maximum a person in one of those states could receive is now up to 99 weeks, or nearly two years — the most in history.

It could be worse, right?

Perhaps eventually we can use these OMG job creation programs to fund sweatshop labor in hard hit areas like California, Michigan, and Florida. "Hot spots," you might say now though Ben Bernanke dismissed them in 2005. Idiots. Who should be begging for a job? I don't think it's you, America.


The Never-Ending Housing Bailout Continues

Thursday, February 25, 2010 , , , , 2 Comments

Suddenly my crappy little overpriced hideout in San Francisco doesn't seem all that crappy.

There was no heat or hot water, so for weeks Mary Fountain would fill a bowl and put it in the microwave, then strip off her extra layers to sponge herself clean.

Upstairs, her longtime neighbor, 70-year-old Geraldine Davis, peers skeptically out at her balcony, hesitant to step onto the cracked concrete. The last time the city inspector came by, he told her he was afraid to walk out there.

This Bronx apartment building, where city housing violations have increased from 82 to nearly 600 in 16 months, is among thousands of rental properties from Los Angeles to Harlem showing a creeping decay as housing values collapse and funds for repairs dry up.

As landlords find themselves owing more than their properties are worth, some have simply walked away, leaving garbage to pile up. Others have disappeared into bankruptcy, with unpaid utility bills. Some have tried to reduce their losses by neglecting basic maintenance.

"There are 100,000 apartments teetering on the edge" in New York City alone, said Harold Shultz, senior fellow at the Citizens Housing and Planning Council. "And depending upon the way various winds blow, they could fall over."

(via KTVU)

It's cool, all we need is another bailout and everything will be fine, right? It's only 100,000 apartments. In NYC alone. Um... $1.5 billion? For what exactly?


President Obama announced a plan to provide five states hit hardest by the continuing housing crisis with funds to assist distressed homeowners. Nevada, Arizona, California, Florida and Michigan will share $1.5 billion based on a formula to be created by the Treasury Department. According to the White House announcement, the funds would be able to be used for a variety of activities, including assisting homeowners who have lost their jobs with their mortgage
payment, and assisting homeowners in refinancing underwater mortgages.

While these are worthy goals, homeowners in these states are not alone in their need. The National Low Income Housing Coalition encourages the White House and the targeted states to address the very real problem of renters losing their homes in foreclosure.

NLIHC estimates that 40% of the households who lose their homes due to foreclosure are renters whose landlords have defaulted on their mortgage. After eviction, many of these families face the very real possibility of becoming homeless.

Don't necessarily buy anything that comes from the NLIHC, they're complicit in Barney Frank's bizarre backdoor bailouts (Open Market):

As described by a press release from the National Low Income Housing Coalition (NLIHC), a group that has long pushed for the [Affordable Housing] trust fund, “The bill as passed … diverts half of the money intended for the housing trust fund in its first year and 25% in its second year. After that 100% of the funds go into the housing trust fund.”

Although Frank has been described as angry about the compromise, the fact is the committee has already given him about four-fifths of what he has always proposed. The NLIHC press release calls the Senate Banking bill a “milestone” and boasts that “the National Housing Trust Fund Campaign has moved one step closer to accomplishing its core goal: establishing a housing trust fund at the federal level with a dedicated source of revenue.”

It's exciting that the nationalized housing project is working out so well for everyone. Even more stunning, the government continues to believe that it is best equipped to serve as financier, maintenance man, and landlord. Really guys?

So actually, even if these troubled "homeowners" (who should in fairness be called debtors) got some help from the government, would you really want to call it help?


GoldmanSachs666 Makes WSJ's "Ten Wall Street Blogs You Need to Bookmark Now"

Thursday, February 25, 2010 , , 3 Comments

It warms JDA's Fedbashing little heart to see that GoldmanSachs666 - a website I have contributed to since May of 2009 and a project that is near and dear to my heart - has been listed on WSJ as a must-read Wall Street blog for bailout addicts.

David Weidner via WSJ:

Every addict has to have his or her fix, and for Wall Street junkies obsessed with bonuses, bailouts and beta, the blogosphere has plenty of smack to go around.

Wall Street blogs have become a serious enterprise of late affirmed by the recent acquisition, for an undisclosed sum, of by Morningstar Inc., the Chicago-based fund research giant and CBS Corp.'s 2007 acquisition of Wall Strip for a reported $5 million.

These homespun sites break news, offer wit and insight that wasn't even available a few years ago. Some have risen to the point of being must-reads on a daily basis. Nouriel Roubini, the economist, is a blogger and reader of blogs. One blog has steady traffic from the Federal Reserve and Congressional staffers. Another is rumored to be read by hedge fund executive Ken Griffin and Jamie Dimon of J.P. Morgan Chase & Co.

And Weidner's kind words on our conspiratorial little baby:

Before Matt Taibbi there was GS666. For hardcore conspiracy theorists who think all of our financial woes are the result of a certain investment bank, this is the place to go. GS666 aggregates all things Goldman, drawing the wrath of the bank in a trademark-infringement lawsuit. The case was resolved and the blog now carries a prominent disclaimer. Founded in February 2009 by a Floridian entrepreneur named Mike Morgan, the site has been run since October by Larry Rubinoff, a semi-retired mortgage professional, and other volunteers after Mr. Morgan suffered a heart attack and required bypass surgery.

•The Cause: According to Mr. Rubinoff to "demonstrate how destructive (Goldman's bankers) are to our lives and the hopes and dreams of our children."
•By Nature Asks The Theological Question: Can the devil do "God's work?"

The devil can't do God's work but that's what incendiaries are for.

Speaking on behalf of the entire GoldmanSachs666 team (surely Larry doesn't mind), we're honored to be among the greats like Dealbreaker (sister site of JDA's own Going Concern), Naked Capitalism, and the Reformed Broker.

For the record, JDA sees a lot more Fed traffic than GoldmanSachs666 but I do have to confess that the SEC and Treasury are both loyal GS666 readers. Yup, saw what you did there. *yawn*


TLP: Hey, Democrats, Not Totally Your Bad, But About That Bipartisanship Thing ...

Thursday, February 25, 2010 , , , , 4 Comments

This is a scenario The Lazy Paperboy completely gets: things are fucked up and maybe not all his fault, but, ahem, it is definitely his job to fix them.

CNN: (Fair warning: Clicking will subject you to Larry King and that old man pimp look he can't stop rocking.)

Two-thirds of Americans think that the Republicans in Congress are not doing enough to cooperate with President Obama, according to a new national poll.

But a CNN/Opinion Research Corp. survey, released Wednesday, also indicates the public believes the Democrats should be the ones to take the first step toward bipartisan cooperation and they want the Democrats to give up more than the GOP to reach a consensus.

The number of people who say Republicans sort of don't give a shit is up by 6 points from April, so the GOP looks like slackers. Also up, and by a more significant 16 points, is the number of "respondents" who feel President Obama is not doing enough to get along. That's now at 52 percent, a result that shifts Obama to the downside of being helpful about things.

Keating Holland, whose country club-ready name gets lost in the juvenile giggles over his title as CNN's polling director, says Obama benefited last spring from not having been around long enough to have much expected of him. "Congressional Republicans were familiar to Americans," Holland said, "but Obama was new to them, so his early attempts to reach out to the GOP continued to resonate even after it became clear that bipartisanship was not within easy reach."

Health care, jobs, financial reform ... get on it, Democrats. We're waiting. That's the sentiment the poll found in 54 percent of Americans. And while you're at it, bend over. More than half of those, um, polled, (sorry, but it's right there) say the Democrats should be willing to give ground to make things work.

More from CNN:
"Americans feel the ball is in the Democrats' court," Holland added. "They may not be held responsible for the problem, but since they are in charge of the government, Americans appear to think they are responsible for the solution."

According to CNN poll numbers released Sunday, Americans overwhelmingly think that the government in this country is broken, but the public overwhelmingly holds out hope that what's broken can be fixed.

See? It's easy. Just hope.


Jobs I Don't Envy: IRS Tax Cheat Snitches

Thursday, February 25, 2010 , 8 Comments

30% huh? Maybe this tax cheat snitch gig isn't as bad as it initially sounds.

In an about face from its previous position that put a blanket prohibition on the IRS’s ability to accept some information from whistleblowers that were currently employed by a taxpayer, the IRS has now adopted a position that it should consider the facts and circumstances of each case before deciding how it can utilize this potentially valuable inside information. The IRS previously said in Chief Counsel Notice 2008-011 that in the case of current-employee informant, the IRS may not use information provided subsequent to the informant’s initial submission and debrief and there could be no further contact with the informant, whereas the new Chief Counsel Notice 2010-004 (issued February 17, 2010) replaces that position with a facts and circumstances test to determine whether it can use such information and whether further contacts are allowed.

“In our experience, high-level employees - the insiders Congress hoped to attract when they created the whistleblower reward program - can best provide the type of information that ultimately leads the IRS to assess and recover unpaid taxes, and they obtain that information legally because it is in their job description to have it,” said Gregory S. Lynam, Tax Partner at The Ferraro Law Firm. In Notice 2010-004, the IRS said it will now look at the facts and circumstances of each case before applying the “one bite” rule to current-employee informants. The Ferraro Law Firm applauds this revised approach, and “we believe that with this new Notice in place the IRS will be able to administer the Whistleblower program consistent with Congressional intent and in a manner that makes use of the best information available,” said The Ferraro Law Firm Tax Partner Scott A. Knott. Lynam added, “By freeing itself from the shackles of the old interpretation, the IRS has righted its previous wrong and is no longer casting aside the highest value information from the highest-level insiders.”

If you're ready to embrace a life of snitching to the IRS, contact The Ferraro Law Firm, they're happy to help:

The new IRS Whistleblower statute gives anyone with information about large-scale tax underpayments, including accounting errors or tax fraud, a significant financial incentive to report it. The IRS must give you up to 30% of any money they collect based upon your information.

Psst, Neil Wolin, 30%, dude! Surely you are familiar with some tax cheats?


China Tells the US to STFU

Thursday, February 25, 2010 , , , 0 Comments

And just in case we did not quite understand what China wanted to tell us because of "language" issues, they made sure to dump a bunch of Treasurys at the same time. Zing.


China's military warned the United States on Thursday to "speak and act cautiously" to avoid reigniting tensions between the two powers, denying the People's Liberation Army played a part in Internet hacking.

Huang Xueping, spokesman for the Chinese Ministry of Defense, said his government would not reverse its decision to suspend "bilateral military plans" with Washington after it said in late January that it would sell $6.4 billion of arms to Taiwan, the self-ruled island Beijing claims as its own.

In January, the giant Internet search company Google Inc threatened to pull back from China after complaining of censorship and hacking attacks on it and other companies.

Analysts said those attacks were sophisticated operations, possibly overseen or abetted by the Chinese military.

The hacking dispute has added to tensions with Washington over quarrels ranging from trade and the Chinese currency to a meeting last week between U.S. President Barack Obama and exiled Tibetan leader the Dalai Lama, who China reviles as a "separatist" for demanding self-rule for his homeland.

As a recommended supplement to this, how about Thinking the Unthinkable: What if China Devalues the Renminbi? via Naked Capitalism.


The SEC Drags Its Feet a Tad Longer on IFRS

Have you ever had a meeting about a meeting? The proposed adoption of IFRS for US public companies is just like that except with less conference room donuts and more chickens with their heads cut off. As Going Concern points out, the SEC is going to need a roadmap for their roadmap at this rate.

GC guessed there were only two possible outcomes:

1) the SEC decides that they will publish a statement (after more meetings) and give an approximate date that the statement will be released and it will be delayed for an indeterminable amount of time, or 2) the Commission decides it will not publish a statement that the IASB can take its self-righteous double-entry accounting attitude back to London-town and we’ll just do whatever the hell we want. THE END.

Aaaaand not surprisingly, it turned out to be #1. Oh SEC, you make it so easy to wildly speculate with your tame, all-too-predictable heel-dragging. Wasn't this whole IFRS thing the SEC's idea in the first place? I can't point you to any public company who thinks ditching LIFO is worth the estimated $35 million price tag (that's per company, mind you) to convert from GAAP to IFRS. If you know of one do let me know. Can you imagine the costs associated with restating all of that inventory just because the Big 87654 lobbied hard enough? It doesn't help that European accounting standards setters are corrupt enough to claim firsties and then try to shove it down our throats. Ooops, it's too bad the US owes the rest of the world one for that whole securitization, over-leveraging mess.

FEI's Edith Orenstein (via AccountingWeb) breaks it down for us:

At an open commission meeting earlier today, the U.S. Securities and Exchange Commission voted unanimously to issue a Statement:

1. reaffirming the Commission's support for a single, globally accepted set of accounting standards,
2. describing issues that need to be analyzed, falling under six categories, in an SEC "Workplan," and
3. describing events that need to occur between now and 2011, including by the SEC's study of certain issues identified in the "Workplan," and completion of the convergence projects on the FASB-IASB Memorandum of Understanding (MOU), to faciliate the SEC's decision in 2011 on whether to incorporate IFRS in the U.S. financial reporting model for SEC issuers. (NOTE: we corrected earlier version of this sentence for typos.)

SEC Chairman Mary L. Schapiro said that although "we do not have all the information" to make the decision on wheter to move to IFRS at this time, "we remain on a steady path to make the decision in 2011."

Hahahahahaha. Is the SEC looking for said information? Taking prudent steps to collect and analyze such information? Have they done a single thing toward this goal in the last year and a half since Christopher Cox announced IFRS was coming like it or not?

Meanwhile, it goes without saying that JDA's main concern is how the AICPA Board of Examiners will deal with this information. What good is it testing standards we don't use on the CPA exam, especially now that we're about 99% sure the SEC will drag this out as long as possible?

Go on, just say "ooops", blame it on Cox, and let's move on with our lives, clutching our GAAP statements like our lives depend on them. Um, there's that or there's making the SEC cover that $35 million fee plus FAR retake fees for all the CPA exam candidates who fail an exam based on financial reporting rules that haven't made their way into the wild. Brilliant, people, absolutely brilliant.

A year and a half of waiting and what do we get? A statement on a statement from the SEC. Way to go, guys. Efficiency! Investor protection!


TLP: Chinese Give Up on Hummer, Drive Home Frustrated

Wednesday, February 24, 2010 , , , , 2 Comments

After months of begging, General Motors realized Chinese manufacturer Sichuan Tengzhong Heavy Industrial Machines just didn't want that Hummer. The American automaker got off its knees and said it would not be turning any more tricks to unload the brand, but would shut down operations.

Tengzhong swore it had the money for the deal, really, but couldn't afford to maintain any kind of an ongoing relationship without a loan. And GM was not going to be a cheap whore who gets pushed out the door burping up bubbles.

The sale fell through, Tengzhong said, because the company could not get the approval of the Chinese government, which has been trying to emphasize environmental protection and less dependence on imported oil, the New York Times reported.

From Nick Bunkley in the NYT:

In addition, people close to the negotiations had said that the biggest obstacle to emerge in the last few days was not regulatory approval, but rather bank financing. While Tengzhong has the cash to pay for the Hummer brand, it needed bank financing to operate the division, redesign vehicles and set up new production plants in China.

A spokesman for Hummer, Nick Richards, said G.M. had no specific timetable for completing the wind down, but left open the possibility that G.M. would be open to new bids.

Oh well, GM had to know it would be tough to make Hummer sexy enough for the Chinese, as full of testosterone as it was. After all, it took forever for GM to get rid of that hot Swedish number it had, finally convincing a Dutch buyer to come out of a hash haze to buy it. And that spacey chick GM kept around, who was always easy to get, left town last fall.


JP Morgan Chase's Jamie Dimon is a Wanted Man in Atlanta

Wednesday, February 24, 2010 , , , 1 Comments

 pic credit: LOLFed

... and no, it's not because he's so sexy.

(h/t Dealbreaker)

CBS Atlanta:

Atlanta City Solicitor Raines Carter told CBS Atlanta News that the city has issued an arrest warrant for the person they believe is responsible for an illegal tire dump located at 1462 Memorial Drive. “We have filed a citation against this entity and it is our intention to prosecute this entity in court for that violation,” said Carter.

The city solicitor said a bank executive in New York is the person responsible for cleaning up the hundreds of tires that are piled up on the property. The arrest citation names James Dimon as the responsible person. He’s the CEO of JPMorgan Chase Bank.

“It is certainly our intention for him to be aware of this because we want something done about this as soon as possible,” said Carter

Hahahahahahahahahaha, that's absolutely unbelievable, Jamie Dimon dumping garbage? Not the PPIMP himself!


Is This Pulling Out or is This Sticking It Back In??

Holy crap, are they actually pulling out? Not so fast, slick, it's only the Fed and Treasury doing what they do best, snowballing each other with liquidity. You can only debit the same blip so many times before it disintegrates. Kindergarten accounting teaches that For Every Transaction: The Value of Debits = The Value of Credits so what happens when they keep making it up and passing it around?

Wall St Cheat Sheet:

Today, Treasury announced as follows:

February 23, 2010

Treasury Issues Debt Management Guidance on the
Supplementary Financing Program

WASHINGTON –The U.S. Department of Treasury today issued the following statement on the Supplementary Financing Program (SFP):

“Treasury anticipates that the balance in the Treasury’s Supplementary Financing Account will increase from its current level of $5 billion to $200 billion. This will restore the SFP back to the level maintained between February and September 2009.

This action will be completed over the next two months in the form of eight $25 billion, 56-day SFP bills. Starting tomorrow, SFP auctions will be held each Wednesday at 11:30 a.m. EST, unless otherwise noted.”


We speculated after the September 2009 wind down announcement that it (1) would provide another $185 in liquidity for risk markets as the cash management bills that financed the program were not rolled over and returned to primary dealers, and (2) would increase demand for short term bills. Since the process will now be reversed, it is reasonable now to believe the outcomes will be reversed as well. Indeed, as Zero Hedge noted in a similar story earlier, demand is already disappearing from indirects in short term bill auctions.

With the brunt of the $200 billion cash management bill sales expected to be picked up primary dealers, this will have the same effect as adding up to $200 billion to bank nonborrowed excess reserves (NBER) on deposit with the Fed. As bank NBER is just north of $1 trillion, a 20% increase over eight weeks in the amount of non-borrowed money locked up at the Fed is material. At a time when Agency and Agency MBS are drawing to a close, and with M2 money supply flat, this de factotightening move is a bit alarming.

In other, more simpler terms via Econbrowser:

Whenever the Federal Reserve buys an asset or makes a loan, it simply credits new reserve deposits to the account that the receiving bank maintains with the Fed. The bank would then be entitled to convert those deposits into physical dollar bills that it could ask the Fed to deliver in armored trucks. Banks currently hold $1.2 trillion in such reserves, or more than a hundred times the average level of these balances in 2006, and more than the total cash the Fed has delivered since its inception a century ago. The traditional way the Fed would bring those reserves back in (and thus prevent them from ending up as circulating cash) would be to sell off some of its assets.

The Treasury's Supplementary Financing Program was introduced in the fall of 2008 to assist the Fed in its massive operations to prop up the financial system at the time. The SFP represents an alternative device by which the Fed could reabsorb the reserves it created. Essentially the Treasury borrows on behalf of the Federal Reserve, and simply holds the funds in the Treasury's account with the Fed. When a bank delivers funds to the Treasury for purchase of a T-bill sold through the SFP, those reserve deposits move from the bank's account with the Fed to the Treasury's account with the Fed, where they now simply sit idle, and aren't going to be withdrawn as cash. In a traditional open market sale, the Fed would sell a T-bill out of its own portfolio, whereas with the SFP, the Fed is asking the Treasury to create a new T-bill expressly for the purpose. But in either case, the sale of the T-bill by the Fed or by the Treasury through the SFP results in reabsorbing previously created reserve deposits.

In severely simple terms, it's important to point out here that though the Fed and Treasury are not one in the same, if you have ever jerked off with your left hand you know exactly what you're watching here. Stick with me, kids.

If you still aren't clear on what's happening before you, Jesse's Café Américain explains it perfectly:

It looks very much like a stealth bailout. It is even more of a scandal because of the Fed's resistance to any disclosures on the principles and specifics by which they are allocating taxpayer money.

Where this gets even more interesting is that the Fed in turn is buying Treasury debt after issuance through its primary dealers, debt that was issued by the Treasury to provide funds to the Fed.

Even more than a stealth bailout, this is starting to smell like 'a money machine.' Money machines are what Bernanke euphemistically called 'a printing press.' What is odious about this particular printing press is that the output is being given directly to a few big banks by a private organization which they own.

Sort of like JP Morgan serving as primary dealer when JP Morgan is really just some publicly-traded banking version of the Fed.

Yup. Definitely sticking it back in. At least be transparent about it, it's not like we can't feel our raw taxpayer asses aching over all of this.


Jobs I Don't Envy: Meet Greece's New Debt Pimp

Wednesday, February 24, 2010 , , 1 Comments

 Don't worry, our experts are on it!

As much as this job has got to suck, I imagine the dude at least had some idea what he was getting into before he agreed to take it.


Petros Christodoulou has just started one of the least enviable jobs in European financial markets—persuading wary investors to buy Greek debt.

A U.S.- and London-trained former bond trader, Mr. Christodoulou was last week named head of Greece's debt management agency, a normally obscure post that has taken on new importance as Greece scrambles to raise cash to service its growing mountain of debt.

After only a few days on the job, Mr. Christodoulou is trying to pull off the trade of his life: the planned sale of €5 billion ($6.8 billion) in Greek debt, a step many in the market view as a critical test of Athens' ability to stave off a default. The sale of the 10-year bond could take place in the next few days, according to a person familiar with the matter. The challenge won't stop there. Greece will need to tap the markets again soon to cover some €20 billion of debt maturing over the next several months.

€5 billion? Pffft, that's absolutely laughable. The US frequently tries to pull off $150 billion+ debt auctions on a weekly basis and the truly miraculous part is that somehow, somewhere, someone is actually buying the stuff. Week after week.

Let me tell you a story. Once when I was little, probably 3 or 4, I stood out in the middle of the street next to my house for whatever reason. Just stood there, waiting, right between lanes. It wasn't a terribly busy street but it was the West side of Milwaukee and I could have easily gotten hit by a car. Who knows why I was allowed to be out there, the point is I just stood there and it was only luck that kept me from getting hit by someone racing down the avenue. Know what happened to me? I got smacked for it, which only happened to little baby JDA one other time in her life (maybe had someone beaten my ass more I'd have less of a potty mouth, aren't you grateful you motherfuckers?).

The Treasury is 4 year old baby JDA standing out there in the middle of the street and it's about time someone storm downstairs, pull them to the curb, and give them a good hard smack across the face. Or the ass. Whatever. A kick would be good too but I'm not advocating violence, naturally.

Hundreds of billions a week. But more importantly, I would still like to know who is buying this shit. Japan? Ha. "Foreign central banks" LOL

This Greece guy is doomed but I know some folks who are more doomed.


The Fed's Inner Feud Rages On

In further Fed cannibalism news, two Fed banks would like you to know without a shred of doubt that they wanted to hike the discount rate. I'm not sure what we're supposed to do with this information but I imagine it would be reasonable to assume that we'll be getting quite a bit of this in the weeks and months ahead as the regional banks preen and primp for each other while pushing their anti-Board agenda. JDA is 100% down for bitch-fighting in the Fed ranks and would like to put $50 on Richmond Fed now just so we can get that out of the way. 2-1 SF Fed ends up getting sold as some bastard arm of Canada's central bank - WTF else good are they?

I digress. Blah blah blah, take notes or something.


Two regional Federal Reserve banks led by more hawkish policymakers began a push to raise the discount rate for Fed emergency bank loans in mid-January, according to minutes of a Fed board meeting released on Tuesday.

The Kansas City and St. Louis Federal Reserve banks were the first to call for the rate hike that was ultimately implemented last week, minutes of the January 25 meeting showed.

When the Fed's policy-setting Federal Open Market Committee met on January 26-27, only those two banks called for raising the rate the Fed charges on emergency loans to banks.

"In light of improving conditions in financial markets, some Federal Reserve Bank directors indicated that they favored increasing the primary credit rate by 25 basis points in order to begin to restore a more normal discount rate structure," the minutes said.

In case you missed it, you really need to read Federal Reserve System Presidents: "This is Your Ass!" to catch up. Grab some popcorn and put a few bucks on your favorite Fed bank. If anyone has the balls to actually take me up on this and start a pool, hit me up. TRB? Come on, this is your kind of shit.


Banks Behaving Badly

Don't get confused by the headline, it's not referring to Bank of America foreclosing on a house paid for in cash. Perhaps behaving isn't the word so much as performing.


U.S. banks posted their sharpest decline in lending since 1942 at the end of last year, suggesting that the industry's continued slide is making it harder for the economy to recover.

While top-tier banks are recovering at a faster clip, the rest of the industry is still suffering, according to a quarterly report from the Federal Deposit Insurance Corp. Banks fighting for survival, especially those plagued by losses on commercial real estate, are less willing to extend loans, siphoning credit from businesses and consumers.

Besides registering their biggest full-year decline in total loans outstanding in 67 years, U.S. banks set a number of grim milestones. According to the FDIC, the number of U.S. banks at risk of failing hit a 16-year high at 702. More than 5% of all loans were at least three months past due, the highest level recorded in the 26 years the data have been collected. And the problems are expected to last through 2010.

As always, this is an appropriate point to indulge in a little shameless self promotion. The Bank Fail Friday team is here to bring you all the bank failure deliciousness so don't forget to tune in every Friday.

Again, banks are tight except when being forced to make risky loans to essentially bankrupt municipalities. What does it matter? It isn't their money. (more WSJ):

Most surveys suggest a combination of factors is at play. A January survey by the Federal Reserve of senior loan officers showed banks have slowed their efforts to tighten lending standards, but have not backed off the more stringent loan terms they put in place over the past two years. The same report, however, also showed that demand for loans from businesses and consumers continues to fall.

"Lending has been weak and spending by businesses and consumers has also been weak," FDIC Chief Economist Richard Brown said.

Bankers, on the other hand, say creditworthy borrowers are hard to come by. Fifth Third Bancorp recently extended a $3.5 million line of credit to Chicago-based One Hope United after the state of Illinois, beset by a budget crisis, delayed payments to the child-and-family-services provider.

If that's not an indirect Illinois bailout, I'm not sure what it is. Hell, I don't really know what isn't a bailout these days. Fifth Third doesn't have a very good track record at this point.


Not So Hot Wife-on-Wife Action

Wednesday, February 24, 2010 , , 1 Comments

 The widow of the IRS employee killed last week by Joseph Stack's anti-IRS rage is now suing Stack's widow. That ought to work out well.


The widow of the Internal Revenue Service employee killed when a Texas man crashed his plane into the agency's Austin office is suing the pilot's widow.

Attorney Daniel Ross says the lawsuit against Sheryl Stack seeks to determine if the pilot left behind insurance policies or other assets.

Ross represents Valerie Hunter, whose 68-year-old husband Vernon Hunter was killed last week when authorities say Joseph Stack deliberately crashed his single-engine plane into the IRS office.

Joseph Stack left behind a lengthy anti-government Internet posting blaming the IRS for personal problems spanning decades.

The lawsuit filed Monday says Sheryl Stack should have warned others about her husband.

Fuck, this is why I will never get married again. Three weeks in Nevada was enough for me, thank you very much.

I'm baffled.


Per the CIA, the United States is the Brokest Nation in the World

Tuesday, February 23, 2010 , , , 4 Comments

If you believe the account balances via the CIA's World Factbook, we're not doing too well compared to the rest of the world. Go on, click it.

The top five (based on "a country's net trade in goods and services, plus net earnings from rents, interest, profits, and dividends, and net transfer payments (such as pension funds and worker remittances) to and from the rest of the world during the period specified. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms."):

  • 1 China $296,200,000,000
  • 2 Japan $131,200,000,000
  • 3 Germany $109,700,000,000
  • 4 Switzerland $79,180,000,000
  • 5 Norway $58,560,000,000

Those are positive account balances in case the coffee hasn't kicked and you're confused.

Putting this into perspective, Zimbabwe comes in #112 with an account balance of -$597,400,000. The United States? Dead last at -$380,100,000,000 in position #190.