It's quite amazing the different views available to us depending on which lens you're looking thru.One could go across the internet and cherry pick enough stories to fully support whatever view they support.I was always taught this is how the human belief system works.First,we develop our beliefs based on our early influences and then spend our time finding ways to support them.
In politics,if you're a republican,you listen to Limbaugh and Hannity and watch Fox.If you're a liberal,you stick to Olberman and Matthews and their ilk.You watch,listen and read whatever is slanted toward your beliefs.Sure makes it tough to objectively weigh the opposing viewpoint.Of course,an independent will claim to take the middle road sometimes agreeing with one side or the other.Eventually,everyone usually ends up disliking you because you ride the fence.
I always wondered which was held in higher regard.The leader type with strong convictions or the open minded type willing to listen to different views.Obama attempts to portray himself as the latter.For example,he's willing to negotiate with terrorists without pre-conditions.I can't say comparing Reagan to Obama would be the best analogy,but they are the two people representing these two scenarios most recently.
If the popularity rating is the yardstick,it's quite clear.Reagan wins hands down. 100% is not possible as there will always be party line people to support one side or the other.If you wish to reject polls and use election results,obviously we can't do that until 2012,but it would be a tall order for Obama to duplicate the Reagan landslide re-election.Based on the mood of the voters and the clear lack of support for Obamas policies,it would be impossible at this point.
I bring this issue up just to ponder what it is we want from our elected officials.Clearly,if you don't agree with their policies,you won't support them.Yet,at face value,one would think you wouldn't want the leader with strong convictions if you're not a supporter.You would be more likely to support a moderate type who may sway to your view.The facts don't seem to bear this out.I'm finding Obama to be more divisive than Reagan.My Dad hated Reagan which I never understood when I was a kid.Now when I look back and realize that my Dad was dependent on the government for its social entitlement programs,I'm able to understand.
You even hear people like John Conyers being scolded by Obama for not publicy supporting him in all instances.The gays are getting impatient.The illegal immigrants are getting impatient.If cap and trade is delayed,you can add them to the list.These are just a few examples that to try to be the all everything to everybody is virtually impossible.It's hard to imagine anyone coming into office with a higher level of support than Obama and he can't pull it off.
To be fair,I blame a large portion of that on the ignorance of the voters.They jumped on the 'hope and change' bandwagon without doing their homework.As we now see with the constant exposes from people like Glenn Beck,this information has always been there if you cared to look for it.
So,as always it comes back to the voter.We really want to vote for a candidate we believe in.Yet,as I explained earlier,human nature dictates that we inherently reject challenges to our belief system.We simply don't want to challenge ourselves,perhaps because we can't deal with the disappointment so well.This leaves us open to buying into the message the candidate is selling.We don't want to spend much time verifying the validity of their claims and researching their true motives.When you do that,you'll find the vast majority of candidates will fail the test.
This is human nature,as well.Power and greed and the two main attractants in holding political office.Even those that didn't enter politics for those reasons find it hard to resist its charms.The moral of this story is you had better spend considerable time studying the character of your candidate and review their influences that shaped their beliefs.Obama is the best example of this.The bandwagon supporters bought into the packaged message for sale while ignoring the man behind it.
It seems those ringing the alarm bells about William Ayers and Rev. Wright had good reason to.We find out more all the time about the radical upbringing of Obama and it makes connecting the dots very easy with the agenda he's pushing thru.We've never had the level of capability that we do today previously in researching a candidate.I would hope that more voters will utilize it next time around so they don't make a short sighted mistake and end up disappointed.More to come...
Monday, December 14, 2009
Wednesday, December 9, 2009
Reparations for our kids
Why not?Why not put the framework in place today to make our elected officials accountable for saddling our next generations with trillions in debt?These politicians who so effortlessly write checks for money they don't have without any accountability as they will likely be out of office when the debt comes due must be stopped.
This would take a drastic shift in policy and would only be supported by incoming legislators with no bill to pay.The focus is always on a balanced budget.While an obvious requirement,it's not the most important one.Keeping spending in check is the key.Congress can simply raise taxes to accomodate increased spending to provide a balanced budget,so this is not an effective deterrent.
If you think the Ron Paul Audit the Fed bill is making Bernanke nervous,legislation put in place to make Congress personally accountable for spending money they don't have would be earth-shattering.Their entire existence is predicated on power.Control of taxation and spending provides them with all the tools in the toolbox.Lobbyists supply them with their personal rewards.
Today we hear Obama preach that we were saved from disaster by spending and that now we must spend more to fuel the recovery.At best,he is misguided.More accurately,he is a criminal as are his cohorts in Congress.It could be the illegal distribution of TARP funds or any of a long list of spending policies that have been going on for decades.The current crop of spenders is just expanding on tradition.
I don't believe there has ever been a time in history in which the public is so informed,or capable of it if they seek it,than today.Ignorance is simply not acceptable and should things continue thru the next election cycle,than the public must accept full responsibility for these policies continuing and the fallout to follow.No excuses.More to come...
This would take a drastic shift in policy and would only be supported by incoming legislators with no bill to pay.The focus is always on a balanced budget.While an obvious requirement,it's not the most important one.Keeping spending in check is the key.Congress can simply raise taxes to accomodate increased spending to provide a balanced budget,so this is not an effective deterrent.
If you think the Ron Paul Audit the Fed bill is making Bernanke nervous,legislation put in place to make Congress personally accountable for spending money they don't have would be earth-shattering.Their entire existence is predicated on power.Control of taxation and spending provides them with all the tools in the toolbox.Lobbyists supply them with their personal rewards.
Today we hear Obama preach that we were saved from disaster by spending and that now we must spend more to fuel the recovery.At best,he is misguided.More accurately,he is a criminal as are his cohorts in Congress.It could be the illegal distribution of TARP funds or any of a long list of spending policies that have been going on for decades.The current crop of spenders is just expanding on tradition.
I don't believe there has ever been a time in history in which the public is so informed,or capable of it if they seek it,than today.Ignorance is simply not acceptable and should things continue thru the next election cycle,than the public must accept full responsibility for these policies continuing and the fallout to follow.No excuses.More to come...
Tuesday, December 8, 2009
The case against Bernanke
Here is a story from IRA breaking down why Bernanke should be denied a 2nd term.
Three Strikes on Ben Bernanke: AIG, Goldman Sachs & BAC/TARP
December 7, 2009
"For a while, the subprime boom enriched investment bankers, lenders, brokers, investors, realtors and credit-rating companies. It allowed hundreds of thousands of Americans to buy homes they never believed they could afford. It later became clear that these homeowners couldn't keep up with their payments… This is the story of how Wall Street transmitted the practices of southern California's go-go lending industry and the inflated U.S. real estate market to the global financial system."
Mark Pittman
"Subprime Securities Market Began as `Group of 5' Over Chinese"
Bloomberg News
December 17, 2007
"Anger is an energy"
John "Rotten" Lydon & Bill Laswell
"Rise"
Public Image Limited
1986
On Saturday, joined by hundreds of friends, family and colleagues on a snowy December day in Yonkers, NY, we celebrated the life of Mark Pittman. Readers of The IRA who wish to express their thanks to Mark and show support for his family may make contributions to the Pittman Children's College Fund, c/o Dr. William Karesh, 30B Pondview Road, Rye, NY 10580.
Bob Ivry from Bloomberg News gave a remembrance of Mark, including reading the letter that his daughter Maggie Pittman posted on zerohedge to dispel rumors that her dad might have been murdered. Some members of the zerohedge family thought that Mark was killed by the banksters for his diligent pursuit of the disclosure of the Fed's many bailout loans to Wall Street firms.
Ivry also told a great story of how, when asked by a younger reporter why she should give Pittman her scoops instead of giving them to CNBC's Charlie Gasparino, Mark replied: "I'm taller than Charlie and can see above the bullshit." We miss Mark a lot.
Coming together with the friends of Mark Pittman ended a grim week. Many of us in the financial community were wading hip-deep through barnyard debris as we watched Federal Reserve Chairman Bernanke dodge and weave in front of the television cameras during his Senate confirmation hearing. We have to believe that Mark would have been pleased as Senators on both sides of the aisle asked questions that came directly from some of his reporting -- and a few of our own suggestions.
To us, the confirmation hearings last week before the Senate Banking Committee only reaffirm in our minds that Benjamin Shalom Bernanke does not deserve a second term as Chairman of the Board of Governors of the Federal Reserve System. Including our comments on Bank of America (BAC) featured by Alan Abelson this week in Barron's, we have three reasons for this view:
First is the law. The bailout of American International Group (AIG) was clearly a violation of the Federal Reserve Act, both in terms of the "loans" made to the insolvent insurer and the hideous process whereby the loans were approved, after the fact, by Chairman Bernanke and the Fed Board. The loans were not adequately collateralized. This is publicly evidenced by the fact that the Fed of New York (FRBNY) exchanged debt claims on AIG itself for equity stakes in two insolvent insurance underwriting units. What more need be said?
As we've noted in The IRA previously, we think the AIG insurance operations are more problematic than the infamous financial products unit where the credit default swaps pyramid scheme resided. And we doubt that any diligence was performed by Geither and/or the FRBNY staff on AIG prior to the decision taken by Tim Geithner to make the loan. We'll be talking further about AIG in a future comment.
Of interest, members of the Senate Banking Committee who want more background on the AIG fiasco, particularly who did what and when, need to read the paper by Phillip Swagel, "The Financial Crisis: An Inside View," Brookings Papers on Economic Activity, Spring 2009, The Brookings Institution.
We hear in the channel that Fed officials were furious when Swagel, who served at the US Treasury with former Secretary Hank Paulson, published his all-to-detailed apology. We understand that several prominent members of the trial bar also are interested in the Swagel document.
Last week the Senate Banking Committee spent a lot of time talking with Chairman Bernanke about why payouts were made to AIG counterparties like Goldman Sachs (GS) and Deutsche Bank (DB), but the real issue is why Tim Geithner and the GS-controlled board of directors of the FRBNY were permitted to make the supposed "loans" to AIG in the first place. The primary legal duty of the Fed Board is to supervise the activities of the Reserve Banks. In this case, Chairman Bernanke and the rest of the Board seemingly got rolled by Tim Geithner and GS, to the detriment of the Fed's reputation, the financial interests of all taxpayers and due process of law.
Martin Mayer reminded us last week that the Fed is meant to be "independent" from the White House, not the Congress from which its legal authority comes by way of the Constitution. Nor does Fed independence mean that the officers of the Federal Reserve Banks or the Board are allowed to make laws. None of the officials of the Fed are officers of the United States. No Fed official has any power to make commitments on behalf of the Treasury, unless and except when directed by the Secretary. Given the losses to the Treasury due to the Fed's own losses, this is an important point that members of the Senate need to investigate further.
The FRBNY not only used but abused the Fed's power's under Section 13(3) of the Federal Reserve Act. In AIG, the FRBNY under Tim Geithner invoked the "unusual and exigent" clause again and again, but there is a serious legal question whether the then-FRBNY President and the FRBNY's board had the right to commit trillions without any due diligence process or deliberate, prior approval of the Fed Board in Washington, as required by law. The financial commitments to GS and other dealers regarding AIG were made always on a weekend with Geithner "negotiating" alone in New York, while Chairman Bernanke, Vice Chairman Donald Kohn and the rest of the BOG were sitting in DC without any real financial understanding of the substance of the transactions or the relationships between the people involved in the negotiations.
Was Tim Geithner technically qualified or legally empowered to "make deals' without the prior consent of the Fed Board? We don't think so. Shouldn't there have been financial fairness opinions re: the transactions? Yes.
We understand that the first order of business in any Fed audit sought by members of the Senate opposed to Chairman Bernanke's re-appointment is to review the internal Fed legal memoranda and FRBNY board minutes supporting the AIG bailout. These documents, if they exist at all, should be provided to the Senate before a vote on the Bernanke nomination. Indeed, if the panel established to review the AIG bailout and related events investigates the issue of how and when certain commitments were made by the FRBNY, we wouldn't be surprised if they find that Geithner acted illegally and that Bernanke and the Fed Board were negligent in not stopping this looting of the national patrimony by Geithjner, acting as de facto agent for the largest dealer banks in New York and London.
The second strike against Chairman Bernanke is leadership. In an exchange with SBC Chairman Christopher Dodd (D-CT), Bernanke said that he could not force the counterparties of AIG to take a haircuts on their CDS positions because he had "no leverage." Again, this goes back to the issue of why the loan to AIG was made at all.
Having made the first error, Bernanke and other Fed officials seek to use it as justification for further acts of idiocy. Chairman Dodd look incredulous and replied "you are the Chairman of the Federal Reserve," to which Bernanke replied that he did not want to abuse his "supervisory powers." Dodd replied "apparently not" in seeming disgust.
We have been privileged to know Fed chairmen going back to Arthur Burns. Regardless of their politics or views on economic policies, Fed Chairmen like Burns, Paul Volcker and even Alan Greenspan all knew that the Fed's power is as much about moral suasion as explicit legal authority. After all, the Chairman of the Fed is essentially the Treasury's investment banker. In the financial markets, there are times when Fed Chairmen have to exercise leadership and, yes, occasionally raise their voices and intimidate bank executives in the name of the greater public good. AIG was such as test and Chairman Bernanke failed, in our view.
Chairman Bernanke does not seem to understand that leadership is a basic part of the Fed Chairman's job description and the wellspring from which independence comes. The handling of AIG by Chairman Bernanke and the Fed Board seems to us proof, again, that Washington needs to stop populating the Fed's board with academic economists who have no real world leadership skills, nor operational or financial experience. Just as we need to end the de facto political control of the banksters over America's central bank, we need also to end the institutional tyranny of the academic economists at the Federal Reserve Board.
The third reason that the Senate should vote no on Chairman Bernanke's second four-year term as Fed Chairman is independence. While Bernanke publicly frets about the Fed losing its political independence as a result of greater congressional scrutiny of its operations, the central bank shows no independence or ability to supervise the largest banks for which it has legal responsibility. And Chairman Bernanke has the unmitigated gall to ask the Congress to increase the Fed's supervisory responsibilities. As we wrote in The IRA Advisory Service last week:
"Indeed, if you want a very tangible example of why the Fed should be taken out of the business of bank supervision, it is precisely the TARP repayment by Bank of America (BAC). The responsible position for the Fed and OCC to take in this transaction is to make BAC raise more capital now, when the equity markets are receptive, but wait on TARP repayment until we are through Q2 2010 and have a better idea on loss severity for on balance sheet and OBS exposures, HELOCs and second lien mortgages, to name a few issues. Apparently allowing outgoing CEO Ken Lewis to take a victory lap via TARP repayment is more important to the Fed than ensuring the safety and soundness of BAC."
One close observer of the mortgage channel, who we hope to interview soon in The IRA, says that given the recent deterioration of mortgage credit, it is impossible that BAC has not gotten its pari passu portion of the losses which are hitting the FHA. The same source says that using conservative math, FHA has another $75 billion in losses to take, with zero left in the FHA insurance fund. Worst case for FHA is double that number, we're told. How could the Fed believe that BAC, which is the biggest owner of mortgages and HELOCs, is immune from this approaching storm? Because the Fed is cooking the books of the largest banks.
The observer confirms our view that trading gains on the books of banks such as BAC are due to the Fed's open market purchases, which drove up prices for MBS and other types of toxic waste. In effect, the Fed's manipulation of the prices of various toxic securities is giving the largest US banks and their auditors a "pass" on accounting write-downs in Q4 2009 and for the full year - assuming that MBS prices do not drop sharply before the end of the month.
Question: Is not the Fed's manipulation of securities prices and the window-dressing of bank financial statements not a vioatlion of securities laws and SEC regulations?
Of note, in her column on Sunday about the widely overlooked issue of second lien mortgages, "Why Treasury Needs a Plan B for Mortgages," Gretchen Morgenson of The New York Times writes that "Unfortunately, there is a $442 billion reason that wiping out second liens is not high on the government's agenda: that is the amount of second mortgages and home equity lines of credit on the balance sheets of Bank of America, Wells Fargo, JPMorgan Chase and Citigroup. These banks - the very same companies the Treasury is urging to modify loans that they service - have zero interest in writing down second liens they hold because it would mean further damage to their balance sheets."
Thus the Fed is not only allowing insolvent zombie banks to repay TARP funds before the worst of the credit crisis is past, but the "independent" central bank is engaged in a massive act of accounting fraud to prop up prices for illiquid securities and thereby help banks avoid another round of year-end write downs, the banks the Fed supposedly regulates. This act of deliberate market manipulation suggests that the Fed's bank stress tests were a complete fabrication. Only by artificially propping up prices for illiquid securities can the Fed make the banks look good enough to close their books in 2009 and, most important, attract private equity investors back to the table.
Of note, the perversion of accounting rules in the name of helping the largest global banks is also well-underway in the EU. Our friends at CFO Zone published a comment on same last week that deserves your attention: "International Accounting Standards Board has 'disgraced itself,' says critic"
What is really funny, to us at least, is that we hear in the channel that BAC is ultimately going to give the CEO slot to a BAC insider, consumer banking head Brian Moynihan, who testified before Congress on the Merrill Lynch transaction in November. Just imagine how the Fed Board, Chairman Bernanke and the Fed's Division of Supervision & Regulation are going to look when, after all the hand wringing about aiding BAC's CEO search by allowing the TARP repayment, the post is finally given to an insider!
Former colleagues describe Moynihan as a close associate of Ken Lewis. If the objective of forcing Lewis' departure was change in the culture in the CSUITE at BAC, installing one of his trusted henchmen, in this case left over from the Fleet Bank acquisition, seems a retrograde step.
All we can say about the treatment of the BAC TARP repayment issue and the Fed's handling of the supervision of large banks generally is that it is high time for the Congress to revisit the McFadden Act of 1927. In particular, we need to look again at making further changes to the Fed to ensure that it is entirely subordinate to the public interest and that never again will private financial institutions such as GS or BAC be in a position to dictate terms to the central bank. Whether you are talking about the loans to AIG or the mishandling of BAC's TARP repayments, the Fed under Chairman Bernanke seems to have acted irresponsibly and contrary to the law.
For all of the above reasons, we think that the Senate should reject the re-nomination of Ben Bernanke and ask the President to nominate a new candidate as Chairman and also nominate two additional candidates for Fed governor to fill the other two long vacant seats.
Three Strikes on Ben Bernanke: AIG, Goldman Sachs & BAC/TARP
December 7, 2009
"For a while, the subprime boom enriched investment bankers, lenders, brokers, investors, realtors and credit-rating companies. It allowed hundreds of thousands of Americans to buy homes they never believed they could afford. It later became clear that these homeowners couldn't keep up with their payments… This is the story of how Wall Street transmitted the practices of southern California's go-go lending industry and the inflated U.S. real estate market to the global financial system."
Mark Pittman
"Subprime Securities Market Began as `Group of 5' Over Chinese"
Bloomberg News
December 17, 2007
"Anger is an energy"
John "Rotten" Lydon & Bill Laswell
"Rise"
Public Image Limited
1986
On Saturday, joined by hundreds of friends, family and colleagues on a snowy December day in Yonkers, NY, we celebrated the life of Mark Pittman. Readers of The IRA who wish to express their thanks to Mark and show support for his family may make contributions to the Pittman Children's College Fund, c/o Dr. William Karesh, 30B Pondview Road, Rye, NY 10580.
Bob Ivry from Bloomberg News gave a remembrance of Mark, including reading the letter that his daughter Maggie Pittman posted on zerohedge to dispel rumors that her dad might have been murdered. Some members of the zerohedge family thought that Mark was killed by the banksters for his diligent pursuit of the disclosure of the Fed's many bailout loans to Wall Street firms.
Ivry also told a great story of how, when asked by a younger reporter why she should give Pittman her scoops instead of giving them to CNBC's Charlie Gasparino, Mark replied: "I'm taller than Charlie and can see above the bullshit." We miss Mark a lot.
Coming together with the friends of Mark Pittman ended a grim week. Many of us in the financial community were wading hip-deep through barnyard debris as we watched Federal Reserve Chairman Bernanke dodge and weave in front of the television cameras during his Senate confirmation hearing. We have to believe that Mark would have been pleased as Senators on both sides of the aisle asked questions that came directly from some of his reporting -- and a few of our own suggestions.
To us, the confirmation hearings last week before the Senate Banking Committee only reaffirm in our minds that Benjamin Shalom Bernanke does not deserve a second term as Chairman of the Board of Governors of the Federal Reserve System. Including our comments on Bank of America (BAC) featured by Alan Abelson this week in Barron's, we have three reasons for this view:
First is the law. The bailout of American International Group (AIG) was clearly a violation of the Federal Reserve Act, both in terms of the "loans" made to the insolvent insurer and the hideous process whereby the loans were approved, after the fact, by Chairman Bernanke and the Fed Board. The loans were not adequately collateralized. This is publicly evidenced by the fact that the Fed of New York (FRBNY) exchanged debt claims on AIG itself for equity stakes in two insolvent insurance underwriting units. What more need be said?
As we've noted in The IRA previously, we think the AIG insurance operations are more problematic than the infamous financial products unit where the credit default swaps pyramid scheme resided. And we doubt that any diligence was performed by Geither and/or the FRBNY staff on AIG prior to the decision taken by Tim Geithner to make the loan. We'll be talking further about AIG in a future comment.
Of interest, members of the Senate Banking Committee who want more background on the AIG fiasco, particularly who did what and when, need to read the paper by Phillip Swagel, "The Financial Crisis: An Inside View," Brookings Papers on Economic Activity, Spring 2009, The Brookings Institution.
We hear in the channel that Fed officials were furious when Swagel, who served at the US Treasury with former Secretary Hank Paulson, published his all-to-detailed apology. We understand that several prominent members of the trial bar also are interested in the Swagel document.
Last week the Senate Banking Committee spent a lot of time talking with Chairman Bernanke about why payouts were made to AIG counterparties like Goldman Sachs (GS) and Deutsche Bank (DB), but the real issue is why Tim Geithner and the GS-controlled board of directors of the FRBNY were permitted to make the supposed "loans" to AIG in the first place. The primary legal duty of the Fed Board is to supervise the activities of the Reserve Banks. In this case, Chairman Bernanke and the rest of the Board seemingly got rolled by Tim Geithner and GS, to the detriment of the Fed's reputation, the financial interests of all taxpayers and due process of law.
Martin Mayer reminded us last week that the Fed is meant to be "independent" from the White House, not the Congress from which its legal authority comes by way of the Constitution. Nor does Fed independence mean that the officers of the Federal Reserve Banks or the Board are allowed to make laws. None of the officials of the Fed are officers of the United States. No Fed official has any power to make commitments on behalf of the Treasury, unless and except when directed by the Secretary. Given the losses to the Treasury due to the Fed's own losses, this is an important point that members of the Senate need to investigate further.
The FRBNY not only used but abused the Fed's power's under Section 13(3) of the Federal Reserve Act. In AIG, the FRBNY under Tim Geithner invoked the "unusual and exigent" clause again and again, but there is a serious legal question whether the then-FRBNY President and the FRBNY's board had the right to commit trillions without any due diligence process or deliberate, prior approval of the Fed Board in Washington, as required by law. The financial commitments to GS and other dealers regarding AIG were made always on a weekend with Geithner "negotiating" alone in New York, while Chairman Bernanke, Vice Chairman Donald Kohn and the rest of the BOG were sitting in DC without any real financial understanding of the substance of the transactions or the relationships between the people involved in the negotiations.
Was Tim Geithner technically qualified or legally empowered to "make deals' without the prior consent of the Fed Board? We don't think so. Shouldn't there have been financial fairness opinions re: the transactions? Yes.
We understand that the first order of business in any Fed audit sought by members of the Senate opposed to Chairman Bernanke's re-appointment is to review the internal Fed legal memoranda and FRBNY board minutes supporting the AIG bailout. These documents, if they exist at all, should be provided to the Senate before a vote on the Bernanke nomination. Indeed, if the panel established to review the AIG bailout and related events investigates the issue of how and when certain commitments were made by the FRBNY, we wouldn't be surprised if they find that Geithner acted illegally and that Bernanke and the Fed Board were negligent in not stopping this looting of the national patrimony by Geithjner, acting as de facto agent for the largest dealer banks in New York and London.
The second strike against Chairman Bernanke is leadership. In an exchange with SBC Chairman Christopher Dodd (D-CT), Bernanke said that he could not force the counterparties of AIG to take a haircuts on their CDS positions because he had "no leverage." Again, this goes back to the issue of why the loan to AIG was made at all.
Having made the first error, Bernanke and other Fed officials seek to use it as justification for further acts of idiocy. Chairman Dodd look incredulous and replied "you are the Chairman of the Federal Reserve," to which Bernanke replied that he did not want to abuse his "supervisory powers." Dodd replied "apparently not" in seeming disgust.
We have been privileged to know Fed chairmen going back to Arthur Burns. Regardless of their politics or views on economic policies, Fed Chairmen like Burns, Paul Volcker and even Alan Greenspan all knew that the Fed's power is as much about moral suasion as explicit legal authority. After all, the Chairman of the Fed is essentially the Treasury's investment banker. In the financial markets, there are times when Fed Chairmen have to exercise leadership and, yes, occasionally raise their voices and intimidate bank executives in the name of the greater public good. AIG was such as test and Chairman Bernanke failed, in our view.
Chairman Bernanke does not seem to understand that leadership is a basic part of the Fed Chairman's job description and the wellspring from which independence comes. The handling of AIG by Chairman Bernanke and the Fed Board seems to us proof, again, that Washington needs to stop populating the Fed's board with academic economists who have no real world leadership skills, nor operational or financial experience. Just as we need to end the de facto political control of the banksters over America's central bank, we need also to end the institutional tyranny of the academic economists at the Federal Reserve Board.
The third reason that the Senate should vote no on Chairman Bernanke's second four-year term as Fed Chairman is independence. While Bernanke publicly frets about the Fed losing its political independence as a result of greater congressional scrutiny of its operations, the central bank shows no independence or ability to supervise the largest banks for which it has legal responsibility. And Chairman Bernanke has the unmitigated gall to ask the Congress to increase the Fed's supervisory responsibilities. As we wrote in The IRA Advisory Service last week:
"Indeed, if you want a very tangible example of why the Fed should be taken out of the business of bank supervision, it is precisely the TARP repayment by Bank of America (BAC). The responsible position for the Fed and OCC to take in this transaction is to make BAC raise more capital now, when the equity markets are receptive, but wait on TARP repayment until we are through Q2 2010 and have a better idea on loss severity for on balance sheet and OBS exposures, HELOCs and second lien mortgages, to name a few issues. Apparently allowing outgoing CEO Ken Lewis to take a victory lap via TARP repayment is more important to the Fed than ensuring the safety and soundness of BAC."
One close observer of the mortgage channel, who we hope to interview soon in The IRA, says that given the recent deterioration of mortgage credit, it is impossible that BAC has not gotten its pari passu portion of the losses which are hitting the FHA. The same source says that using conservative math, FHA has another $75 billion in losses to take, with zero left in the FHA insurance fund. Worst case for FHA is double that number, we're told. How could the Fed believe that BAC, which is the biggest owner of mortgages and HELOCs, is immune from this approaching storm? Because the Fed is cooking the books of the largest banks.
The observer confirms our view that trading gains on the books of banks such as BAC are due to the Fed's open market purchases, which drove up prices for MBS and other types of toxic waste. In effect, the Fed's manipulation of the prices of various toxic securities is giving the largest US banks and their auditors a "pass" on accounting write-downs in Q4 2009 and for the full year - assuming that MBS prices do not drop sharply before the end of the month.
Question: Is not the Fed's manipulation of securities prices and the window-dressing of bank financial statements not a vioatlion of securities laws and SEC regulations?
Of note, in her column on Sunday about the widely overlooked issue of second lien mortgages, "Why Treasury Needs a Plan B for Mortgages," Gretchen Morgenson of The New York Times writes that "Unfortunately, there is a $442 billion reason that wiping out second liens is not high on the government's agenda: that is the amount of second mortgages and home equity lines of credit on the balance sheets of Bank of America, Wells Fargo, JPMorgan Chase and Citigroup. These banks - the very same companies the Treasury is urging to modify loans that they service - have zero interest in writing down second liens they hold because it would mean further damage to their balance sheets."
Thus the Fed is not only allowing insolvent zombie banks to repay TARP funds before the worst of the credit crisis is past, but the "independent" central bank is engaged in a massive act of accounting fraud to prop up prices for illiquid securities and thereby help banks avoid another round of year-end write downs, the banks the Fed supposedly regulates. This act of deliberate market manipulation suggests that the Fed's bank stress tests were a complete fabrication. Only by artificially propping up prices for illiquid securities can the Fed make the banks look good enough to close their books in 2009 and, most important, attract private equity investors back to the table.
Of note, the perversion of accounting rules in the name of helping the largest global banks is also well-underway in the EU. Our friends at CFO Zone published a comment on same last week that deserves your attention: "International Accounting Standards Board has 'disgraced itself,' says critic"
What is really funny, to us at least, is that we hear in the channel that BAC is ultimately going to give the CEO slot to a BAC insider, consumer banking head Brian Moynihan, who testified before Congress on the Merrill Lynch transaction in November. Just imagine how the Fed Board, Chairman Bernanke and the Fed's Division of Supervision & Regulation are going to look when, after all the hand wringing about aiding BAC's CEO search by allowing the TARP repayment, the post is finally given to an insider!
Former colleagues describe Moynihan as a close associate of Ken Lewis. If the objective of forcing Lewis' departure was change in the culture in the CSUITE at BAC, installing one of his trusted henchmen, in this case left over from the Fleet Bank acquisition, seems a retrograde step.
All we can say about the treatment of the BAC TARP repayment issue and the Fed's handling of the supervision of large banks generally is that it is high time for the Congress to revisit the McFadden Act of 1927. In particular, we need to look again at making further changes to the Fed to ensure that it is entirely subordinate to the public interest and that never again will private financial institutions such as GS or BAC be in a position to dictate terms to the central bank. Whether you are talking about the loans to AIG or the mishandling of BAC's TARP repayments, the Fed under Chairman Bernanke seems to have acted irresponsibly and contrary to the law.
For all of the above reasons, we think that the Senate should reject the re-nomination of Ben Bernanke and ask the President to nominate a new candidate as Chairman and also nominate two additional candidates for Fed governor to fill the other two long vacant seats.
Monday, December 7, 2009
1or2or3or4or5or6or7or...
Just had to chime in quickly on Tiger Woods.As of today,he's up to 7 mistresses.I would categorize them as class action whores.It reminds me of the mailings you get from the slip and fall lawyers to get everyone and their brother on board with a class action lawsuit.So,if cheating with a married man is OK on your list of morals,then hurry up and get your name in so you'll be eligible for a chunk of the settlement to just go away.Now,of course Tiger is guilty of having an affair as he has admitted to it.He will have to deal with the fallout for the rest of his life.But I have to start questioning when this many women jump on the bandwagon as to the validity of their claims.It just seems far too many would have to be involved in the cover-up for a long period of time to be plausible.We'll see how it all plays out,but I think it's too late for a mulligan,Tiger.More to come...
Saturday, December 5, 2009
Coveragegate!
Seems appropriate enough.It appears that the major media outlets still march to Rahm Emanuels orders as they won't touch the climategate scandal.Once the lid is off,they know they can't put the genie back in the bottle.So,they will continue the cover-up until Copenhagen.
I'd sure like to know their exit strategy because when the story does come to light,what plausible explanation can they conjur up to explain their ignorance of the greatest scientific cover-up in history?Have they not factored in the NASA angle which is about to get bigger as well?
Obviously,the media has no credibility left with anyone other than the ignorant who only casually glance at the evening news,so what's one more scandal.Take an outlet like CNN,however,and it seemingly makes no sense.Their ratings are plummeting.Losing Lou Dobbs only made it worse.Do they really want to go all the way to the bottom with Obama?Don't you cut your losses at some point?
This certainly has all the earmarks of a stimulus/healthcare scenario with the administration touting the urgency to pass this immediately.I think that's why Obama abruptly changed his agenda and will now be in attendance on the 18th because they know they must jam this thru immediately before the scandal gains traction globally and it's too late.Waiting for next summer at the next conference is no longer plausible.
Reports have been published stating that nothing will happen this year on climate change but I would have to think behind the scenes the dealmakers are drastically working to secure a deal at Copenhagen before that entire agenda implodes.More to come...
I'd sure like to know their exit strategy because when the story does come to light,what plausible explanation can they conjur up to explain their ignorance of the greatest scientific cover-up in history?Have they not factored in the NASA angle which is about to get bigger as well?
Obviously,the media has no credibility left with anyone other than the ignorant who only casually glance at the evening news,so what's one more scandal.Take an outlet like CNN,however,and it seemingly makes no sense.Their ratings are plummeting.Losing Lou Dobbs only made it worse.Do they really want to go all the way to the bottom with Obama?Don't you cut your losses at some point?
This certainly has all the earmarks of a stimulus/healthcare scenario with the administration touting the urgency to pass this immediately.I think that's why Obama abruptly changed his agenda and will now be in attendance on the 18th because they know they must jam this thru immediately before the scandal gains traction globally and it's too late.Waiting for next summer at the next conference is no longer plausible.
Reports have been published stating that nothing will happen this year on climate change but I would have to think behind the scenes the dealmakers are drastically working to secure a deal at Copenhagen before that entire agenda implodes.More to come...
Friday, December 4, 2009
No jobless recovery for Michigan
I just read some comments from the Director of ThumbWorks!,a division of Michigan Works.Marv Pichla stated that Michigan won't have a jobless recovery.He based it on emerging 'green' technology and automotive battery technology jobs.Wow!That takes a minute to swallow.
So the rest of the nation will have a jobless recovery,but not here in our state?Michigan has the 'upper hand' based on our ad campaign so this must set us apart from the rest.What's the matter with these people?Do they only read the White House press releases for their news?
Today we see the national unemployment rate dip to 10.0%.We only lost 11,000 jobs in November they say.I wonder where the 98,000 people went that are no longer part of the workforce?They dropped off the planet apparently.Technically,they haven't actively sought work in the past 4 weeks is why,but this is based on the sample of the 60,000 households surveyed each month by the BLS.
Gee,the 'saved or created' jobs claim fiasco by the W.H. is similar.The number is derived from survey results collected by the administration.They recently threw the people compiling these numbers under the bus stating that reporting errors were responsible for any inconsistencies.So,in other words,take any of these numbers with a grain of salt.
Here in Michigan we have no recovery at all,so the claim is moot anyway.A rosy future?Not possible with the current administration both nationally and at state levels.Sorry,but the status quo is our future for now with flat growth and unemployment not getting worse being the best we can hope for.More to come...
So the rest of the nation will have a jobless recovery,but not here in our state?Michigan has the 'upper hand' based on our ad campaign so this must set us apart from the rest.What's the matter with these people?Do they only read the White House press releases for their news?
Today we see the national unemployment rate dip to 10.0%.We only lost 11,000 jobs in November they say.I wonder where the 98,000 people went that are no longer part of the workforce?They dropped off the planet apparently.Technically,they haven't actively sought work in the past 4 weeks is why,but this is based on the sample of the 60,000 households surveyed each month by the BLS.
Gee,the 'saved or created' jobs claim fiasco by the W.H. is similar.The number is derived from survey results collected by the administration.They recently threw the people compiling these numbers under the bus stating that reporting errors were responsible for any inconsistencies.So,in other words,take any of these numbers with a grain of salt.
Here in Michigan we have no recovery at all,so the claim is moot anyway.A rosy future?Not possible with the current administration both nationally and at state levels.Sorry,but the status quo is our future for now with flat growth and unemployment not getting worse being the best we can hope for.More to come...
Tuesday, December 1, 2009
Obama the warmonger!
Well,wouldn't that be the headline if Bush made the same commitment to send more troops to Afghanistan?It would be by the left certainly.No weapons of mass destruction.No threat of Afghanistan invading the United States.Al Qaeda is centered in Pakistan.And I believe we already ran the Taliban out 8 years ago only to have them return.
Obama claims he will finish the job this time.That we will train the Afghanistan military to defend itself so that we can leave.Even the left doesn't buy this as they've spent years condemning this type of strategy in Iraq.
We all know that a surge in Afghanistan will simply result in the Taliban scattering and re-organizing in a different country sympathetic to their cause.The blood of our soldiers to die in the coming years will be on Obama,yet we'll still hear the same old tired rhetoric of blame Bush.He'll claim that since Bush incorrectly started the war in Iraq instead of Afghanistan where the 'real' terrorists are located,we allowed them to grow much stronger and more difficult to defeat.Mark it down in stone.In fact,Gibbs can simply read from my blog next year or the year after when he has to explain the casualty count and why the troop withdrawl isn't going as planned.
So,hope and change crowd,how's that working out for you?No quick pullout from the unnecessary war in Iraq.No meeting the deadline for closing Gitmo.And now an expansion for the other war in Afghanistan.Iran waits in the wings.North Korea is still a player.And lets not forget he will have to deal with the coming domestic disturbances at home due to his economic policies.Violence is only a matter of time with the unemployment situation.How many time can he go to the well on the Bush excuse?The far left will buy in eternally,but he's already losing the rest.More to come...
Obama claims he will finish the job this time.That we will train the Afghanistan military to defend itself so that we can leave.Even the left doesn't buy this as they've spent years condemning this type of strategy in Iraq.
We all know that a surge in Afghanistan will simply result in the Taliban scattering and re-organizing in a different country sympathetic to their cause.The blood of our soldiers to die in the coming years will be on Obama,yet we'll still hear the same old tired rhetoric of blame Bush.He'll claim that since Bush incorrectly started the war in Iraq instead of Afghanistan where the 'real' terrorists are located,we allowed them to grow much stronger and more difficult to defeat.Mark it down in stone.In fact,Gibbs can simply read from my blog next year or the year after when he has to explain the casualty count and why the troop withdrawl isn't going as planned.
So,hope and change crowd,how's that working out for you?No quick pullout from the unnecessary war in Iraq.No meeting the deadline for closing Gitmo.And now an expansion for the other war in Afghanistan.Iran waits in the wings.North Korea is still a player.And lets not forget he will have to deal with the coming domestic disturbances at home due to his economic policies.Violence is only a matter of time with the unemployment situation.How many time can he go to the well on the Bush excuse?The far left will buy in eternally,but he's already losing the rest.More to come...
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