Wednesday, December 12, 2007

Collateral Damage (Banks' Bad Loans)


The money that the big banks lost in the ongoing housing meltdown is going to come out of our pockets with the help of "your" government. It is being done indirectly, so as not to illicit the well-deserved outrage this move would incur if it were done openly. Still, few in the corporate media will tell you how the shell game is going to go down. The big media people and the big bank people both have an interest in keeping the shell game hidden. Don't expect them to inform you of this. Their real goal may even be to conceal this information from you while blathering endlessly about the horse-race aspects of the Presidential campaign or even the latest rehab antics of some pop-tart.

A clue can be found here (under the headline "Central Banks Pumping Billions into Banking System"), where the writer says of the huge money auctions now in progress, "The auctions held by the Fed will set interest rates on borrowings by banks from the Fed. The banks will be able to post any collateral they wish, including illiquid securities such as collateralized debt obligations, as they now can do at the discount window. But while it often becomes known which banks borrow at the discount window, the auction procedures are designed to keep the identities of the borrowers secret."

Don't get distracted by the showy wave of the magician's hand, follow the money..

(continued- click WEDNESDAY below and scroll down for rest of article.)

2 Comments:

Blogger Mark Moore (Moderator) said...

The original article noted that central banks around the world are going to create about $100,000,000,000.00 of money (out of thin air). This money will be given to their mega-bank buddies to help their "liquidity". Releasing that much new liquidity will of course further dilute the value of all other dollars in the world- including the ones in your paycheck.

That means that there will be a hidden "inflation tax" on this money. It will benefit those who get to spend it first, but once it works into the economy it will cost everyone else as the value of the dollars they hold erode even more. In addition, I strongly suspect that even the regular interest on this "money created from thin air" will be born by the taxpayers.

Did you notice the key point that the banks borrowing the new money can use ANYTHING THEY WANT AS COLLATERAL? Yes Mildred, that means the crooked banks can get "loans" of billions of dollars which will be "collateralized" by a bundle of nearly worthless sub-prime mortgages! They can bundle all their bad loans together and trade them for money!

So then the banks can do what some of their customers are doing. The customers who notice that the falling value of their home makes it worth less than the money owe for it are doing what? That's right, they are walking away from the home and letting the banks have the "collateral"- which turns out to be worth much less than the loan.

Well, the banks are about to do the same thing to our government- with the fed's secret approval of course. The banks are going to bundle these bad loans, use them as "collateral" as if they were worth a lot more than they are, and then they are going to walk away with the loan money and leave the government with the collateral!

The main difference in the two scenarios is that the bank that first lent someone the money for a home can repossess that home. Many of the loan agreements that these banks will use for "collateral" are so complex that no one actually knows who really owns the home anymore.

As the article also notes, this is going to be done secretly. The public will have no way of knowing which banks are borrowing or checking to see if the "collateral" such banks offer is really worth the bailout money that they are being given.

How can governments in open systems of government give away a hundred billion dollars in secret? How can it be that the public will not be able to know who got this money and what the public treasury is getting in return? If you are wondering that your problem is that you are under the illusion that this is still your government. Its not. It is theirs until you act to take it back.

7:32 PM, December 12, 2007  
Anonymous Nia said...

This is great info to know.

3:56 AM, November 10, 2008  

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