The Fed and the Bankster's Next Move
The banksters have begun the next phase of The Greatest Bank Robbery, whereby they siphon off the wealth of the country while leaving us nothing but debt in exchange. I was wondering how they were going to initiate this phase. Now that the game plan has been set up, I can only marvel at the cunning manner in which they carry out their rapacious malevolence. First, the history…
Their awful bets in 2008 prompted them to accelerate what they had been doing bit by bit for many years. This was the same crooked racket that President Andrew Jackson caught their predecessors at almost 200 years ago. “Gentlemen, I have had men watching you for a long time,” Jackson told them, “I am convinced that you have speculated in the breadstuffs of the country. When you won, you split the profits among yourselves, when you lost you charged it to the bank.”
This is a different century, but it’s the same scam. The big politically connected banks speculated with money they created out of thin air. If their picks turned out to be winners, they kept the money. But as the bets got bigger, the risks got higher. In 2008 it all blew up on them at once. When a little guy like you and me makes stupid and reckless investment decisions, we go bankrupt. The big guys have it set up so that when they make mistakes, you pay for it, not them.
Here is how it worked. They took their bad investments to something called the “Fed discount window” and exchanged them for dollars, or Treasury notes denominated in dollars. The Fed, run by the big banks and for the big banks, will not reveal to Congress how much was given to a bank for a given asset. The excuse for the “discount window” is to provide temporary liquidity to a bank that has a cash flow problem.
But the big banks did not have a cash flow problem- they had an insolvency problem. It wasn’t just that they had valuable assets that they could not sell fast enough, the assets they had were junk not worth half of what they paid for them. They were “underwater” in that they owed more to depositors than they had in net worth. No matter. The fed bought those assets off the banks at secret price, but still we know it was a higher price than the free market was willing to give. Sometimes, the Fed loaned to them with the assets as collateral. Then the banks told the fed to keep the collateral.
continued on the jump.....
Their awful bets in 2008 prompted them to accelerate what they had been doing bit by bit for many years. This was the same crooked racket that President Andrew Jackson caught their predecessors at almost 200 years ago. “Gentlemen, I have had men watching you for a long time,” Jackson told them, “I am convinced that you have speculated in the breadstuffs of the country. When you won, you split the profits among yourselves, when you lost you charged it to the bank.”
This is a different century, but it’s the same scam. The big politically connected banks speculated with money they created out of thin air. If their picks turned out to be winners, they kept the money. But as the bets got bigger, the risks got higher. In 2008 it all blew up on them at once. When a little guy like you and me makes stupid and reckless investment decisions, we go bankrupt. The big guys have it set up so that when they make mistakes, you pay for it, not them.
Here is how it worked. They took their bad investments to something called the “Fed discount window” and exchanged them for dollars, or Treasury notes denominated in dollars. The Fed, run by the big banks and for the big banks, will not reveal to Congress how much was given to a bank for a given asset. The excuse for the “discount window” is to provide temporary liquidity to a bank that has a cash flow problem.
But the big banks did not have a cash flow problem- they had an insolvency problem. It wasn’t just that they had valuable assets that they could not sell fast enough, the assets they had were junk not worth half of what they paid for them. They were “underwater” in that they owed more to depositors than they had in net worth. No matter. The fed bought those assets off the banks at secret price, but still we know it was a higher price than the free market was willing to give. Sometimes, the Fed loaned to them with the assets as collateral. Then the banks told the fed to keep the collateral.
continued on the jump.....
posted by Mark Moore (Moderator) at Monday, January 24, 2011
4 Comments:
So now the Federal Reserve was stuck with a gigantic pile of toxic assets for which they grossly overpaid, and the big banks were stuck with, well they were stuck with gigantic piles of cash. They went from insolvent to having so much cash that they did not know what to do with it all. Of course, we were assured by the leaders of both political gangs that the American people had to borrow these trillions from the ChiComs and give it to the banks so that the banks could start loaning again. It sounds so stupid when you think about it- borrowing to the Chinese to give to the banks so they could loan to us.
How in the world did we ever go for something so idiotic? “We” didn’t. In a show of bi-partisan ignoring of the American people, Congress passed it and Bush signed it over the strident objections of the vast majority of the people who voted them into office.
At any rate, the banks did not start loaning again. For the most part they still haven’t. It seems they did not trust us with the money that we gave them. But they had to do something with the massive tonnage of cash that the Fed lavished on them.
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The Fed helped them out again. It started paying a tiny percentage of interest for “excess” funds deposited at the Federal Reserve. That served as a disincentive to loan businesses and individuals. They got a risk-free return just by depositing the money at the Fed. Sure the interest rate was tiny, but even a tiny interest rate on 500 billion dollars is healthy profit- especially when you got the money basically as a gift! So the Fed has been paying the banks to deposit back with them the money that they gave to the banks in exchange for their trash. Excess reserves held for the banks soared to record levels.
That brings us to the Fed’s current problem. They bought all of those assets that are generating income streams which are only a tiny fraction of what they are supposed to be paying, yet the Fed itself is paying interest to all those big banks to re-deposit that money with them. In addition, the Fed has operating expenses. Normally they cover those expenses by doing things like selling assets. Too bad for them there are no buyers for their assets except at a significant loss. Even treasuries would sell at a loss since the fed has been working so hard to keep interest rates artificially low. And the assets they got from the banks? Forget about it! The Fed itself would become insolvent if it unloaded those assets for what they were really worth because they would have to sell them for huge losses compared to their book value (the amount of money the fed gave their bankster friends for the asset).
The solution they have devised for this problem is elegantly wicked. Not only does this solution get them out of their trap, but it also solves the new problem that their bankster friends have- what to do with all this cash they are sitting on. They have so much cash, they can’t find profitable places to stick it all. It’s cluttering up their mansions. They could buy bonds, but they know the dollar is due to take big losses- that’s one reason they are in a hurry to find places to profitably spend theirs. They could buy stocks, but they are so swollen with cash that they have already bid up the price of stocks to levels that are completely unjustified by the expected profitability of the companies themselves. The banks simply have too much cash to be easily absorbed. They have scammed the American People out of more money than they can figure out how to spend. What to do with all this ill-gotten gain?
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Well, there is a large pile of assets that might be tempting targets- if they could get them for the right price. That pile of assets sits on the Fed’s books. Why, it’s the very assets that they sold to the Fed at or near book value! Since they are so flush with cash right now that they might be willing to buy back some of those assets, if the price is right for them.
Of course they won’t pay book value. They won’t pay the Fed what the Fed paid them for those assets. That would be ludicrous! Instead, they will pick them up for maybe half price, or even quarter price. They will buy back their dogs at such bargain basement prices that they will turn into cash cows! They will rob the taxpayers both coming and going, cheating them twice on the same asset. They will wind up with the cash and the assets, leaving those commoner slobs with only the debt used to originally finance the shell game.
The only barrier to the plan is that of course, the Federal Reserve would soon become insolvent itself if it aided and abetted the banksters who run it in siphoning off the national wealth with this scheme. Many think that the Fed is close to insolvency now, because they can’t unload all of the trash they have over paid for without taking a terminal hit.
ontinued...
Finally, Fiscal reality has forced the Fed to quit acting as a conduit to help the big banks loot the Treasury- just kidding, actually they are going to try to use an accounting trick to hide the Fed’s insolvency. You see when the Fed makes a profit over and above its operating expenses, it remits the profits to the Treasury. That was a condition of the Fed’s creation, otherwise they could simply create 100 quadrillion dollars and grow fat off of the interest. They are not allowed to profit from such an obvious misuse of their currency-issuing authority, but they have found subtle ways to do so.
Under their new rule change, losses will not count as losses. They will be “negative liabilities”. That is to say, they will be counted as a credit against future profits that they would have to, in theory, turn over to the Treasury. So now the Fed can lose a trillion dollars a year for the next two decades, but as long as they create enough money out of thin air to pay operating expenses they are “solvent”.
It’s an absurd accounting fiction that will enable them to sell back the damaged assets to their buddies at bargain basement prices. That is what’s coming next. And who is going to compete with the big banks in buying those assets? Not Americans, as we are starved for cash out here in the heartland. No, our securities, mortgages and other debt, will be bought up by the banksters who stole from us the money they are now using to buy us out. Foreigners will be the only ones able to bid against them, and those will be our future masters. It is written that the “Borrower is servant to the lender.” Barring a miracle of awakening, that is our fate.
Andrew Jackson ended the pillaging of the central bankers of his generation by ending the central bank. The American people will find and turn to a new Andrew Jackson, or they will slide into debt slavery.
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