De-leveraging Debts Onto The Taxpayers

March 4, 2008

Elaine Meinel Supkis

It pays to go to the official government web sites and read the press releases there. A study in delusion, insane beliefs and blind optimism. The financial leaders want us to think we are 're-pricing assets.' As if they are being generous. The continuing fire sale is a disaster for the big bankers and our government. They want to make prices go UP, not down. Yet they want no inflation! This bizarre dual desire is why we feel as if we are in a ship in the middle of a hurricane with a volcano erupting onshore, nearby. One thing about the Outer Darkness: this is where opposites suddenly switch or merge, explosively. Since we have this bizarre duality thinking, it is quite likely it will end very badly.

Under Secretary for Domestic Finance Robert K. Steel Testimony

Before the Senate Committee on Banking, Housing and Urban Affairs

For several months, our financial markets have gone through periods of turbulence, followed by periods of improvement. A great deal of de-leveraging is occurring, which has created liquidity challenges for financial institutions and thereby compromised our credit markets' ability to help be an engine of economic growth.

It took a long time to build up the excesses in our markets, and we are now working through the consequences. Market participants are adjusting, making disclosures, raising capital, and re-pricing assets.

We have continued to engage with our fellow regulators and market participants, so that collectively, we work through these challenges to limit the spillover effects to our economy and make our markets even stronger.

First: were our markets strong? Generally speaking, when someone talks about 'strength' they usually mean, 'it makes a profit.' They really don't care how this profiteering is done. So long as profits flow. The word 'profiteering' has negative connotations. This is often used to describe people making a financial killing off of wars. The US is at war. And the only winners have been the profiteers. The seeming health of our domestic economy is due nearly entirely to war spending. Unlike in real wars which create shortages and money for domestic spending is constricted, the US has foolishly chosen to have domestic expansion run alongside war spending.

Normally, war spending soaks up savings that might go into other things. And war taxes rise. But ever since the Vietnam War, the US has been encouraged to overspend and not tax ourselves by both our allies and even more significantly, by our potential or actual enemies and of course, all our rivals. Instead of punishing us for doing this, all the planet has encouraged us to go into the red.

This graph from the St. Louis Fed shows how this works:

From the St. Louis Fed

The Chinese government has carefully studied Professor Kennedy's seminal work, 'The Rise and Fall of the Great Powers'. [Click here to order book] They chose to use this book as their 'Bible' long ago. Recently, they made a miniseries based on this book. The thesis is, all empires rot pretty much the same way. And there are ways of gaging this decline. And one of the top things to watch is not the amount of gold an empire commands.

It is industrial output. And military procurement corruption levels. The US spends more than all the other nations together on our military. A good hunk of this spending is corruption. Any legislator brave enough to go against the corruption is punished by being cut out of the immense flow of funds that pour into military projects. So instead of stopping this, Congress vies with the President in overspending. Privatization was supposed to stop this bleeding of public funds. But that was a Trojan Horse. It caused misspending and corruption to double.

So the budget now dwarfs all other Federal spending. Social Security isn't government over spending. It brings in much more than it spends. This is used to hide overspending in the military. The same advisors in the Treasury who refuse to talk about military misspending also love to warn us that Social Security, the source of much government revenue, is bad! This is part of the duality of these liars. They play magic tricks telling us, up is down, in is out. So they beat the drums when it comes to military spending that is killing us while sounding the trumpets of alarm concerning Social Security which is solvent.

The second lie in this testimony to Congress by the Treasury is 'It took a long time to build up excesses.' This is obviously a very stupid lie. All the charts and graphs clearly show that these excesses began to really take off exactly 7 years ago. When Bush was installed into the highest office. He immediately began to cut taxes wildly, double and redouble military spending and the Federal Reserve simultaneously blessed all this by dropping interest rates to historic lows. Warnings that all this was very inflationary as well as destructive were ignored. Totally. By both the media and the rulers.

Now they want us to imagine the huge bubbles they created were slow and incremental. Not due to the huge tax cuts for the rich. Now, they wish to keep the tax cuts, keep raising military spending and keep the profits by isolating losses from the bottom lines or by government bail outs that benefit themselves. The assurances Steel has been giving are for a return to the old status quo of the previous 7 years! Instead of changing course, the government is being advised to set sail straight into the volcanic firestorm onshore.

This is impossible, of course. But all our allies as well as everyone who hates us and hope we die, want us to do this, too! We have no obligation to grant all these people, their wishes. Especially since this will destroy us. The primary function of any government is to protect the nation. All nations should do this. Then they can negotiate trade and finance with each other in honesty.

The present system is set up to appear to be benefitting us but it obviously is not. And if the world was unaware of the dire effects of this status quo we are in, it might be forgivable.

But this is not so! Like I said before, the Chinese are not only aware, they are praying we continue the status quo. The Japanese love the status quo! Nearly free military protection coupled with total freedom to invade and dominate US industries! What is there to not love in that? Europe has been surging past the US in all statistical measures of wealth and trade. They love the status quo and will move heaven and earth to keep it going. The free military protection is a big, big bonus. Once again, they are scared of Russia and hope the US will spend another trillion a decade, protecting them from the nation they have repeatedly attacked in the past.

Steel:

Recent events underscore the need for strong market discipline, prudent regulatory policies, and robust risk management. The Treasury Department and our colleagues comprising the President's Working Group on Financial Markets are addressing the current and strategic challenges, and are doing all we can to ensure high quality, competitive, and orderly capital markets. We seek to strengthen market discipline, mitigate systemic risk, enhance investor confidence and market stability, as well as facilitate stable economic growth

How bizarre is this? Both the privateers, the profiteers and our corrupt government have worked tirelessly to destroy all regulations, remove all rules, drop all barriers. They have encouraged reckless speculation and wild investing, not anything even remotely prudent. And capital markets can't be 'orderly' if they are run out of a host of tax haven pirate coves across the planet. These places are, by definition, not regulated nor secure. Market discipline can't happen if a government and its central bankers are goof balls running wild, drunk with power, screaming for more, more, more money!

And stable economic growth? This is beyond pathetic. Has American-owned industry grown domestically? Or has it been vanishing overseas while foreigners move manufacturing here in order to keep us from putting up trade barriers? This bizarre game of transferring all our own businesses abroad while others do the opposite is exactly the sort of thing that troubles me a lot. For when things go in opposite directions at the same time at warp speed, this always ends with a big crash. There is no way around this: the many contradictions we are seeing today in banking, public spending, manufacturing and politics will resolve themselves very violently if allowed to continue.

Bank of England urges banks to buy 'frozen' securities

The Bank of England's financial markets chief has issued a clarion call for banks and investors to buy up the troubled asset-backed securities at the heart of the financial crisis.

It is a "serious puzzle" that no one is buying this "supposedly undervalued" paper, Paul Tucker said, adding that unless these frozen markets restarted soon, the credit crisis would reach a new intensity.

In a wide-ranging speech, Mr Tucker, the Bank's executive director for markets, hinted that he is considering voting for an interest rate cut at next week's Monetary Policy Committee meeting, as well as acknowledging that the cost of borrowing for many households had increased significantly over the past two months as mortgage companies withdraw products.

Just as remarkable, however, was his statement about parts of the mortgage-backed securities market, which has ground to a standstill amid fears that the instruments could be tainted by sub-prime defaults.

Just 5 months ago, Britain was boasting about a boom. The British bankers were boasting about how they made London once again, the center of world finance. They delighted in the rise in value of housing in the vicinity of London. They imagined their good fortune was singular and not part of the global money glut started by Washington's overspending on wars and corruption. English manufacturing has been in steep decline since the Great Depression. Recently, iconic brands like Jaguar were first sold to American industrialists but they are in decline so they sold it at a steep loss to India. India is a growing manufacturing power. Britain used to flood India with trade goods. Now, the flow is reversing. Just like with China.

Like the US government, the British government wants the privateers and profiteers to buy up all the bad debts they sold. They won't and in the end, can't do this. Much of the wealth of these financiers is pure, unadulterated debt. The crisis this year began specifically when the Japanese carry trade shut down suddenly last July. The money being fed into the housing, buy-outs and deal making sectors collapsed totally. This is because all systems are set to run on infinite debts ground out by the magic money machine in Tokyo. Today, all nations agree that Japan's interest rate is far below the rate of Japanese inflation, forget world inflation. This means they are irresponsibly making money out of thin air, money that is very inflationary.

Yet no one and I do mean, NO ONE in the West wants this to stop. The governments are all hoping the privateers and profiteers will resume running off to Japan to take loans so they can buy Treasuries. Then all will be well aside from the pesky issue of global inflation. This is where the insanity is clearest: the Bank of England is anxious to restart the lending frenzy so they, like the Fed, will drop interest rates. This, in the teeth of world inflation.

We know how this will end: eventually, the money must either deflate or it becomes meaningless. Zimbabwe's massive Weimarian inflation barely makes back page news in the US. I fear, this is because we don't want to see how bad it can get. Then there is India: India Inflation at 3-Year High; Crackdown on Hoarding

India's inflation accelerated to the fastest pace in more than three years, underscoring a threat from rising food prices that prompted the government to announce a crackdown on hoarding.

Wholesale prices rose 7 percent in the week ended March 22 from a year earlier, faster than the previous week's 6.68 percent, the Ministry of Commerce and Industry said in New Delhi. A Bloomberg News Survey of 16 economists forecast a 6.64 percent gain. Stocks and bonds fell.

Not only do we have global inflation, it is accelerating. Even as the asset values of everything held dear in the West declines, as industry is falling and all indications are pointing to both national and global contraction, inflation is increasing. The money pumping exercises in the West coupled with an increase in US military and domestic spending is joined at the hip with a resumption of the Japanese carry trade. This is the dynamic that brought us into this mess. Resuming or increasing this will simply make global problems increasingly intolerable.

Military feels fuel-cost gouge in Iraq

Military units pay an average of $3.23 a gallon for gasoline, diesel and jet fuel, some $88 a day per service member in Iraq, according to an Associated Press review and interviews with defense officials. A penny or two increase in the price of fuel can add millions of dollars to U.S. costs.
Critics in Congress are fuming. The U.S., they say, is getting suckered as the cost of the war exceeds half a trillion dollars -- $10.3 billion a month, according to the Congressional Research Service.
Some lawmakers say oil-rich allies in the Middle East should be doing more to subsidize fuel costs because of the stake they have in a secure Iraq. Others point to Iraq's own burgeoning surplus as crude oil prices top $100 a barrel. Baghdad subsidies let Iraqis pay only about $1.36 a gallon.

The US privateers are in cahoots with the Arab pirates. Cheney and Bush smooch and hug the very same people who are raiding our Treasury. All are in a cynical embrace. The Arabs want us to be their economic slaves. Our rulers agree. Even as we are horrified to see our leader embracing despotic kings who run cruel empires of oil, we don't impeach them for treason! According to our leaders, the attackers on 9/11 mostly came from Saudi Arabia. Yet we do nothing but kiss the king. And there is little outrage over here.

The promise of cheaper oil is dangled in front of our noses to keep us, like a donkey following a carrot tied to a stick, going in circles.

NorthStar Halts Student Loans

NorthStar Education Finance Inc., one of the nation's largest originators of government-backed student loans, said it will suspend such lending immediately, adding to growing concerns about the stability of the college financial-aid system just as students are set to begin borrowing for the fall.

NorthStar, a nonprofit lender based in St. Paul, Minn., originated about $836.9 million in new federal student loans in fiscal 2006. It ranks 13th among lenders participating in the government's Federal Family Education Loan, or FFEL, program, according to FinAid.org, a financial-aid Web site.

The lending crisis continues. The government could cut out the middle man and simply give out loans to students and homebuyers. But the privatization movement was set in motion so the privateers could latch onto fees and bonuses while the government carries the risks. Now, they can't hang onto various sectors due to the collapse in other sectors. Student lending is impossible to discharge via bankruptcy. It is a life sentence. The big banking houses knew all this several years ago before the debt explosion took off. They lobbied Congress very hard to change the bankruptcy laws. Now we see why: they wanted us trapped with no escape. Yet that is not enough! So the plan it to shut down all the lending systems, force the government to do everything for them and then they will sit back and resume being a conduit which sucks down US tax dollars.

This plan takes me to the top of this story: when the entire system is set up to beggar the workers and the masses while opening one door after another to corruption and easy profits via stealing money from the government leads to inflation, destruction of public services and the collapse of the empire.

Corporate Bond Prices Imply High Defaults, S&P Says

Investors are pricing in defaults on corporate bonds twice as high as projected by rating companies, said Deven Sharma, Standard & Poor's president.

``The markets are pricing in a default rate of 9 or 10 percent for high-yield corporate debt, which is a lot higher than we're forecasting,'' Sharma said in an interview with Bloomberg Television. ``There is a recession and the recovery will be somewhat slower than we anticipated.''

The forecasting abilities of all the rating organizations like S&P and Moody's is so dismal, they should be shut down. Anyone relying on them for accurate and timely information about future possibilities is a fool. They turned from doing their stated jobs to being frauds, con artists and cheer leaders. The entire system is infested with this ethos. At all costs, all systems are to be maintained and pushed forwards even if it means, off a cliff. This tendency is very strong. Investors who listen to these interlocking schemers should beware. They are not truthful or honest.

This graph from the blog, Big Picture, shows how the withholding taxes have fallen. Last time they fell suddenly like this was when the Dot Com bubble popped.

And anyone with half a brain can see from history, what is going on! ALL the hard-core economic news is bad! Stocks, at the beginning of any collapse, always rise on expectations that there is no decline! But these declines are very obvious this time around. Shipping is down. Unemployment is rising. Housing is falling drastically. Incomes are falling. Inflation of necessities is rising. Debts are high and bankruptcies are rising. Businesses are canceling deals. Banks are seeing runs. The withholding tax is no longer increasing, it is decreasing. All these are classic signs of a major downturn. The last time we had this with the Dot Com bubble collapse, the Fed increased business by faking interest rates. And they are doing this yet a second time in less than 5 years in the hopes this will perform the same function.

But of course, this is the problem: it can't do it twice in a row. The only way to make houses affordable again is to either raise incomes or reduce the value of everyone's homes. There is no third choice. The only way to start the consumer spending spree is to give away money which is what we will be seeing soon as the government starts to mail out the free funny money checks next month. But this increases inflation. Last time around, inflation was sopped up by outsourcing American labor. By offshoring everything while lending cheap, we saw record trade deficits which destabilized global finances and launched global inflation as cheap dollars flooded all markets. We can't do this forever, either.

CMBS volume now seen plunging to six-year low

The credit market seizure of 2008 will slash sales of a popular type of commercial mortgage bond to their lowest level in six years, worse than expected just a few months ago, a top underwriter said.

Issuance of bonds backed by a variety of loans on office buildings, hotels and retail stores could reach just $30 billion to $40 billion this year, about half of the levels predicted at the end of November, according to a JPMorgan (JPM.N: Quote, Profile, Research) presentation this week.

Development of the so-called conduits led to an explosion in issuance, with the total CMBS market growing 43 percent since early 2006 to $770 billion at the end of 2007.

Like all the systems set up in our present 'loot the nation' matrixes, the CMBS market was set to enable fraud. In the past, the Savings & Loans hit the rocks in the 1980's because this was a great place where developers and bankers could conspire to increase profits by mis-pricing both risk and value. Since these loans are schemes cooked up between two parties both seeking profits, the temptation to lie and cheat is very great.

What are 'conduits'?

Commercial real estate first mortgage debt is generally broken down into two basic categories: (1) loans to be securitized (“CMBS loans”) and (2) portfolio loans. Portfolio loans are originated by a leader and held on its balance sheet through maturity. In a CMBS transaction, many single mortgage loans of varying size, property type and location are pooled and transferred to a trust. The trust issues a series of bonds that may vary in yield, duration and payment priority. Nationally recognized rating agencies then assign credit ratings to the various bond classes ranging from investment grade (AAA/Aaa through BBB-/Baa3) to below investment grade (BB+/Ba1 through B-/B3) and an unrated class which is subordinate to the lowest rated bond class.

Investors choose which CMBS bonds to purchase based on the level of credit risk/yield/duration that they seek. Each month the interest received from all of the pooled loans is paid to the investors, starting with those investors holding the highest rated bonds, until all accrued interest on those bonds is paid. Then interest is paid to the holders of the next highest rated bonds and so on. The same thing occurs with principal as payments are received. This sequential payment structure is generally referred to as the “waterfall.” If there is a shortfall in contractual loan payments from the Borrowers or if the loan collateral is liquidated and does not generate sufficient proceeds to meet payments in all bond classes, the investors in the most subordinate bond class will incur a loss with further losses impacting more senior classes in reverse order of priority.

The typical structure for the securitization of commercial real estate loans is a real estate mortgage investment conduit (REMIC). A REMIC is a creation of the tax law that allows the trust to be a pass-through entity which is not subject to tax at the trust level. The CMBS transaction is structured and priced based on the assumption that it will not be subject to tax with respect to activities; therefore, compliance with REMIC regulations is essential.

Here are the MarkIt graphs for the CMBX markets:

Between October and March 13th, the spread shot up. This was bad news for the CMBX markets. Now that the government has clearly signaled, it will bail out EVERYONE who has been playing all these betting games, the spread is getting less. But not because the economy is faring better. But because RISK is vanishing. It is being transfered recklessly to our government!

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Comments

[Rosco]

Elaine

I remember being 'taught' about the Boxer Rebellion back in HS. The teach said it had started when the evil, ruthless Chinese had attacked warehouses full of private property owned by the British. Dastardly!

What I didn't learn was that the warehouses were full of opium from India.

The British were concerned about their trade deficit with China. The Chinese weren't buying anything from the British so the Limeys decided to flood the coastal cities in China with an addictive substance, opium, which would guarantee 'customer brand loyalty' to keep purchasing British 'goods'.

You should do a piece on the Boxer Rebellion in relationship to managing trade deficits

[mad mike]

when ever i go to my bank i harangue whacky bernanke. shouldnt one speak of feduciary
matters at a bank?
i tell the manager whacky should be thrown in jail for stealing all the money and forcing interest down on savings.
here in the great state of new jerky our gold man sacks gov-ner kooky corzine is shutting down state parks for paltry millions in savings. such as 4 million.
but the legislature is making it possible for the A.C. casinos to stay open during a
state shut down. i guess they can then run without oversight.
which can only mean the fix is in. what contempt the politicians must have for the public. and what "clewless" bone heads my fellow citizens must be.
kooky corzine is already being dubbed the robber baron.
i suggest that gov-nerships not be selected by ballot. but appointed as the richest white man. certainly not a woman or a negro.
the only other alternative is to select an illegal alien at random to serve as a gov-ner at minimum wage. perhaps the post can be totally eliminated and shut down. i have not read of drumthwacket, the gov-ner's mansion being shut down in this dire fiscal emergency. nor are any give backs expected of the perks the legislature has voted to give themselves.
only the poor huddled masses will be forced under penalty of law to give money to the state. capitalism is great, aint it?
or is is fascism? i get the two confused lately.

[Elaine Meinel Supkis]

Corzine nearly killed himself. That's a start.

[Mikalai]

Elaine,

Would like to ask your opinion on this document :
http://www.federalreserve.gov/boarddocs/legalint/FederalReserveAct/2008/20080403/20080403.pdf

As far as I know they already asked for an examtion in August '07 together with BAC and C. What are their main intentions and consequence of this actions? Would it further disstabilize financial enviroment??? Is it done to prop their capital ratios which would probably became worse after acquisition of BSC??

[Elaine Meinel Supkis]

Thanks for finding that important document! I am going to try to digest it.

[rockpaperscizzors]

Lenders Swamped By Foreclosures Let Homeowners Stay (Update1

April 4 (Bloomberg) -- Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages.

The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years,...Lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline....

With home sales dropping and national inventories rising, the lenders have another reason to delay foreclosures, said Howard Fishman, a real estate investor based in Minneapolis.

``What are the banks going to do?'' Fishman said. ``They don't want the house. They have a mortgage for $1 million and the house is worth $750,000.''

Legal fees and maintaining a vacant property while paying the mortgage, insurance and taxes can add up to as much as 15 percent of the value of the home, and it may take months for the foreclosure to work through the legal system, he said.

``The end result is taking back a property that the bank will have to manage, rent out and or sell,'' Zalewski said.

In many cases, lenders also have to foot the bill for fixing up vacant homes that have been vandalized.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aOluOO8Vy0gc&refer=home

The sleazy banker/lender subprime mortgage catastrophemess should be called the Boomerang effect.

[Dutch]

Now they want us to imagine the huge bubbles they created were slow and incremental. Not due to the huge tax cuts for the rich. Now, they wish to keep the tax cuts, keep raising military spending and keep the profits by isolating losses from the bottom lines or by government bail outs that benefit themselves. The assurances Steel has been giving are for a return to the old status quo of the previous 7 years! Instead of changing course, the government is being advised to set sail straight into the volcanic firestorm onshore.

Elaine, what I think you fail to realize here is that these bubbles are REAL, this is drug money that is being laundered. PEOPLE want dope.And these criminals want the profits for control, and why not, they have the most money so they are goin to invest it so they remain in control and expand their profit base.

[rockpaperscizzors]

Federal Reserve staff move into offices of investment banks to monitor activities

The US Federal Reserve has sent staff into some of Wall Street’s biggest firms and its New York branch is gathering evidence on key traders’ activities as America’s central bank raises its scrutiny of risk to an unprecedented level.

Fed staff have set up shop in Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns to monitor their financial condition just days after Henry Paulson, the US Treasury Secretary, proposed that the Fed become the financial industry’s “risk czar”.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3678053.ece

[Dutch]

Oh, and dont forget, when it comes to government funds.....50 cents of every dollar goes to "Administration". HAHAHA

[rockpaperscizzors]

OT or maybe not?, I found this fun facts timeline of the Rothschild's..... Here's some worthy notations:
"There are now only 5 nations on the world left without a Rothschild controlled central bank: Iran; North Korea; Sudan; Cuba; and Libya."

And interesting quotes: Nathan Mayer Rothschild is not amused and he stated, “Either the application for renewal of the charter is granted, or the United States will find itself involved in a most disastrous war.”

Andrew Jackson’s response to this is to say, “You are a den of thieves vipers, and I intend to rout you out, and by the Eternal God, I will rout you out.”

1845: Andrew Jackson (The 7th President of the United States) dies. This Great Patriot leaves instructions in his will to have, “I Killed The Bank,” inscribed on his headstone, a reference to the fact he banished the Rothschilds second Central bank in the United States from the US in 1837.

1865: In a statement to Congress, President Abraham Lincoln states, “I have two great enemies, the Southern Army in front of me, and the financial institution in the rear. Of the two, the one in my rear is my greatest foe.” Later that year President Lincoln is assassinated.

1911: John F. Hylan, then mayor of New York, states, “The real menace of our republic is the invisible government which, like a giant octopus, sprawls its slimy length over our city, state and nation. At the head is a small group of banking houses, generally referred to as international bankers.”

1963: On June 4th President John F. Kennedy (the 35th President of the United States 1961 – 1963) signs Executive Order 11110 which returned to the U.S. government the power to issue currency, without going through the Rosthchilds owned Federal Reserve.

Less than 6 months later on November 22nd, president Kennedy is assassinated by the Rothschilds for the same reason as they assassinated President Abraham Lincoln in 1865, he wanted to print American money for the American people, as oppose to for the benefit of a money grabbing war mongering foreign elite. This Executive Order 11110, is rescinded by President Lyndon Baines Johnson (the 36th President of the United States 1963 to 1969) on Air Force One from Dallas to Washington, the same day as President Kennedy was assassinated.

1980: The global phenomenon of privatisation starts. The Rothschilds are behind this from the very beginning in order to seize control of all publicly owned assets worldwide.

http://www.freedom4um.com/cgi-bin/readart.cgi?ArtNum=47766&Disp=0

[Mikalai]

Elaine,
Would like to follow up on my previous post about request of JPM to lift restrictions under Section 23A…
As far as I understand that section restricts banks (depository institutions) to commit more then 10% of it’s capital to any single affiliate and 20% to all of its affiliates. It’s main goal to maintain reasonable risk of these banks. Very important. Even if it’s affiliates are on the edge of solvency that use to be the line you are not suppose to cross. Now. Why JPM knowingly take that risk? I guess they have a lot of red flags popping up. Is it JPM or BSC? As I’ve seen on your blog JPM is THE largest holder of derivatives IN THE WORLD!!! Did they start to blow up? There is not a chance we can know. Are they trying to get the money for themselves (29B) and loose regulations on top and after some time tell everyone that BSC is impossible to save (but at least they tried, right) ?
Or it is BSC. They use to deal with a lot of hedge funds. They use to sell a lot of these crappy paper to these funds. It’s interesting, I’ve read somewhere that when they use to sell those things to “sweet” the deal of selling highly illiquid instruments such as CDS sell-side firms also sell a “put”, i.e right of the buyer to sell it back at pre-determined conditions. At that time nobody knew or most likely care about what would happen if defaults would reach such enormous levels as we face now (and it’s not the end). So, and that “insurance” was considered as “free” money. Hey, they put AAA rating on these CDS …. Same as US credit. And now we hear that a lot of hedge funds going “belly-up” and may be they trying to unload at least some of this stuff on to BSC?

Anyhow, I am still trying to understand what the hell these means. Would greatly appreciate your input as I am a great fan of your blog and highly value your opinion.

By the way BAC did similar thing with CFC. And you know what : http://losangeles.bizjournals.com/losangeles/stories/2008/03/31/daily40.html?ana=yfcpc

And it’s not the Countrywide MORTGAGE it’s Countrywide BANK!!! Man, I hope people got their money (over 100K) out in time. This is just driving me nuts when I see this things happen and our FED who suppose to regulate is a F*****ing REASON why this happen. And they still doing it!!! Unbelievable.

And also take a look at this guy. He put two videos yesterday and one today. Priceless.
1. Lehman and Aurora (it’s lending arm)
http://www.youtube.com/watch?v=tebO2v3qBVY&NR=1
2.MSM lying about defaults
http://www.youtube.com/watch?v=iO3gmJsZDkY&NR=1
3. HELOC in CA. WFC
http://www.youtube.com/watch?v=nm3Q5aEoiG4
at the end there is VERY INTERESTING report.

Thank you for your time

Mikalai

[EEngineer]

Great read as always. Reading everything you write is quite a slog though. The fact that it means that I don't have time to watch TV is probably a good thing. But the masses are busy with two jobs trying to make ends meet. Most don't have the luxury of reading a few hours a day.

I have the feeling that the herd is getting restless. They don't know what it is, but they're starting to sense something just isn't right. When they finally get around to lifting their collective heads (or looking away from the TV) they'll see that the world is not what they had imagined it was. It is at that moment that they will be open to new ideas. I assume that TPTB will have a Rove Jr to try and blame it all on someone and sell them some awful solution. How do we counter this?

[barbara hazleton]

Just got back from a week of visiting China on a tourist Visa. Mainstream Media was available on the intenet but most financial blogs, including this one were censored and inaccessible.

[Elaine Meinel Supkis]

The Chinese government knows me VERY well. VERY VERY well. Like, personally. They hate and fear me yet find me agreeable only because I understand them but this makes them freak out even more because no one is supposed to know the 50 plan [which has only 20 years left!].

So they started censoring me. Only the top guys read me.

About the JP Morgan deal: it stinks to high heaven and low hell. I will write more about it tomorrow. Am too tired tonight. This is all one big cheating operation that was done out of desperation. The Derivative Beast nearly ate everything just three weeks ago. Note how the media and our government is now lying like mad about all this. They want us to think the mess is over, not beginning.

[hardrock]

Another great post Elaine. I would recommend that all of your readers go to 'Financial Sense .com' and give a quick read of 'Deepcaster's' piece as well as Ty Andros's. They sum up quite well just what these greedy bastards are up to. Ty seems to think 'they' do have 'it' fixed [for now] and the markets are getting ready to run up like hell....while all the time the public will be on the sidelines or sitting in Treasuries where they will take a helluva hair cut. The 'stupido' public will come into the market just in time for the insiders to have suckers to sell to. History repeats itself...again.

[sb]

Elaine - just to let you know that I very much like your work. I also would like to have you permission to feature you as a guest columnist. Please email me when time permits.

[Teddy]

Elaine, hopefully you had a chance to watch the video of the Jesse Ventura interview on Larry King the other night. He has a book coming out called, Don't Start The Revolution Without Me. He thinks there is change coming, but it won't be from the Democrat and Republican elitist parties who he rightfully blamed for the mess the country is in.

[Elaine Meinel Supkis]

SB: I sent you an email. Hope to hear back.

Teddy: when economic turmoil happens, the countries undergoing this go to extremes. In our case, the US has killed unions, labor organizing, and is in the middle of a massive endorsement of the concept of religious/ethnic cleansing in the Middle East.

So I expect a huge surge in Naziism. This is because the number of organizations that are fighting for civil rights of all sorts, is in steep decline. This is due to religious organizations wishing to overthrow secular, non-ethnic governments. The theology of ethnic identity/religious intolerance is being promoted while the concept of church and state being separate is rapidly being tossed out.

This is most unfortunate and I try to stop this madness but a good way to be tossed aside is to say, 'Zionism is creating and increading Naziism.'

I wish I could stop this historic force. It is most dangerous. All things that are contradictory will be resolved eventually by an explosion. This is true in economics, social matters and in the nature of matter and reality.

Total opposites attract.

[Dutch]

This is most unfortunate and I try to stop this madness but a good way to be tossed aside is to say, 'Zionism is creating and increading Naziism.'

I believe so, in the populace,to put in power, Social Communism which is and always has been Anti-Christ.

We need another Andrew Jackson and a Patrick Henry.

[Ed-M]

Elaine,

Naziism is never good for ethnic, religious and sexual minorities. And even if Zionism was friendly with Naziism before and is creating it currently, Naziism always ends up destroying the beneficiaries of Zionism: our friends, the Jews.

[Elaine Meinel Supkis]

Naziism is ethnic cleansing with a vengeance. ANYONE can do it! Anyone!

Making it specific to Germans is to not learn any lessons. People don't like learning lessons. This is why the lessons of the Nuremberg trials are being ignored.

[Dutch]

I really dont know what 'Naziism' is. There really is not a whole lot to research.It is all biased. But I do have an understanding of Zionism and it is sheer EVIL.