Big Banks Get Big Bucks From Bernanke

Elaine Meinel Supkis

In the future, the guys who are making this mess can rehabilitate themselves by doing useful work as we see below. Meanwhile, the top banks and the Federal Reserve play a game they played back in 1929 when they needed to 'stop the panic'. It will be just as useless. Nearly 40,000 mortgage company employees are without work in just ONE WEEK. And more companies are folding faster than umbrellas at Yankee Stadium after a summer shower.

From the Christian Science Monitor:

US farmers using prison labor
With tightening restrictions on migrant workers, some farmers are turning to the incarcerated.

Maybe some hard sweat in a hot sun will cure these guys. But right now, the vast majority are free as birds. And they are all joining the baby chorus demanding the commies running our government bail them all out and not pay for health care for 50 million people. Indeed, we just saw huge swaths of Midwestern farmlands swept by terrible floods caused by epic thunderstorms that don't seem to want to move but are parked right on top of much of our farmlands. 22 Americans died in these 11" gushers. I am pretty scared of these, we got 7" last year and my husband and I were nearly swept away by a raging river that was once a very tiny, seasonal stream! These people, and there are many thousands of them, have no flood insurance. And they will lose everything and the government will promise stuff but we shall see.

Our government is going bankrupt. It can't pay for everyone all at once. And the sums used to help regular people are far smaller than the epic funds (infinity?) used to protect wild business wheeler-dealers.
Here is a Market Watch headline that boasts about the stupid rescue operation that has now made things infinitely worse:

'V' for 'Very Fucked Up.' Normally, stocks do NOT do a violent down and then an equally violent upwards move without any real news happening. Namely, no Presidents were assassinated, no terrorist attacks on Wall Street. Nothing except a very dangerous banking crisis caused by wild spending, wild lending and ridiculously low interest rates below the rate of inflation. All the main banks in the world except for China, used every possible trick to reinflate this stupid bubble. This should never have happened. The US went off a cliff long ago and is now falling through space. The entire economy became focused on building and selling houses.

This, in the world's #1 economy that was being systematically stripped of all industry and all exportable manufactured items except for Boeing jets and half of them are now built overseas, they are merely assembled here. Oh, and weapons systems. Otherwise, we are sunk. This crisis has been anticipated and explained for quite a while. Way too many Americans made their livings via the housing market. Way too much personal 'wealth' was based on housing values. Now it is all collapsing because American home owners have tapped out all their equity in their homes and have also run out of the ability to pay a mortgage even if it is only the interest rate! This whole mess was, since 2005, utterly unsustainable and obvious. But far from stopping the madness, the government enabled it to continue, grow bigger and become a total flood of red ink which is now, like the floods afflicting America, sweeping everything away in its path.

From Market Watch:

U.S. stocks rallied to close higher Wednesday to cap four days of Federal Reserve-fueled gains as four major banks tapped the Fed for funds and talk of deal-making further eased liquidity concerns in the credit markets.

"Some confidence has returned to the marketplace, at least for the time being," said Mike Malone, trading analyst at Cowen & Co.

Deal activity "seems to be opening a little bit here," said Art Hogan, chief market strategist at Jefferies & Co. said.

And what are these deals? Why, everyone buying and selling each other, not creating new businesses or funding exciting new ideas within older businesses. This is pure debt dumping. Why on earth is our government bankrupting itself to enable this very destructive activity? Always, always, when they buy and sell each other, they lay off lots of workers! So this should be HALTED, not ENABLED! I am just pixelated with rage over this. Stocks going up usually means workers losing jobs! This formula has been the rock foundation of our present economic system for the last 15 years. Companies that refuse to lay off workers are punished and their stocks drop. Companies that embrace debt fire everyone to 'stream line' their business so they can pay off the stupid debts they didn't need in the first place.

From Market Watch:

Right now, there are plenty of ways to earn a 5% or higher yield on your savings, but many consumers don't take advantage of those rates, according to a recent survey.

Sixty percent of consumers surveyed in May said they "almost never" check the interest rates available on savings accounts, even though most respondents pointed to rates as a top concern for them, according to an online survey of about 5,800 U.S. households conducted for HSBC Direct, a unit of HSBC Holdings PLC (HBC:90.75, +1.65, +1.9%) , the U.K.-based bank.

Who is being hammered? Why, Mr. and Mrs. Savings For The Future! They are supposed to buy CDs. But those can't be touched without penalties over the course of a year. Many savers are like my husband and I: we don't pay taxes via a mortgage, we pay ourselves so we have to save several hundred a month to pay all at once at the end of the year. We can't park this in a CD because we pay into it each month! When it reaches the pay-out level, we hand it over to the government.

But banks must keep us happy! What if I get suspicious and cease depositing it at all? This would then stay under the matress until tax time! This can and probably will happen if banks begin to go under. Instead, the powerhouses who need everyone to churn debt nonstop will force the Fed to drop rates and punish savers and banks will collapse and everyone will wonder why this is happening. Well, the bedrock of the entire banking system is Yours Truly, myself! And anyone else who puts away a few bucks every month.

From Associated Press:

Four major banks said Wednesday they each borrowed $500 million from the Federal Reserve's discount window, lending weight to the central bank's efforts to restore liquidity to tight markets.

In going public with the moves, Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and Wachovia Corp. each stressed they have "substantial liquidity" and the ability to borrow money elsewhere. The borrowings, at least in part, seemed meant to reassure investors' jitters about the credit crunch rattling Wall Street.

In a joint statement, the latter three banks said they decided to borrow the money to demonstrate "the potential value of the Fed's primary credit facility" and encourage its use by other banks.

Hey, give me $500 million. I like these stupid rich people: they trot off to a private bank run as if it were a government agency and they hold out their slimy paws and get $500 million magic dollars, no questions asked. Not only that, they all said they didn't need the money at all! Well, hell's bells, give it to me! This charity from the same clowns who hate Social Security and whine about giving health care to children, are suddenly Santa Claus and Trick or Treating their good buddies and golf partners! And the statement that this is to demonstrate that the Fed is primarily a credit facility...good grief! You mean to tell me our bankers didn't already know this? Are they this stupid?

Brain dead is no excuse. This entire story about the top bankers pretending to blush and shuffle their feet and say, 'Aw, I really didn't need that red firetruck, Santa', while snatching at it with greedy hands. They just wanted to show me their...fucking power over our currency which they can manipulate outrageously.

From Bloomberg:

The rising cost of credit took its toll on Lehman Brothers Holdings Inc., Accredited Home Lenders Holding Co. and HSBC Holdings Plc as the subprime mortgage fallout spreads through the economy.

Lehman, the biggest underwriter of U.S. bonds backed by mortgages, became the first firm on Wall Street to shut its subprime-lending unit and said 1,200 employees will lose their jobs. Accredited, reeling from its canceled purchase by Lone Star Funds this month, stopped making home loans. London-based HSBC, Europe's largest bank by market value, closed a U.S. mortgage office after failing to finance new loans.

Everyone is going down the toilet. I suppose Lehman Brothers are slapping themselves on their foreheads today! 'Duh! Why didn't we realize we could just go the Uncle Bernie and he would float us as much money as we need!' Well, I'm sure they will be at Bernie's pad tomorrow with their begging cup out! And of course, no one gives two fruitcakes that all these people lost their jobs. They are nobody. They don't need money to tide themselves over.

From Bloomberg:

Capital Fund Management, a Paris- based hedge-fund manager, said its Discus Master Fund could lose as much as 27 percent of its assets, or $407 million, after the bankruptcy of cash-management firm Sentinel Management Group Inc.

Not only did these stupid hedge funds provide no hedge against a down market, they are all connected to each other like that bridge that collapsed the other day. One piece falls, the whole thing goes boom. The sums of money involved in these collapses and they are happening with increasing speed now, is far in excess of the small amounts set aside to fix this mess. Less than a trillion dollars won't support a $15 trillion dollar world debt/carry trade economy in swift collapse. Stocks went up today because everyone is expecting total bail outs. This Christmas Time fun comes with a deadly price-tag: a depression. This is no ordinary recession. The red ink is too deep and on too many levels all at once.

From Bloomberg:

The residence is just one of a trail of buildings dotting the sandy coastline constructed by Enrique Banuelos as he amassed a fortune of more than 4 billion euros ($5.4 billion) over the past 15 years. Banuelos lost much of that money -- and shareholders' -- as the stock market punished the firm he founded, Astroc Mediterraneo SA, amid a rapid cooling of Spain's housing market.

Astroc shares lost 89 percent from their Feb. 26 peak of 72.60 euros on the Madrid Stock Exchange, when the company had an implied value of 8.8 billion euros, to their July 24 low. On July 26, when Banuelos resigned as chairman, shares rose 39 percent. He'd already given up day-to-day management.

Housing is collapsing in Spain. Spain sold off much of its gold reserves to keep the government solvent. This will have bad repercussions because it is based on the English continuing to tap loans that are now in the same state of disarray as in America.

From the Daily Mail:

The global credit crunch will see a sharp rise in the number of Britons put on a debt blacklist and denied mortgages, loans and credit cards, experts claim.

The seven million turned down by mainstream lenders in 2006 is predicted to soar to at least 8.6million by 2011 - around one in six of the adult population.

Like here, they are running out of people who can afford to take on more debts. The debt pool does have limits. This is reality. A reality that has been ignored despite all the statistics showing the debts are so huge, there is litle left to be added. 'Just one thin mint, sir.' applies here in spades.

From CNN:

Bank of America Corp. plans to invest $2 billion in Countrywide Financial Corp., the mortgage lender that recently faced a liquidity crunch, The Wall Street Journal reported Wednesday.

The second-largest bank will buy preferred stock that yields 7.25 percent and can be converted into Countrywide common stock at $18 per share, the newspaper said, citing unnamed people familiar with the situation.

Countrywide stock is soaring. I bet the top officers will resume selling off the last of their stocks. They sold off $400 million this year alone! And why on earth would the Bank of America do this dumb thing? Did a certain Santa Claus offer to pay the difference between the loss on loans and the price of the assets? And why hasn't the Fed first demand the officers return the sums they took out of the company? This is so disgusting. Saving the rich like this.

And this saves NOT ONE HOMEOWNER. They get no refi-deals that will fix their economic woes. They will still go bankrupt and will still lose their homes. The deal is, the US government will lend these crooks and their banks enough sub-inflation loans, they can sell the houses they repossess to someone else! And this is how we plan to paper over one of the messiest crashes in American history.

Culture of Life News Main Page

Comments

[ArthurCorgi]

please see my new column, elaine, for a sure fire bet.

http://elainemeinelsupkis.typepad.com/arthurcorgi/

[Al]

Elaine, I don't know if you read the article Dean Baker wrote earlier this week on foreclosures. without going into great detail, he suggests the homeowner be allowed to remain in the home and pay rent at the prevailing local rate.

http://www.commondreams.org/archive/2007/08/20/3297/

[rain]

My friend at work has a mortage with Countrywide that she got in March 2005. It is for 5.5% until it resets in March 2008. She said in her mortage agreement if she sells or refinances before Feb. 2008
she has to pay an $18,000 penalty. She has only the month of Feb. 2008 to do this.
I do not know if Countrywide's
contracts are standard in each state. This one is in Texas.
I'm sure she will try her best to keep I guess Countrywide's house.

[patience]

Elaine,

Kevin Drum and Atrios of Brad Delong's claim that Bernanke can save us from what Dean Baker and yourself have documented as the worst housing disaster ever.

see

http://delong.typepad.com/sdj/2007/08/are-fundamental.html

For details

Drum claims that Bernanke has no economic tools to help, and atrios claims that Bernanke is not God and therefor will inevitably fail.

http://www.washingtonmonthly.com/archives/individual/2007_08/011925.php

Given your expertise, why not imagine up the most evil and stupid ways to "solve" this problem and then tell us these will all come to nasty ends. It would be nice to have this all documented before the big Crash in September.

[Elaine Meinel Supkis]

About 'reset' loans: people who fell into temptation fell into the claws of a very nasty demon. The demon always rings the doorbell claiming they have free money and they live in a gingerbread house.

Anyone who bought a house with a reset loan will have to learn a very harsh lesson. These things are POISON. If one doesn't qualify for a real loan, one shouldn't bid up the price of houses and buy using poison loans.

I lived for 10 years in a tent in the northeast in winter in order to build a house with no debt. This is the price I paid. I am a free woman today because I took the trouble and lived without electricity or water for most of those 10 years. We all pay a price somewhere. Anyone seeking to live in a house for free after doing something foolish and dangerous...I have no sympathy for.

We MUST pay our bills. Every penny of the loan given to these people was from someone's savings account somewhere on earth, mostly China. It is unfair for Americans to take this money and run.

About Bernanke and the coming crash: he can't stop it. If he hyper-inflates the dollar the Chinese will punish us by destroying the dollar faster than we can inflate it. They are not the OPEC nations.

And the OPEC guys have us by the economic throat now. They are quite different and much more sophisticated than 30 years ago.

[Al]

So true about OPEC being much different guys. and the lions share of this change is due to Pres Chavez lobbying for a price band. along with his loans taking place of the IMF is a big reason why the US wants him gone. Chavez is not paranoid, we really are out to get him.

[Elaine Meinel Supkis]

100% correct, Al!