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Bear of Little Brain

With this blog, I know how Wile E. Coyote felt trying to catch the Road Runner!
Snippet from my last comment on the fast-receding previous post:

"I just watched Bunning on Bloomberg discussing this Freddie/Fannie/All-of-Hank's-buddies bailout legislation. He said that 700 pages had just been added to the Bill. Strange how these things spring fully-formed in a matter of days or so when a crisis is created/occurs. Reminds me of the Patriot Act.

They wouldn't be thinking of crashing the currency and issuing Amero's (another fully-formed solution), would they? No, didn't think so."

Phew, I need a rest.

Elaine Meinel Supkis

HAHAHA. The lobbyists at work! They ran over with all the right papers to insert. With instructions. 'Insert lobbyist tab A in Congress slot B...leave all spare change at the desk.'


And this is eye opening (RTT News):

The FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits, FDIC Chairman Sheila Bair said Friday.

However, that fund is "a myth," according to longtime banking consultant Bert Ely, and consumers may end up paying the price of what is expected to be a growing wave of bank failures.
... snip ...
The FDIC has around $53 billion set aside to back up bank deposits up to $100,000 per depositor, one of the ways the organization is designed to ensure confidence in the banking industry. However, according to Ely, that $53 billion is "not really available."

"The deposit insurance fund is as real as the social security trust fund," Ely said, noting that only a "small fraction" of the $53 billion is actually available and "any losses beyond that will be assessed on the banks."


"Bernake and the Broomstick"

AKA..."Sorcerers Apprentice"..("Fantasia")



Am I insane, or is this housing bill HYPERINFLATIONARY? Fed Chairman Beardsley Ruml admitted that, because of the Fed's ability to tax via inflation, "Taxes for Revenue are Obsolete" – "given control of a central banking system and an incontrovertible currency [that is, a fiat currency not backed by gold], a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue. All taxation, therefore, should be regarded from the point of view of social and economic consequences."

Elaine Meinel Supkis

As I said, they hope to shove the Goddess of Inflation back under a rock and continue with sending all our debts to China and Japan. Seriously, this is the solution!

And it is certainly fatal in the long run.


The Beard and his Broomstick are
trying to sweep the water under the rock.
Trouble is...the ground (debt) is already

These guys are suicidal maniacs.

Quote from above letter:

"a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue. All taxation, therefore, should be regarded from the point of view of social and economic consequences"

So I guess bridges,roads and schools will
not be needed soon. What are the "consequences" of that ? !

YMBSM ! Tis obvious now that TPTB want a
Mad Max society. The "Government" is now
just going to be one set of gangbangers
amoung many others.


What we are watching is of course not any form of capitalism.

It is not socialism either.

While it has some of the mechanical characteristics of socialism it generates none of the social benefits and of course does not intend to do so.

It is gangsterism.

We will all need our own gang soon but only a few will be able to organize one.

To do so you need muscle, cash (or whatever is passing for it) and beauty.

Got Gang?


The U.S., on the other hand is having a devil of a time attracting foreign investment, ever since the credit crunch hit the markets last August... I've told you all this before, but it bears repeating here as this is important. Foreign investors are attracted to yield differential, (and other things but most yield differential), and when they wanted to invest in the U.S. they would seek out Corporate Bonds and Commercial Paper, as they had higher yields that stocks which have done basically nothing now for years, when you throw in inflation, and Treasuries... But the credit crunch caused Corporate bond and Commercial Paper issuance to dry up, and they haven't recovered, even yet! And we've seen a huge drop in the net foreign security purchases data... I'll repeat this later this morning in my presentation, but Pfennig Readers get it first... The Total amount of the Current Account Deficit that needs to get financed each month is $80-85 Billion... During 2007, we only averaged $51 Billion, and that data kept trending downward as the year went on... And has continued to be suspect this year...

This financing of the Deficit is the biggest bugaboo for the dollar... It has been, it is, and will continue to be! So... Let the jawboners talk... Let the dolts sell euros, yen, Aussie, etc. and buy dollars... Their day of reckoning will come... OK, that's just my opinion, I have no proof that it will come, it's just my opinion... (that will make the legal beagles happy!)



So, now all of the mortgage debts that are failing can be passed to the public (slaves).

Thus the mortgage holders no longer have an incentive to pursue foreclosure. Foreclosure is costly and a far less certain means of principal recovery than sliding the Jokers to the Joes (well at least until all of the Joes's assets are stripped out by the various strip mining operations underway).

Watch for in place defaults on the part of mortgagees to spike. They will figure out that the banks are not going to run them off and foreclose on them.

The banks are going to slip the debt to the Fed. How long will the fed take to foreclose?

I figure a mortgagee can default and stay in place in the house for and year or two minimum without making any payments before the fed figures out how to proceed with the inventory for which they now will be responsible.

Market Watcher

Hi, Elaine.

Excellent essay. You have a quick mind. Fun to watch it work.



Having obsessively studied the run-up to the Great Depression and having lived through the 70's Stagflation, I'm getting a real bad case of Deja Vu. The American consumer is actually responding to our financial disaster by cutting back on purchases and new debt (of course), but the Federal Government - already bankrupt - is spenidng even faster, writing blank checks for everyone on Wall Street, and driving our economic future off a cliff.

CRISIS MANAGEMENT ALERT: In case you're lucky enough to have more than $100,000 in an FDIC-insured account, but unlucky enough to have more than $100,000 in an FDIC-insured account (like a CD that doesn't mature for a while), it turns out there is a way to protect more than $100,000 in an account through FDIC insurance.

I found out about this because I sold some real estate several years ago and put a chunk of the proceeds into several multi-year CDs at banks paying 6%+.Unfortunately, two of those banks, NetBank and IndyMac, have gone belly up. I only deposited $100,000 into each, but I had tens of thousands in accumulated interest at risk.

However, I was informed by the FDIC that, because the accounts were opened in the name of a Revocable Living Trust (mine), they were FDIC insured for $100,000 PER BENEFICIARY. In my case there's two beneficiaries, so I was insured for $200,000 per account. Whew!!

If you already have more than $100,000 in an account that is in your own name, and you can't withdraw it without losing some of your interest (as is the case with CDs), you can still increase your FDIC protection by contacting your bank and doing the paperwork necessary to transfer ownership of the account to your Revocable Living Trust. If you don't have a Revocable Living Trust, you should look into setting one up (it's not hard or expensive, but you should see a qualified lawyer).

This credit/housing/banking mess is only going to get worse - we are in the financial death spiral now, and many more banks are going to fail. It's not equitable or fair that the FDIC has this special break for Living Trustees only, but if your funds are trapped in a CD account and are vulnerable, you might think seriously about using to get out whole.

Blunt Force Trauma

The buggers approved it. Prepare to die (kidding)!


Elaine Meinel Supkis

Michael, you are correct! People forget the $100,000 isn't just the deposit but also the accumulated interest on CDs. And if you have a spouse, you get up to $200,000.

My goodness, I spent the morning on the backhoe preparing for today's floods....rain, rain, rain, lightning and downpours! We got, at one point, huge drops of dense rain, one inch ever 15 minutes!

This is an amazing summer.


Elaine - am I reading you correctly that this means the oil prices will indeed continue to decrease since that is what China needs?

1 trillion dollar losses. Sounds like a lot but it is only 1 % of world GDP for one year. It will be

1 trillion dollar losses. Sounds like a lot but it is only 1 % of world GDP for one year. It will be absorbed and the world will move on.

Good consequences

1. fund managers who caused this will loose their powers. Hang em high I say.
2. China , Japan etc will not allow the US economy to collapse
but they will demand austerity from the US .You should be
thankful for a global economy. The pain to come
for your citizens will be sort lived .You will trade your
way out of it. Ive never seen so many US cars on our Austalian
roads as now.
3. The USA will end up #4 in the economic pecking order but is
that so bad. You will still be able to project your economic and political power abroad and as long as it is directed at facsists and islamists as in iraq and afghanistan you will get plenty of international support


1% hit all piled in less than 5yrs still hurt a lot. On top of that, this is not even the bottom. The economy is still slowing down. so one an expect more collapsing big business.

Who is going to bail out GM? What happen if wave of retail groups start collapsing? etc. etc


"And if you have a spouse, you get up to $200,000."

Caution: JOINT ownership is required! Just "having a spouse" does not automatically increase FDIC insurance. Each "account owner" is entitled up to $100k insurance per bank. My spouse and I have "joint (-ly owned) accounts" at two banks and therefore our assets are insured up to $200k per bank. More insurance per bank is available with trusts that name beneficiaries, which are restricted to family members. All info is available on the FDIC web site.


the CFTC is coming out with is Spin that
there are "no speculators" in the oil pits.
Lets see: Oil a barrel cost around 75.00
in the Middle East. Its sells for
125.00 a barrel in New York this
morning. Who is fooling who. The biggest
commodity joke in the world. I am sure
the PENSION FUND money had nothing to do with
it. And to make up for all of the losses
from the Subprime market...


you are assuming FDIC is actually solvent enough to bail you out.

IndyMac alone already eat up 10% of their fund. A lot of money order is not being filled.

Elaine Meinel Supkis

As I keep saying, the US has little reserves! Everything has been allowed to run in the red or be woefully undercapitalized. We are NOT CAPITALISTS AT ALL.

The communists are capitalists.

And yes, just like up until last week, naked short selling was not real and anyone talking about it was an idiot. Then it suddenly became real!

And oil speculation was not real. Now, they are crushing all but the big guys. Goldman Sachs had pre-warning of this crack down and moved out. All the smaller bears will now be slaughtered in that market. They can't unwind like GS and JP Morgan.


"The deposit insurance fund is as real as the social security trust fund," Ely said, noting that only a "small fraction" of the $53 billion is actually available and "any losses beyond that will be assessed on the banks."

And how solvent are the BANKS? Watch the money disappear down a black hole! HAHAHAHA.


Mish Global Eco. has a laundry list that reads like a SNL skit in Bizarro World, the Alternate Universe. It would be damn funny if it wasn't so damn true. Here's a few highlights:

Re/FDIC: 24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.

25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.

What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.

5. Paulson asked for "Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)" just days after he said "Financial Institutions Must Be Allowed To Fail".Obviously Paulson is reporting from the 5th dimension. In some alternate universe...

8. Bernanke testified before Congress on monetary policy but did not comment on either money supply or interest rates. The word "money" did not appear at all in his testimony.

10. The Fed takes emergency actions twice during options expirations week in regards to the discount window and rate cuts.

11. The SEC takes emergency action during options expirations week regarding short sales.

12. The Fed has implemented an alphabet soup of pawn shop lending facilities whereby the Fed accepts garbage as collateral in exchange for treasuries. Those new Fed lending facilities are called the Term Auction Facility (TAF), the Term Security Lending Facility (TSLF), and the Primary Dealer Credit Facility (PDCF).



Elaine Meinel Supkis

Whenever things go bad, the first to be sacrificed are savers and careful people.

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