Category Archives: Shadow banking
The shadow banking system is the infrastructure and practices which support financial transactions that occur beyond the reach of existing state sanctioned monitoring and regulation. It includes entities such as hedge funds, money market funds and Structured investment vehicles. Investment banks may conduct much of their business in the shadow banking system (SBS), but they are not SBS institutions themselves. The core activities of investment banks are subject to regulation and monitoring by central banks and other government institutions – but it has been common practice for investment banks to conduct many of their transactions in ways that dont show up on their conventional balance sheet accounting and so are not visible to regulators.
by Tyler Durden
Oct 30, 2016 11:46 AM
Until the Friday blockbuster news that the FBI was reopening its probe into the Hillary email server, the biggest overhang facing the Clinton Campaign was the escalating scandal involving the Clinton Foundation, Doug Band’s consultancy firm Teneo, and Bill Clinton who as a result of a leaked memo emerged was generously compensated for potential political favors by prominent corporate clients using Teneo as a passthru vehicle for purchasing influence.
In a section of the memo entitled “Leveraging Teneo For The Foundation,” Band spelled out all of the donations he solicited from Teneo “clients” for the Clinton Foundation. In all, there are roughly $14mm of donations listed with the largest contributors being Coca-Cola, Barclays, The Rockefeller Foundation and Laureate International Universities. Some of these are shown below (the full details can be found in “Leaked Memo Exposes Shady Dealings Between Clinton Foundation Donors And Bill’s “For-Profit” Activities“)
Band also lays out the millions in speaking fees arranged by Teneo:
Band also offers the following commentary on the “$50 million in for-profit activity” he was able to secure for Bill Clinton (as of November 2011) as well as the “$66 million in future contracts, should he choose to continue with those engagements.”
Independent of our fundraising and decision-making activities on behalf of the Foundation, we have dedicated ourselves to helping the President secure and engage in for-profit activities – including speeches, books, and advisory service engagements. In that context, we have in effect served as agents, lawyers, managers and implementers to secure speaking, business and advisory service deals. In support of the President’s for-profit activity, we also have solicited and obtained, as appropriate, in-kind services for the President and his family – for personal travel, hospitality, vacation and the like. Neither Justin nor I are separately compensated for these activities (e.g., we do not receive a fee for, or percentage of, the more than $50 million in for-profit activity we have personally helped to secure for President Clinton to date or the $66 million in future contracts, should he choose to continue with those engagements).
With respect to business deals for his advisory services, Justin and I found, developed and brought to President Clinton multiple arrangements for him to accept or reject. Of his current 4 arrangements, we secured all of them; and, we have helped manage and maintain all of his for-profit business relationships. Since 2001, President Clinton’s business arrangements have yielded more than $30 million for him personally, with $66 million to be paid out over the next nine years should he choose to continue with the current engagements.
In effect, what Band was doing, as the NYT’s Nick Confessore summarized, “was selling his clients on idea that giving to foundation was, in essence, a way to bolster their influence. Clinton & Band built a platform for executives to bolster their companies’ images, bathe in BC’s praise, and do some good, while Teneo extracted earnings for Band and, depending on what you see in these e-mails, Clinton himself. Teneo paid Clinton until late ’11.”
As Confessore also pointed out, “I guess you can wave it all off as a nothingburger. But Chelsea Clinton and some of Clinton’s other aides were clearly freaking out.”
And he concluded by saying “Generally, the emails show Clinton’s *own closest aides* troubled or horrified by things that her surrogates have spent years waving off.”
Today, with this context, we focus on one particular email disclosed in the latest Podesta email release, in which an email from Doug Band to Cheryl Mills and John Podesta dated November 12, 2011, or just days before the abovementioned memo was sent out, admits that “I’m starting to worry that if this story gets out, we are screwed.”
Here is the full email:
Need get this asap to them although I’m sure cvc [Chelsea Clinton] won’t believe it to be true bc she doesn’t want to Even though the facts speak for themselves.
John, I would appreciate your feedback and any suggestions I’m also starting to worry that if this story gets out, we are screwed. Dk [Declan Kelly] and I built a business. 65 people work for us who have wives and husbands and kids, they all depend on us. Our business has almost nothing to do with the clintons, the foundation or cgi in any way. The chairman of ubs could care a less about cgi. Our fund clients who we do restructuring and m and a advising the same just as bhp nor tivo do. These are real companies who we provide real advice to through very serious people. Comm head for goldman, dep press secretary to bloomberg, former head of banking, and his team, from morgan stanley for asia and latin am.
I realize it is difficult to confront and reason with her but this could go to far and then we all will have a real serious set of other problems. I don’t deserve this from her and deserve a tad more respect or at least a direct dialogue for me to explain these things. She is acting like a spoiled brat kid who has nothing else to do but create issues to justify what she’s doing because she, as she has said, hasn’t found her way and has a lack of focus in her life. I realize she will be off of this soon but if it doesn’t come soon enough…
Four years later, the story is out, not thanks to Chelsea Clinton as Doug Band was concerned, but due to a hack of John Podesta’s email account.
However, in light of the latest FBI scandal involving Anthony Weiner, It remains to be seen if either Band or the Clintons are screwed – it appears that the general public has more than enough distractions to forget about this potential graft scandal involving the Clintons and their influence-peddling clients.
By Michael Snyder, on February 24th, 2015
Janet Yellen is very alarmed that some members of Congress want to conduct a comprehensive audit of the Federal Reserve for the first time since it was created. If the Fed is doing everything correctly, why should Yellen be alarmed? What does she have to hide? During testimony before Congress on Tuesday, she made “central bank independence” sound like it was the holy grail. Even though every other government function is debated politically in this country, Yellen insists that what the Federal Reserve does is “too important” to be influenced by the American people. Does any other government agency ever dare to make that claim? But of course the Federal Reserve is not a government agency. It is a private banking cartel that has far more power over our money and our economy than anyone else does. And later on in this article I am going to share with you dozens of reasons why Congress should shut it down.
The immense power wielded by the Federal Reserve is clearly demonstrated whenever Janet Yellen speaks publicly. On Tuesday, her comments about interest rates sent stocks to brand new record highs…
Yellen, in her semi-annual testimony before the Senate banking committee, used a word familiar to investors when she reiterated that the central bank will be “patient” on raising interest rates for the first time since the 2008 financial crisis. Traders took that as a sign that interest rates would remain unchanged until autumn.
The Dow Jones Industrial Average rose 92.35 points (0.5%) to 18,209.19, while the Standard & Poors 500 gained 5.82 points (0.3%) to 2,115.48, both eclipsing Friday’s record closes.
But Yellen was also unusually defensive on Tuesday. The “Audit the Fed” bill that is being sponsored by Rand Paul (among others) has her really freaked out. The following comes from the Hill…
Appearing before the Senate Banking Committee, Yellen was on the defensive, as Republicans questioned how the Fed conducts monetary policy and Democrats put forward ideas for getting tougher on Wall Street.
In the midst of all of it, Yellen generally argued the Fed was designed as an independent entity for a reason — and it would be best not to change it.
“Central bank independence in conducting monetary policy is considered a best practice for central banks around the world,” she said. “Academic studies, I think, establish beyond the shadow of a doubt that independent central banks perform better.”
In fact, she went so far as to mention the “Audit the Fed” bill by name…
A GOP-controlled Congress has given the bill its best chances yet of passage, and that renewed interest led Yellen to deliver her most spirited opposition yet.
“I want to be completely clear,” she said. “I strongly oppose Audit the Fed.”
Yellen argued the audit measure would allow politicians to second-guess the Fed’s decisions, which, in turn, would weaken the central bank. And the ultimate victim of that process, she said, would be the U.S. economy.
So what is she so concerned about?
We are all accountable to someone.
What is so wrong about the Federal Reserve being accountable to Congress?
Why can’t we find out what is really going on inside the Fed?
And of course it isn’t just Yellen that is freaking out. Just consider these comments from Richard Fisher, the president of the Federal Reserve Bank of Dallas…
“It is always politically convenient to make something sound mysterious, if not malevolent, by claiming it is opaque,” Fisher said in a speech to the Economic Club of New York that is part of an effort by Fed officials to fight the legislation.
“My suspicion is that many of those in Congress calling for ‘auditing’ the Fed are really sheep in wolves’ clothing,” he said. “Having proven themselves unable to cobble together with colleagues a working fiscal policy or to construct a regulatory regime that incentivizes rather than discourages investment and job creation — in other words, failed at their own job — they simply find it convenient to create a bogeyman out of an entity that does its job efficiently.”
Obviously this is a very, very touchy subject over at the Fed.
It is quite clear that they do not want the rest of us to be able to see what they are really up to.
And the truth is that if the American people really did know how the Federal Reserve works and what it has been doing behind closed doors, most Americans would want it shut down tomorrow.
At the end of the day, the reality of the matter is that we don’t even need a Federal Reserve. I really like how David Stockman made this point the other day…
At the end of the day, American capitalism does not need recycled political hacks like Jerome H. Powell or clueless school marms like Janet Yellen to thrive. If we need a Fed at all, it is the one designed by Carter Glass 100 years ago. That is, a “bankers bank” that was intended to provide standby liquidity at a penalty spread above the free market interest rate in consideration for good collateral originating from inventory and receivables in the real economy.
Under that arrangement, there would be no monetary central planning or pointless attempts to manage the level of GDP, the number of new jobs, the rate of housing starts, the fluctuations of the CPI or the amplitudes of the business cycle. There would also be no pegging of the money market rate, no helping hand for Wall Street gamblers, no cheap debt to enable profligate politicians to kick-the-can down the road indefinitely.
In short, what the nation really needs is not an “independent” Fed, but one that is shackled to a narrow and market-driven liquidity function. The rest of its current remit is nothing more than the self-serving aggrandizement of the apparatchiks who run it; and who have now managed to turn the nation’s vital money and capital markets into dangerous, unstable casinos, and the nations savers into indentured servants of a bloated and wasteful banking system.
The Federal Reserve has been around for just over a hundred years, and it has done an absolutely abysmal job for the American people.
I want to share with you some facts and figures that I have shared before, but they bear repeating. Please share this list of 100 reasons why the Federal Reserve should be shut down with everyone that you know…
#1 We like to think that we have a government “of the people, by the people, for the people”, but the truth is that an unelected, unaccountable group of central planners has far more power over our economy than anyone else in our society does.
#2 The Federal Reserve is actually “independent” of the government. In fact, the Federal Reserve has argued vehemently in federal court that it is “not an agency” of the federal government and therefore not subject to the Freedom of Information Act.
#3 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized “much like private corporations“.
#4 The regional Federal Reserve banks issue shares of stock to the “member banks” that own them.
#5 100% of the shareholders of the Federal Reserve are private banks. The U.S. government owns zero shares.
#6 The Federal Reserve is not an agency of the federal government, but it has been given power to regulate our banks and financial institutions. This should not be happening.
#7 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. So why is the Federal Reserve doing it?
#8 If you look at a “U.S. dollar”, it actually says “Federal Reserve note” at the top. In the financial world, a “note” is an instrument of debt.
#9 In 1963, President John F. Kennedy issued Executive Order 11110 which authorized the U.S. Treasury to issue “United States notes” which were created by the U.S. government directly and not by the Federal Reserve. He was assassinated shortly thereafter.
#10 Many of the debt-free United States notes issued under President Kennedy are still in circulation today.
#11 The Federal Reserve determines what levels some of the most important interest rates in our system are going to be set at. In a free market system, the free market would determine those interest rates.
#12 The Federal Reserve has become so powerful that it is now known as “the fourth branch of government“.
#13 The greatest period of economic growth in U.S. history was when there was no central bank.
#14 The Federal Reserve was designed to be a perpetual debt machine. The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape. Since the Federal Reserve was established 100 years ago, the U.S. national debt has gotten more than 5000 times larger.
#15 A permanent federal income tax was established the exact same year that the Federal Reserve was created. This was not a coincidence. In order to pay for all of the government debt that the Federal Reserve would create, a federal income tax was necessary. The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers.
#16 The period prior to 1913 (when there was no income tax) was the greatest period of economic growth in U.S. history.
#17 Today, the U.S. tax code is about 13 miles long.
#18 From the time that the Federal Reserve was created until now, the U.S. dollar has lost 98 percent of its value.
#19 From the time that President Nixon took us off the gold standard until now, the U.S. dollar has lost 83 percent of its value.
#20 During the 100 years before the Federal Reserve was created, the U.S. economy rarely had any problems with inflation. But since the Federal Reserve was established, the U.S. economy has experienced constant and never ending inflation.
#21 In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent. In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent.
#22 The Federal Reserve has stripped the middle class of trillions of dollars of wealth through the hidden tax of inflation.
#23 The size of M1 has nearly doubled since 2008 thanks to the reckless money printing that the Federal Reserve has been doing.
#24 The Federal Reserve has been starting to behave like the Weimar Republic, and we all remember how that ended.
#25 The Federal Reserve has been consistently lying to us about the level of inflation in our economy. If the inflation rate was still calculated the same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.
#26 Since the Federal Reserve was created, there have been 18 distinct recessions or depressions: 1918, 1920, 1923, 1926, 1929, 1937, 1945, 1949, 1953, 1958, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2008.
#27 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression.
#28 The Federal Reserve created the conditions that caused the stock market crash of 1929, and even Ben Bernanke admits that the response by the Fed to that crisis made the Great Depression even worse than it should have been.
#29 The “easy money” policies of former Fed Chairman Alan Greenspan set the stage for the great financial crisis of 2008.
#30 Without the Federal Reserve, the “subprime mortgage meltdown” would probably never have happened.
#31 If you can believe it, there have been 10 different economic recessions since 1950. The Federal Reserve created the “dotcom bubble”, the Federal Reserve created the “housing bubble” and now it has created the largest bond bubble in the history of the planet.
#32 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis. The following is a list of loan recipients that was taken directly from page 131 of the report…
Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion
#33 The Federal Reserve also paid those big banks $659.4 million in “fees” to help “administer” those secret loans.
#34 During the last financial crisis, big European banks were allowed to borrow an “unlimited” amount of money from the Federal Reserve at ultra-low interest rates.
#35 The “easy money” policies of Federal Reserve Chairman Ben Bernanke have created the largest financial bubble this nation has ever seen, and this has set the stage for the great financial crisis that we are rapidly approaching.
#36 Since late 2008, the size of the Federal Reserve balance sheet has grown from less than a trillion dollars to more than 4 trillion dollars. This is complete and utter insanity.
#37 During the quantitative easing era, the value of the financial securities that the Fed has accumulated is greater than the total amount of publicly held debt that the U.S. government accumulated from the presidency of George Washington through the end of the presidency of Bill Clinton.
#38 Overall, the Federal Reserve now holds more than 32 percent of all 10 year equivalents.
#39 Quantitative easing creates financial bubbles, and when quantitative easing ends those bubbles tend to deflate rapidly.
#40 Most of the new money created by quantitative easing has ended up in the hands of the very wealthy.
#41 According to a prominent Federal Reserve insider, quantitative easing has been one giant “subsidy” for Wall Street banks.
#42 As one CNBC article stated, we are seeing absolutely rampant inflation in “stocks and bonds and art and Ferraris“.
#43 Donald Trump once made the following statement about quantitative easing: “People like me will benefit from this.”
#44 Most people have never heard about this, but a very interesting study conducted for the Bank of England shows that quantitative easing actually increases the gap between the wealthy and the poor.
#45 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s.
#46 The mainstream media has sold quantitative easing to the American public as an “economic stimulus program”, but the truth is that the percentage of Americans that have a job has actually gone down since quantitative easing first began.
#47 The Federal Reserve is supposed to be able to guide the nation toward “full employment”, but the reality of the matter is that an all-time record 102 million working age Americans do not have a job right now. That number has risen by about 27 million since the year 2000.
#48 For years, the projections of economic growth by the Federal Reserve have consistently overstated the strength of the U.S. economy. But every single time, the mainstream media continues to report that these numbers are “reliable” even though all they actually represent is wishful thinking.
#49 The Federal Reserve system fuels the growth of government, and the growth of government fuels the growth of the Federal Reserve system. Since 1970, federal spending has grown nearly 12 times as rapidly as median household income has.
#50 The Federal Reserve is supposed to look out for the health of all U.S. banks, but the truth is that they only seem to be concerned about the big ones. In 1985, there were more than 18,000 banks in the United States. Today, there are only 6,891 left.
#51 The six largest banks in the United States (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley) have collectively gotten 37 percent larger over the past five years.
#52 The U.S. banking system has 14.4 trillion dollars in total assets. The six largest banks now account for 67 percent of those assets and all of the other banks account for only 33 percent of those assets.
#53 The five largest banks now account for 42 percent of all loans in the United States.
#54 We were told that the purpose of quantitative easing is to help “stimulate the economy”, but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in “excess reserves” that they have parked at the Fed.
#55 The Federal Reserve has allowed an absolutely gigantic derivatives bubble to inflate which could destroy our financial system at any moment. Right now, four of the “too big to fail” banks each have total exposure to derivatives that is well in excess of 40 trillion dollars.
#56 The total exposure that Goldman Sachs has to derivatives contracts is more than 381 times greater than their total assets.
#57 Federal Reserve Chairman Ben Bernanke has a track record of failure that would make the Chicago Cubs look good.
#58 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment.
#59 The Federal Reserve was created by the big Wall Street banks and for the benefit of the big Wall Street banks.
#60 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle.
#61 There has never been a true comprehensive audit of the Federal Reserve since it was created back in 1913.
#62 The Federal Reserve system has been described as “the biggest Ponzi scheme in the history of the world“.
#63 The following comes directly from the Fed’s official mission statement: “To provide the nation with a safer, more flexible, and more stable monetary and financial system.” Without a doubt, the Federal Reserve has failed in those tasks dramatically.
#64 The Fed decides what the target rate of inflation should be, what the target rate of unemployment should be and what the size of the money supply is going to be. This is quite similar to the “central planning” that goes on in communist nations, but very few people in our government seem upset by this.
#65 A couple of years ago, Federal Reserve officials walked into one bank in Oklahoma and demanded that they take down all the Bible verses and all the Christmas buttons that the bank had been displaying.
#66 The Federal Reserve has taken some other very frightening steps in recent years. For example, back in 2011 the Federal Reserve announced plans to identify “key bloggers” and to monitor “billions of conversations” about the Fed on Facebook, Twitter, forums and blogs. Someone at the Fed will almost certainly end up reading this article.
#67 Thanks to this endless debt spiral that we are trapped in, a massive amount of money is transferred out of our pockets and into the pockets of the ultra-wealthy each year. Incredibly, the U.S. government spent more than 415 billion dollars just on interest on the national debt in 2013.
#68 In January 2000, the average rate of interest on the government’s marketable debt was 6.620 percent. If we got back to that level today, we would be paying more than a trillion dollars a year just in interest on the national debt and it would collapse our entire financial system.
#69 The American people are being killed by compound interest but most of them don’t even understand what it is. Albert Einstein once made the following statement about compound interest…
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
#70 Most Americans have absolutely no idea where money comes from. The truth is that the Federal Reserve just creates it out of thin air. The following is how I have previously described how money is normally created by the Fed in our system…
When the U.S. government decides that it wants to spend another billion dollars that it does not have, it does not print up a billion dollars.
Rather, the U.S. government creates a bunch of U.S. Treasury bonds (debt) and takes them over to the Federal Reserve.
The Federal Reserve creates a billion dollars out of thin air and exchanges them for the U.S. Treasury bonds.
#71 What does the Federal Reserve do with those U.S. Treasury bonds? They end up getting auctioned off to the highest bidder. But this entire process actually creates more debt than it does money…
The U.S. Treasury bonds that the Federal Reserve receives in exchange for the money it has created out of nothing are auctioned off through the Federal Reserve system.
There is a problem.
Because the U.S. government must pay interest on the Treasury bonds, the amount of debt that has been created by this transaction is greater than the amount of money that has been created.
So where will the U.S. government get the money to pay that debt?
Well, the theory is that we can get money to circulate through the economy really, really fast and tax it at a high enough rate that the government will be able to collect enough taxes to pay the debt.
But that never actually happens, does it?
And the creators of the Federal Reserve understood this as well. They understood that the U.S. government would not have enough money to both run the government and service the national debt. They knew that the U.S. government would have to keep borrowing even more money in an attempt to keep up with the game.
#72 Of course the U.S. government could actually create money and spend it directly into the economy without the Federal Reserve being involved at all. But then we wouldn’t be 17 trillion dollars in debt and that wouldn’t serve the interests of the bankers at all.
#73 The following is what Thomas Edison once had to say about our absolutely insane debt-based financial system…
That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.
Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.
But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.
#74 The United States now has the largest national debt in the history of the world, and we are stealing roughly 100 million dollars from our children and our grandchildren every single hour of every single day in a desperate attempt to keep the debt spiral going.
#75 Thomas Jefferson once stated that if he could add just one more amendment to the U.S. Constitution it would be a ban on all government borrowing…
I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.
#76 At this moment, the U.S. national debt is sitting at $18,141,409,083,212.36. If we had followed the advice of Thomas Jefferson, it would be sitting at zero.
#77 When the Federal Reserve was first established, the U.S. national debt was sitting at about 2.9 billion dollars. On average, we have been adding more than that to the national debt every single day since Obama has been in the White House.
#78 We are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in all of U.S. history combined.
#79 If all of the new debt that has been accumulated since John Boehner became Speaker of the House had been given directly to the American people instead, every household in America would have been able to buy a new truck.
#81 Since 2007, the U.S. debt to GDP ratio has increased from 66.6 percent to 101.6 percent.
#82 According to the U.S. Treasury, foreigners hold approximately 5.6 trillion dollars of our debt.
#83 The amount of U.S. government debt held by foreigners is about 5 times larger than it was just a decade ago.
#85 If Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
#86 Sometimes we forget just how much money a trillion dollars is. If you were alive when Jesus Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.
#87 If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
#88 In addition to all of our debt, the U.S. government has also accumulated more than 200 trillion dollars in unfunded liabilities. So where in the world will all of that money come from?
#89 The greatest damage that quantitative easing has been causing to our economy is the fact that it is destroying worldwide faith in the U.S. dollar and in U.S. debt. If the rest of the world stops using our dollars and stops buying our debt, we are going to be in a massive amount of trouble.
#90 Over the past several years, the Federal Reserve has been monetizing a staggering amount of U.S. government debt even though Ben Bernanke once promised that he would never do this.
#91 China recently announced that they are going to quit stockpiling more U.S. dollars. If the Federal Reserve was not recklessly printing money, this would probably not have happened.
#92 Most Americans have no idea that one of our most famous presidents was absolutely obsessed with getting rid of central banking in the United States. The following is a February 1834 quote by President Andrew Jackson about the evils of central banking…
I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, (bringing his fist down on the table) I will rout you out.
#93 There are plenty of possible alternative financial systems, but at this point all 187 nations that belong to the IMF have a central bank. Are we supposed to believe that this is just some sort of a bizarre coincidence?
#94 The capstone of the global central banking system is an organization known as the Bank for International Settlements. The following is how I described this organization in a previous article…
An immensely powerful international organization that most people have never even heard of secretly controls the money supply of the entire globe. It is called the Bank for International Settlements, and it is the central bank of central banks. It is located in Basel, Switzerland, but it also has branches in Hong Kong and Mexico City. It is essentially an unelected, unaccountable central bank of the world that has complete immunity from taxation and from national laws. Even Wikipedia admits that “it is not accountable to any single national government.” The Bank for International Settlements was used to launder money for the Nazis during World War II, but these days the main purpose of the BIS is to guide and direct the centrally-planned global financial system. Today, 58 global central banks belong to the BIS, and it has far more power over how the U.S. economy (or any other economy for that matter) will perform over the course of the next year than any politician does. Every two months, the central bankers of the world gather in Basel for another “Global Economy Meeting”. During those meetings, decisions are made which affect every man, woman and child on the planet, and yet none of us have any say in what goes on. The Bank for International Settlements is an organization that was founded by the global elite and it operates for the benefit of the global elite, and it is intended to be one of the key cornerstones of the emerging one world economic system.
#95 The borrower is the servant of the lender, and the Federal Reserve has turned all of us into debt slaves.
#96 Debt is a form of social control, and the global elite use all of this debt to dominate all the rest of us. 40 years ago, the total amount of debt in our system (all government debt, all business debt, all consumer debt, etc.) was sitting at about 2 trillion dollars. Today, the grand total exceeds 56 trillion dollars.
#97 Unless something dramatic is done, our children and our grandchildren will be debt slaves for their entire lives as they service our debts and pay for our mistakes.
#98 Now that you know this information, you are responsible for doing something about it.
#99 Congress has the power to shut down the Federal Reserve any time that it would like. But right now most of our politicians fully endorse the current system, and nothing is ever going to happen until the American people start demanding change.
#100 The design of the Federal Reserve system was flawed from the very beginning. If something is not done very rapidly, it is inevitable that our entire financial system is going to suffer an absolutely nightmarish collapse.
by MIKE WHITNEY
President Barack Obama is determined to prevail in his battle with GOP congressional leaders on the debt ceiling issue, but not for the reasons stated in the media. Obama is less concerned with the prospect of higher interest rates and frustrated bondholders than he is with the big Wall Street banks who would be thrust back into crisis if there is no resolution before October 17. Absent a debt ceiling deal, the repurchase market–known as repo–would undergo another deep-freeze as it did in 2008 when Lehman Brothers defaulted triggering a run on the Reserve Primary Fundrepurchase market which had been exposed to Lehman’s short-term debt. The frenzied selloff sparked a widespread panic across global financial markets pushing the system to the brink of collapse and forcing the Federal Reserve to backstop regulated and unregulated financial institutions with more than $11 trillion in loans and other obligations. The same tragedy will play out again, if congress fails lift the ceiling and reinforce the present value of US debt.
Repo is at the heart of the shadow banking system, that opaque off-balance sheet underworld where maturity transformation and other risky banking activities take place beyond the watchful eye of government regulators. It is where banks exchange collateralized securities for short-term loans from investors, mainly large financial institutions. The banks use these loans to fund their other investments boosting their leverage many times over to maximize their profits. The so called congressional reforms, like Dodd Frank, which were ratified after the crisis, have done nothing to change the basic structure of the market or to reign in excessive risk-taking by undercapitalized speculators. The system is as wobbly and crisis-prone ever, as the debt ceiling fiasco suggests. The situation speaks to the impressive power of the bank cartel and their army of lawyers and lobbyists. They own Capital Hill, the White House, and most of the judges in the country. The system remains the same, because that’s the way the like it.
US Treasuries provide the bulk of collateral the banks use in acquiring their short-term funding. If the US defaults on its debt, the value that collateral would fall precipitously leaving much of the banking system either underwater or dangerously undercapitalized. The wholesale funding market would grind to a halt, and interbank lending would slow to a crawl. The financial system would suffer its second major heart attack in less than a decade. This is from American Banker:
As banking policy analyst Karen Shaw Petrou describes it, Treasury obligations are the “water” in the financial system’s plumbing.
“They’re the global reserve currency and they are perceived to be the most secure thing you can own,” said Petrou, managing partner of Federal Financial Analytics. “That is why it is pledged as collateral. … The very biggest banks fear that a debt ceiling breach breaks the pipes.”….
Rob Toomey, managing director and associate general counsel at the Securities Industry and Financial Markets Association, said institutions are concerned about whether Treasury bonds that default are no longer transferable between market participants.
“Essentially, whatever the size is of the obligation that Treasury is unable to pay, that kind of liquidity would just disappear from the market for whatever time the payment is not made,” Toomey said.”
By some estimates, the amount of liquidity that would be drained from the system immediately following a default would be roughly $600 billion, enough to require emergency action by either the Fed or the US Treasury. Despite post-crisis legislation that forbids future bailouts, the government would surely ride to rescue committing taxpayer revenues once again to save Wall Street.
Keep in mind, the US government does not have to default on its debt to trigger a panic in the credit markets. Changing expectations can easily produce the same result. If the holders of US Treasuries (USTs) begin to doubt that the debt ceiling issue will be resolved, then they’ll sell their bonds prematurely to avoid greater losses. That, in turn, will push up interest rates which will strangle the recovery, slow growth, and throw a wrench in the repo market credit engine. We saw an example of how this works in late May when the Fed announced its decision to scale-back its asset purchase. The fact that the Fed continued to buy the same amount of USTs and mortgage-backed securities (MBS) didn’t stem the selloff. Long-term rates went up anyway. Why? Because expectations changed and the market reset prices. That same phenom could happen now, in fact, it is happening now. The Financial Times reported on Wednesday that “Fidelity Investments, the largest manager of money market funds… had sold all of its holdings of US Treasury bills due to mature towards the end of October as a “precautionary measure.”
This is what happens when people start to doubt that US Treasuries will be liquid cash equivalents in the future. They ditch them. And when they ditch them, rates go up and the economy slips into low gear. (Note: “China and Japan together hold more than $2.4 trillion in U.S. Treasuries” Bloomberg)
Now the media has been trying to soft-peddle the implications of the debt ceiling standoff by saying, “No one thinks that holders of USTs won’t get repaid.”
While this is true, it’s also irrelevant. The reason that USTs are the gold standard of financial assets, is because they are considered risk-free and liquid. That’s it. If you have to wait to get your money, then the asset you purchased is not completely liquid, right?
And if there is some doubt, however small, that you will not be repaid in full, then the asset is not really risk free, right?
This is what the Fidelity flap is all about. It’s about the erosion of confidence in US debt. It’s about that sliver of doubt that has entered the minds of investors and changed their behavior. This is a significant development because it means that people in positions of power are now questioning the stewardship of the present system. And that trend is going to intensify when the Fed begins to reduce its asset purchases later in the year, because winding down QE will precipitate more capital flight, more currency volatility and more emerging market runaway inflation. That’s going to lead to more chin scratching, more grousing and more resistance to US stewardship of the system. None of this bodes well for Washington’s imperial aspirations or for the world’s reserve currency, both of which appear to be living on borrowed time.
The media has done a poor job of explaining what’s really at stake. While, it’s true that higher interest rates would make consumer loans more expensive and put the kibosh on the housing recovery, that’s not what the media cares about. Not really. What they care about is the looming massacre in shadow banking where USTs are used as collateral to secure short-term loans by the banks so they can increase their leverage by many orders of magnitude. In other words, the banks are using USTs to borrow gobs of money from money markets and financial institutions so they can finance their other dodgy investments, derivatives contracts and ancillary casino-type operations. If there’s a default, the banks will have to come up with more capital for their scams that are leveraged at 40 or 50 to 1. This systemwide margin call would trigger a deflationary spiral that would domino through the entire system unless the Fed stepped in and, once again, provided a giant backstop in the form of blank check support. Here’s how Tim Fernholz sums it up over at Daily Finance:
“…Many informed people are worried” (about) “A freeze in the tri-party repo market, akin to the cascade of troubles that followed the Lehman Brothers bankruptcy in 2008.”….
In 2008, more than a third of that collateral was mortgage-backed securities. When Lehman went bankrupt, its lenders began a “fire sale” of the securities it used as collateral, which drove down the value of other mortgage-backed securities, which led to more fire sales. This dynamic would eventually lead to a freeze in the repo markets, which, at the time, provided $2.6 trillion in funding to the banks each day…..
Today, most of the collateral in use is U.S. Treasuries and “agency securities” — mortgage-backed securities guaranteed by the U.S. government:
… if the ugly day of a default comes, lenders may simply stop accepting U.S. debt as collateral. That will have the effect of sucking some $600 billion in liquidity out of the banking system. Unable to get funding for Treasurys, securities dealers would be pressured to sell them-or other assets-to find new funding, creating a fire sale dynamic…..
And, of course, this scenario is only about how the Treasurys work in the repo markets. U.S. debt is used as collateral for derivatives swaps and numerous other transactions; if they are suddenly worth less than expected, lenders can be expected to demand more collateral up front, putting even more pressure on the financial system. That’s why pressure is building to raise the ceiling before the world’s largest economy enters a scenario with so much uncertainty.”
Repeat: “That’s why pressure is building to raise the ceiling before the world’s largest economy enters a scenario with so much uncertainty”.
So the Obama team isn’t worried that Joe Homeowner won’t be able to refi his mortgage or that the economy might slip back into recession. They just don’t want to see Wall Street take it in the shorts again. That’s what this is all about, the banks. Because the banks are still up-to-their-eyeballs in red ink. Because they still don’t have enough capital to stay solvent if the wind shifts. Because all the Dodd Frank reforms are pure, unalloyed bullsh** that haven’t fixed a bloody thing. Because the risks of another panic are as great as ever because the system is the same teetering, unregulated cesspit it was before. Because the banks are still financing their sketchy Ponzi operations with OPM (other people’s money), only now, the Fed’s over-bloated balance sheet is being used to prop up this broken, crooked system instead of the trillions of dollars that was extracted from credulous investors on subprime mortgages, liars loans and other, equally-fraudulent debt instruments.
Can you see that?
This is why the media is pushing so hard to end the debt ceiling standoff; to preserve this mountainous stinkpile of larceny, greed and corruption run by a criminal bank Mafia and their political lackeys on Capital Hill. That’s what this is all about.
And we’re still at risk of it happening all over againby Adam Taggart Saturday, March 30, 2013, 12:42 PM
Then, when the Fed’s fire hoses started spraying an elephant soup of liquidity injections in every direction and its balance sheet grew by $1.3 trillion in just thirteen weeks compared to $850 billion during its first ninety-four years, I became convinced that the Fed was flying by the seat of its pants, making it up as it went along. It was evident that its aim was to stop the hissy fit on Wall Street and that the thread of a Great Depression 2.0 was just a cover story for a panicked spree of money printing that exceeded any other episode in recorded human history.
David Stockman, The Great Deformation
David Stockman, former director of the OMB under President Reagan, former US Representative, and veteran financier is an insider’s insider. Few people understand the ways in which both Washington DC and Wall Street work and intersect better than he does.
In his upcoming book, The Great Deformation: The Corruption of Capitalism in America, Stockman lays out how we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few. And when trouble arises, these few are bailed out at the expense of the public good.
By manipulating the price of money through sustained and historically low interest rates, Greenspan and Bernanke created an era of asset mis-pricing that inevitably would need to correct. And when market forces attempted to do so in 2008, Paulson et al hoodwinked the world into believing the repercussions would be so calamitous for all that the institutions responsible for the bad actions that instigated the problem needed to be rescued — in full — at all costs.
Of course, history shows that our markets and economy would have been better off had the system been allowed to correct. Most of the “too big to fail” institutions would have survived or been broken into smaller, more resilient, entities. For those that would have failed, smaller, more responsible banks would have stepped up to replace them – as happens as part of the natural course of a free market system:
Essentially there was a cleansing run on the wholesale funding market in the canyons of Wall Street going on. It would have worked its will, just like JP Morgan allowed it to happen in 1907 when we did not have the Fed getting in the way. Because they stopped it in its tracks after the AIG bailout and then all the alphabet soup of different lines that the Fed threw out, and then the enactment of TARP, the last two investment banks standing were rescued, Goldman and Morgan [Stanley], and they should not have been. As a result of being rescued and having the cleansing liquidation of rotten balance sheets stopped, within a few weeks and certainly months they were back to the same old games, such that Goldman Sachs got $10 billion dollars for the fiscal year that started three months later after that check went out, which was October 2008. For the fiscal 2009 year, Goldman Sachs generated what I call a $29 billion surplus – $13 billion of net income after tax, and on top of that $16 billion of salaries and bonuses, 95% of it which was bonuses.
Therefore, the idea that they were on death’s door does not stack up. Even if they had been, it would not make any difference to the health of the financial system. These firms are supposed to come and go, and if people make really bad bets, if they have a trillion dollar balance sheet with six, seven, eight hundred billion dollars worth of hot-money short-term funding, then they ought to take their just reward, because it would create lessons, it would create discipline. So all the new firms that would have been formed out of the remnants of Goldman Sachs where everybody lost their stock values – which for most of these partners is tens of millions, hundreds of millions – when they formed a new firm, I doubt whether they would have gone back to the old game. What happened was the Fed stopped everything in its tracks, kept Goldman Sachs intact, the reckless Goldman Sachs and the reckless Morgan Stanley, everyone quickly recovered their stock value and the game continues. This is one of the evils that comes from this kind of deep intervention in the capital and money markets.
Stockman’s anger at the unnecessary and unfair capital transfer from taxpayer to TBTF bank is matched only by his concern that, even with those bailouts, the banking system is still unacceptably vulnerable to a repeat of the same crime:
The banks quickly worked out their solvency issues because the Fed basically took it out of the hides of Main Street savers and depositors throughout America. When the Fed panicked, it basically destroyed the free-market interest rate – you cannot have capitalism, you cannot have healthy financial markets without an interest rate, which is the price of money, the price of capital that can freely measure and reflect risk and true economic prospects.
Well, once you basically unplug the pricing mechanism of a capital market and make it entirely an administered rate by the Fed, you are going to cause all kinds of deformations as I call them, or mal-investments as some of the Austrians used to call them, that basically pollutes and corrupts the system. Look at the deposit rate right now, it is 50 basis points, maybe 40, for six months. As a result of that, probably $400-500 billion a year is being transferred as a fiscal maneuver by the Fed from savers to the banks. They are collecting the spread, they’ve then booked the profits, they’ve rebuilt their book net worth, and they paid back the TARP basically out of what was thieved from the savers of America.
Now they go down and pound the table and whine and pout like JP Morgan and the rest of them, you have to let us do stock buy backs, you have to let us pay out dividends so we can ramp our stock and collect our stock option winnings. It is outrageous that the authorities, after the so-called “near death experience” of 2008 and this massive fiscal safety net and monetary safety net was put out there, is allowing them to pay dividends and to go into the market and buy back their stock. They should be under house arrest in a sense that every dime they are making from this artificial yield group being delivered by the Fed out of the hides of savers should be put on their balance sheet to build up retained earnings, to build up a cushion. I do not care whether it is fifteen or twenty or twenty-five percent common equity and retained earnings-to-assets or not, that is what we should be doing if we are going to protect the system from another raid by these people the next time we get a meltdown, which can happen at any time.
You can see why I talk about corruption, why crony capitalism is so bad. I mean, the Basel capital standards, they are a joke. We are just allowing the banks to go back into the same old game they were playing before. Everybody said the banks in late 2007 were the greatest thing since sliced bread. The market cap of the ten largest banks in America, including from Bear Stearns all the way to Citibank and JP Morgan and Goldman and so forth, was $1.25 trillion. That was up thirty times from where the predecessors of those institutions had been. Only in 1987, when Greenspan took over and began the era of bubble finance – slowly at first then rapidly, eventually, to have the market cap grow thirty times – and then on the eve of the great meltdown see the $1.25 trillion to market cap disappear, vanish, vaporize in panic in September 2008. Only a few months later, $1 trillion of that market cap disappeared in to the abyss and panic, and Bear Stearns is going down, and all the rest.
This tells you the system is dramatically unstable. In a healthy financial system and a free capital market, if I can put it that way, you are not going to have stuff going from nowhere to @1.2 trillion and then back to a trillion practically at the drop of a hat. That is instability; that is a case of a medicated market that is essentially very dangerous and is one of the many adverse consequences and deformations that result from the central-bank dominated, corrupt monetary system that has slowly built up ever since Nixon closed the gold window, but really as I say in my book, going back to 1933 in April when Roosevelt took all the private gold. So we are in a big dead-end trap, and they are digging deeper every time you get a new maneuver.
Freedom was illegal in the Colonies in 1776 and Freedom is still illegal in America today. Those that signed the Declaration of Independence knew that a tyrannical government would never relinquish its power without resistance.
Governments are supposed to protect the rights of the people, but if they are not held in check, they will begin to abuse the people that they were created to protect. Rather than protecting the people, governments tend to protect the ruling class and enslave everyone else. This scheme will work as long as the people cling to the illusion that they are free.
Goethe, a well known German philosopher, once stated “None are more hopelessly enslaved than those who falsely believe they are free.”.
It has been the job of the media and government schools to indoctrinate the people into believing that they are free. Slaves are much more productive and easy to control than individuals that know that the financial elite are calling the shots.