Or....

Shadow Bankers Gone Wild

Preamble

Recently the New York Times published yet another article expressing surprise at the previous existence of securitized financial instruments prior to the last several decades. Securitized financial instruments, or actually securitization, has been around for at least several centuries, and whenever it becomes widely used a Great Depression, or economic meltdown, ensues.

This is the foundation for that bandied about term, “shadow banking.” Without securitization, there would be no such capability. With securitization, the process for creating debt-financed billionaires and multi-millionaires reaches critical mass.

Unfortunately, so to does the dramatic increase in unemployment and poverty.

Those so-called “experts” or “pundits” who continue misleading the populace with extravagant claims as to the recent origins of the securitization process have done a major disservice to society. This brief blog will attempt to rectify this situation.

Bank of America Looks Like  First of Many

Michael Collins

"This merger (Bank of America and Merrill Lynch) is a classic example of how the actions of our nation’s largest financial institutions led to the near-collapse of our financial system," said Attorney General Cuomo. "Bank of America, through its top management, eng

A strategist at the Deutsche Bank had something interesting to say last week regarding the economic crisis in southern Europe.

“The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,” Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today.

It seems impossible that what is going on in Greece has anything to do with America. After all, Greece has defaulted on its debts so often over the last two centuries that you could almost set your watch to it. It was always contained in the past because Greece's economy is so small, so why would this time be different this time?

And yet, it isn't contained this time. It is spreading and no one knows how far it might go.

In our current interconnected global economy nothing happens in a vacuum.

Fears mount over European debt: Markets worry that financial crises in Portugal, Greece could spread across euro zone and spill across borders

 Spooked investors worldwide were fleeing risky assets like stocks. And from Shanghai to Sao Paulo, people were awakening to the reality that what is happening in these European minnow states has vast implications for the fate of the fragile global economic recovery.

The much awaited January unemployment report is released and from the headlines, one would think this is great. It's not.

The reason is the U.S. lost another 20,000 jobs. The employment-population ratio rose from 58.2 to 58.4 percent. This means while the ratio of the employed to unemployed improved, it is in part because there are more people added to the general population who are not being counted in the potential workforce or inversely, a decrease in the overall civilian workforce, which causes the ratio to increase.

Below are the total non-farm payrolls. The first is the raw numbers and the second is in percent change from the previous months report. In nonfarm payrolls one can see the real job losses that are still occurring this recession.

I know we all believe the housing bubble has already popped and all things real estate are over. One might think this post should be from 2006 from the title. But it's not, this post is from 2010 and below are the reasons for the question.

First is the latest SIGTARP report saying the Government has become the mortgage market with U.S. taxpayers shouldering the risk. From the SIGTARP report we have a 100% government mortgage market at this point.

^{Click on image to enlarge}

The president had some bold words for the American public earlier this week. He said things that some people didn't want to hear. He talked about responsibility and sacrifices.

"We simply cannot continue to spend as if deficits don't have consequences, as if waste doesn't matter, as if the hard-earned tax dollars of the American people can be treated like Monopoly money, as if we can ignore this challenge for another generation.
". . . It's time to save what we can, spend what we must and live within our means once again."
- President Obama, 2010

After saying these bold words he then presented Congress with a plan for the largest deficit in American history. I guess politicians are immune from irony.

First of all, let's break down the budget itself.

Want to see some damning statistics? Read this paragraph, taken from The Plight of American Manufacturing.

See what bad trade deals and global labor arbitrage bring us?

The January 2010 SIGTARP report is released and if anything it's a validation of this sites many observations to date on TARP.

Despite the fact that the explicit goal of the Capital Purchase Program (“CPP”) was to increase financing to U.S. businesses and consumers, lending continues to decrease, month after month, and the TARP program designed specifically to address small-business lending — announced in March 2009 — has still not been implemented by Treasury.

Notwithstanding the fact that preserving home ownership and promoting jobs were explicit purposes of the Emergency Economic Stabilization Act of 2008 (“EESA”), the statute that created TARP, nearly 16 months later, home foreclosures remain at record levels, the TARP foreclosure prevention program has only permanently modified a small fraction of eligible mortgages, and unemployment is the highest it has been in a generation.

On January 29, 1911, a small band of 18 revolutionaries marched into Mexicali and seized the town, practically without firing a shot. Thus began one of the most unusual and controversial episodes in Mexican history.
These revolutionaries were not the typical warlords that Mexico was used to seeing. These revolutionaries had American volunteers, but not the sort of filibusters that Baja California was already very familiar with. In fact, this revolutionary movement had little in common with anything Mexico had experienced before or since.

These revolutionaries weren't interested in just overthrowing the corrupt and repressive government, they wanted to overthrow society as well.

This is the advanced Q4 GDP and it's a blow out. GDP increased 5.7% in Q4 2009.

Party on Garth! This is an advanced report, so there might be significant revisions. Recall Q3 2009 GDP originally came in at 3.5% and was revised down to 2.2%.

The acceleration in real GDP in the fourth quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and an upturn in nonresidential fixed investment that were partly offset by decelerations in federal government spending and in PCE.

Just a little bit, investment is a blow out at 39.3% increase!

One must wonder how much of the business investment credit from the Stimulus, which was a 50% bonus depreciation, and allows a 50% write off on business investments in the first year, is the reason for this private inventory investment acceleration.

Obama put forth some elements of a second jobs bill. With that, I strongly suggest all those who were disappointed, disgusted with the first Stimulus, start right now pushing for legislation we need.

Here are the main elements, laid out in the State of the Union Speech.

• Take $30 billion of the [TARP] money Wall Street banks have repaid and use it to help community banks give small businesses the credit [Subsidized Small Business Loans].
• Small Business tax credit - one that will go to over one million small businesses who hire new workers or raise wages
• Eliminate all capital gains taxes on small business investment
• Tax incentive for all businesses, large and small, to invest in new plants and equipment

The House Committee on Oversight and Government Reform is holding a hearing today, The Federal Bail Out of AIG.

All prepared statements are at the above link. The hearing has testimony from:

• Treasury Secretary Timothy Geithner
• Former Treasury Secretary Mr. Henry Paulson
• SIGTARP Inspector General Mr. Neil Barofsky
• Executive VP and NY Fed General Council Mr. Thomas Baxter
• Senior VP and AIG CFO Mr. Elias Habayeb
• Former NY Fed Chairman of Board of Governers Mr. Stephen Friedman

I'm still swimming through mountains of documents and tons of verbiage, but I will sum up what I do not know so far.

Firstly, it seems that when it comes to figuring out who precisely gave the go ahead for the 100% AIG counterparty payouts, magically top officials were not involved.

The Plunder, Pillage and Destruction of the American Tax Base

We don’t pay taxes; only the little people pay taxes. – Leona Helmsley

PREAMBLE:
This brief blog is an attempt at a synthesis of the excellent and exemplary research of superior individuals who have sought out the ways and manner of tax evasion and tax avoidance.

When such avoidance and evasion becomes institutionalized, the impact on any society can be quite severe. Seldom do people understand the connection between massive and institutionalized tax loss and deficit (debt) spending and the existence of debt-financed billionaires (that is, debt-financed wealth).

These activities are extremely antithetical to all forms of progress, as I endeavor to illustrate here.

My, my, my. Today we have a preview of President Obama's State of the Union address. What is most offensive is the claim this administration is trying to help the middle class.

We are being bombarded with these misleading headlines:

Right. So, guess what policy initiatives are in the speech? Tax cuts.

A doubling of the child care tax credit for families earning under $85,000; a $1.6 billion increase in federal funding for child care programs and a program to cap student loan payments at 10 percent of income above "a basic living allowance."