Citigroup (C) and Bank of America (BAC) won’t live to see May. The government will take them over within the next 60 days. The announcement may come as soon as tomorrow evening.
All the biggest banks are the biggest bankrupts. The futility of trying to keep a bankrupt bank lending while the bankrupt bank has to borrow is pure insanity. We cannot do this. It is the definition of a ‘black hole.’ Money goes in and nothing comes out. On top of this, the futility of running a system in the red in order to run banks that are in the red, is becoming increasingly obvious.
There are only a very few creditor nations and the two biggest are in Asia: China and Japan. Neither nation wishes to lend our government trillions of dollars unless we do things their way. And since both are major trade rivals, Japan is the world’s #2 economy and China is the world’s #3 economy, the ultimate price we pay for the loans to bail out our bankrupt banks will be opening the door to Asian export powers here in America. Already, we are the major reason both nations are trade export giants.
Both want to restart the very lopsided trade with the US and both are using our need for their sovereign wealth lending to insure our trade with both remains extremely lopsided.
Fannie Mae Rescue Hindered as Asians Seek Guarantee
Asian investors won’t buy debt and mortgage-backedsecurities from Fannie Mae and Freddie Mac until they carry explicit U.S. guarantees, similar to those given on bonds issued by Bank of America Corp. orCitigroup Inc.
The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and shore up the nation’s largest mortgage-finance companies.
Even after President Barack Obama vowed on Feb. 18 to sink as much as $400 billion of capital into Fannie Mae and Freddie Mac, double the original commitment, “there is still a concern that there is no guarantee” from the government, said Shimomura, who oversees $4 billion in non-yen bonds for the arm of Japan’s largest bank.
The entire effort to drop home lending rates in the teeth of mass-defaulting on previous home loans will fail. True, the rates have dropped. But this cost our government nearly $2 trillion dollars. Our Treasury and the Federal Reserve had to suck down immense amounts of bad debts. We have to ask ourselves, ‘What the hell happened, anyway, in the first place?’
This question is not being asked by anyone in DC. The only question is, ‘How can we protect the high cost housing caused by the bubble so no one loses money with this bubble deflating?’ History has a very stern answer to that question: ‘No, you can’t reflate bubbles, they are bad and the losses must happen or you will never see prosperity again.’
There is only one way a bubble’s effects can be retained: by devaluing the currency until it loses over 50% of its value and then, the prices will match real wages again. Of course, this means raising wages very fast until people living in $500,000 shanties in California will be making $150,000 a year, working as stoop labor in fields or patching holes in highways, etc. In other words, the dollar has to be even more meaningless.
This is bad, all around. Preserving the currency leads to greater strength tomorrow. Devaluing and weakening a currency leads to a spiral downwards whereby the government collapses, the economy misallocates resources badly and we have social chaos. The US $ is the world’s fiat currency. The world tolerated us negotiating dollar devaluations in the past only because they were so very eager to keep exporting to us. They still will allow this but only if they own our Treasury and control the Federal Reserve.
Then, when the time is ripe, they will apply the brakes on our inflationary system. This is, after all, the Chinese 50 year plan! Hillary Clinton toured Asia this week and will come home with more plans to sell our future to China and Japan in exchange, we get to buy ridiculously overpriced homes with ridiculously underpriced mortgages.
BofA, CitiGroup say nationalization not neededAmid speculation about the nationalization of banks, executives of the two banks most cited for that fate are saying it isn’t necessary.
Bank of America Corp. and CitiGroup are struggling amid the financial meltdown that has crippled the country for over a year. Bank of America bought mortgage lender Countrywide and brokerage Merrill Lynch & Co. Inc. and has experienced indigestion with their bad debt. Citi itself ran into problems last year when its highly leveraged investments in home loan securitizations started collapsing.
Ken Lewis, chief executive of Bank of America, told his senior team that the bank is not being seized by the government, despite increasing calls for action by politicians and pundits in Washington, D.C., and articles in the international press.
Nationalization of troubled banks would allow for a “swift and orderly” restructuring, former Federal Reserve Chairman Alan Greenspan told the Financial Times of London in an interview this week.
Greenspan should be arrested. He created this stupid housing bubble. Now, he wants to nationalize the banks. How about nationalizing the biggest banks of them all: the Federal Reserve banks? Eh? Why isn’t the news about that? Well, both Ron Paul and Kucinich have been talking about this in Congress. To an empty House. The leadership of both parties utterly reject this because the leadership of both parties works for the same guys who are bankrupting the banks.
After this brief message from the far fringes of our political estate, back to the ruling elites: the NYT is the paper they cling to for transmitting messages to the masses. They constantly try to explain to us, how we are to do business and run our banking system. The NYT is all for cleaning up small messes but is extremely allergic to cleaning up the Big Messes. This is why neither Ron Paul nor Kucinich ever appear on those pages.
Krugman is OK since he is a little cleaner-upper who never mentions the Jewish Mafia, for example. Good puppy! He can pretend to be blindsided by obvious con men who run around in the same exact social circles in Manhattan as he. I used to run around in these same exact circles when I lived in the City, too. So I know that these things are not so mysterious to inquisitive minds.
Anyway, the NYT is trying to explain how lending works while not mentioning the Federal Reserve, the Rothschilds, Jekyll Island or anything. I read old NYT stories and trust me, the Victorian reporters were very intent on these sorts of things which is why the creators of the Federal Reserve had to go to great lengths to elude reporters. Unlike the Bilderbergers today who flaunt their secrecy while the publishers and owners of our media attend these super-secret enclaves! Grinding my teeth, of course, as I mention this.
Anyway, the Bilderberg conspirators want us to understand what went wrong and how to fix it [ie: give the Bilderberg gang all our future tax moneys]:
Now, let’s have the names of the ‘investors’ who will pay 8% while we taxpayers have to lend 92%? Well, if we wish to see these names, all we have to do is ask the NYT, whose owner always goes to these secret Bilderberg meetings, to cough up the list of names of co-conspirators! HAHAHA.
Note that WE ARE THE REAL BANKERS but the guys who get ALL THE PROFITS are the ones who ‘capitalize’ this stupid thing by putting down less than the traditional 10% of capitalization for funding lending.
Actually, looking at that graph above, it looks an awful lot like a story about germs. The little house shapes are bacteria and the round circles are the hosts. This illustrates not how lending works but how we pass diseases from one host to the next!
I notice that the NYT cartoon above has no mention as to who the ‘investor’ is. The ‘owner of the loans’ is in the previous story. Now, I could prove this easily by referring to ‘Bloomberg News’ so why can’t the NYT do this, too? HAHAHA. The owners of the Times would be savaged at the next Bilderberger tea party! Yup. Explaining things properly is Verboten.
This is certainly telling the truth. If these stupid loans to people who are paying way, way too much for housing, are not paid back, the infester investors take little to no losses while we all lose, big time. Do we control who gets these loans?
HAHAHA. Nope. The bankrupt bankers who bankrupted us by handing out loans to a bunch of dead beats will get to decide, who gets a loan! A loan, paid for by solvent people. Solvent people who refuse to give their hard-earned savings to banks because the stupid bankrupt bankers want our central bank which is the most odious of them all, to have super-low interest rates for savers! While creating oceans of inflation by debasing the currency via wild lending to a bunch of dead beats who can’t pay off their loans! Sheesh!
The US has become the Japanese carry trade due to our ZIRP banking system. The rich ‘investors’ will NOT be using CAPITAL to buy the 8% basis of these government-sponsored loans. No, they will BORROW this money from the Federal Reserve and then CARRY it to the Treasury and TRADE it for higher-interest bonds backing US housing loans! See how easy this is to figure out!!!!
This is our version of the Japanese carry trade only it is a vampire trade that has our own rulers sucking our blood.
Largely hidden from view is a vast financial system that serves as the banker to the banks. And, like many lenders, this system is in deep trouble. The question is how to fix it.
Most banks no longer hold the loans they make, content to collect interest until the debt comes due. Instead, the loans are bundled into securities that are sold to investors, a process known as securitization.
But the securitization markets broke down last summer after investors suffered steep losses on these investments. So banks and other finance companies can no longer shift loans off their books easily, throttling their ability to lend.
The result has been a drastic contraction of the amount of credit available throughout the economy. By one estimate, as much as $1.9 trillion of lending capacity — the rough equivalent of half of all the money borrowed by businesses and consumers in 2007, before the recession struck — has been sucked out of the system….
The market for new securities backed by mortgages and other types of loans has collapsed. Last year, investors bought $313.9 billion of these securities, down from $1.6 trillion in 2007 and $2.1 trillion in 2006, according to Dealogic…
Simon Johnson, an economics professor at the Massachusetts Institute of Technology and a former chief economist at the International Monetary Fund, said many people might take a dim view of the TALF program because it provided government subsidies to investors like hedge funds. Investors who borrow from the Fed could enjoy annual returns of 20 percent or more.
“The TALF,” he said, “raises a lot of questions.”
HAHAHA! The article ENDS with this IMF economist saying, the TALF is ‘raising a LOT of questions.’ OK: if I were interviewing this dude, would I end the story on that statement???
This is where a flood of questions would start, not end! I would demand to know what this guy’s questions about the TALF really are. Here, we have proof of my contention that the NYT will give us only so much information and then, like the Palestinians in Gaza, we suddenly find a huge wall with watch towers in the way and we can’t get past it or we get shot.
So we have to tunnel. Thank the gods for the web! We can find this information elsewhere.
Beijing said on Friday that one of its big state-owned banks, the China Development Bank, agreed to lend the Brazilian oil giant Petrobras $10 billion in exchange for sending China a long-term supply of oil.
That investment came after similar deals were signed this week with Russia and Venezuela, bringing China’s total oil investments this month to $41 billion.
China’s biggest aluminum producer also agreed earlier this month to invest $19.5 billion in Rio Tinto of Australia, one of the world’s biggest mining companies. And last Monday, the China Minmetals Corporation bid $1.7 billion to acquire OZ Minerals, a huge zinc mining company, also in Australia.
Flush with cash and eager to take advantage of weak commodity prices, China is once again on the hunt for global energy and resources to power its growing economy. But this time, China is being welcomed as an investor overseas.
President Hu Jintao of China was traveling this week on his “Friendship and Cooperation Tour” in Africa, where China has substantial interests in resources and mining. Vice President Xi Jinping was visiting South America, meeting with the leaders of Brazil and Venezuela and signing cooperation agreements on oil and minerals.
People who don’t understand the nature of wealth cannot see how the Chinese can be part of this collapsing economic mess and STILL be able to buy things! Well, they have this thing Karl Marx called ‘capital’. And they have ‘labor’ and land. And are firm believers in the Pyramid of Wealth, that cartoon I drew yesterday. Land, water, grain, animals and gold: combine this with labor and you have wealth. The wealth from trade profits is now being used to buy up all the systems the Chinese feel they need for the next stage of the great 50 year plan.
The end goal of this plan is for China to be the world’s #1 economy and political power with the US in hock to China. All the plans to bail out the stupid people who paid too much for their shanties or mini-mansions in exurbia are destructive for the US people. We have to cut to the chase: we cannot live beyond our means anymore. If we do, when the day of doom arrives and we discover the world’s banking power, China, is now demanding we kow tow to the Dragon Throne, it will be due to this bail out.
We have to resist bailing out from a housing bubble by having bystanders, namely, myself and others who didn’t play the hyper-real estate games, to bankroll maintaining ridiculous house prices. I have a belief that is very strong: any building today that has a price tag bigger than what I sold my mansion for in New Jersey which is one of the highest income states in America, that house is overpriced. Namely, a little suburban hick-hole should NOT be priced at above $300,000.
The mansion I sold was huge. It had huge grounds that were groomed. A 6 foot hedge that was 700′ long. It has 12 pillars so big, you could barely put your arms around them. It had stained glass windows, a brick carriage house that was two stories tall and had a slate roof as did the mansion which was three stories tall. I could go on and on about the details of this immense place that drove me nuts, it was too bid and required staff to run.
The point is simple: there is no way in hell that housing is ‘more valuable’ in 2005 compared to my mansion when I sold it in 1989. This is just impossible. A 2,000 sq ft house on a an eight of an acre in a cookie-cutter neighborhood in central California or non-oceanfront Florida is just not the equivalent of a 6,000 sq ft mansion on more than an acre of prime land near Manhattan! And these cheap, little, poorly-built houses were selling for well over $300,000, often for half a million dollars!
I can’t tell everyone how much that astonishes me. It was ridiculous back then and impossible to retain today. At the opposite end, the real mansions were going for $5 to $50 million which is also every bit as ridiculous. These white elephants will now be unsellable at any price. Just like after previous bubbles leading to depressions.
Only by turning these things into schools or other purposes, can they survive, barely. I was able to live in a mansion only by aggressively filling it with residents who paid me for living with me. So I didn’t lose money, maintaining it. On the other hand, the rich need to be rich to keep these huge things going, they are very serious money drains.
The NYT had stories the other day about people who want to sell their houses at inflated prices. They all wanted to live ‘smaller’ due to high taxes and overhead. But could find no one who wanted this immense financial burden. Well, duh! The only way to make these houses affordable again is for their prices to drop!
And I have lost money on houses! Once, I lost $100,000! That was a lot of loot, BACK THEN. Today, not so much loot. I didn’t weep and wail and demand the government bankrupt our future so my house could be sold for more! Back when I paid 9.45% for a mortgage, I didn’t demand the government subsidize my borrowing for house buying. This is how markets work: you make money sometimes, but sometimes you lose! That’s life.
The system everyone who is bankrupting us want, is one where they always win no matter what while manipulating the system to give them artificially cheap loans so they can SPECULATE while having no risks. How disgusting is that?
There has been less emphasis on what we, as individuals, should do. President Obama ducked the question at his news conference last week. But logic suggests that we should be gluing those credit cards back together. The government is actually going to pay us to buy a new house or car. Borrow and spend, borrow and spend is what got us into this mess. Apparently, borrow and spend will get us out of it.
It sounds too good to be true, but it is true. By now we all know about the “paradox of thrift”: If everyone stops spending because times are bad, times get even worse. An economist writing in the New York Times the other day addressed the wonderfully inverted problem of people who feel guilty about not spending enough. His advice: Don’t feel guilty about saving money, because it’s the government’s job, not yours, to make sure that we spend enough. But what if you don’t feel guilty about reckless borrowing and spending? What if you actually enjoy it? This has been a more common attitude in recent years. Is it still okay? Or does the medicine have to taste bad to be any good?
We ran up debts in good times. The ‘gooder’ the time, the more we ran up debts. When the debts became too great, we decided to ZIRP everything so we can continue to run up even bigger and bigger debts while being increasingly unable to pay the principal of this borrowing! And this will destroy our entire nation, utterly and totally, unless we stop.
Not borrowing in bad times makes them worse. But the ONLY thing that prevents this is for us to tax ourselves and NOT borrow a lot in good times. This means, no bubbles due to easy credit in a hot market. As markets heat up, interest rates are supposed to go up, not down. Greenspan knew this when he dropped rates below the rate of inflation and kept it there as lending raced ahead due to the Japanese carry trade.
Now, we have the US carry trade. This is very bad in the long run. Look at Japan! Not exactly a good role model. And we are ass-backwards. The Japanese carry trade supported Japanese industrial exports. Ours supports hyper-high housing prices and imports. This is suicidal.
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