One of the top Freddie Mac executives executed himself. These economic games can be deadly. Instead of facing reality, taking on the pain of loss, some people prefer death which is understandable: if they don’t appreciate life, the alternative isn’t so dark. The entire system is run by people who focus on creating wealth but refuse to pay the price of this wonderful wealth when the Goddesses suddenly decide, it is time to balance the books, zero out the bottom line and restore order. The entire US financial system is out of order and we see officials and bankers struggle to KEEP IT OUT OF ORDER. Not, be honest and restore sanity.
David Kellermann, 41, was a longtime Freddie Mac executive who joined the firm as an analyst in 1992. Police were called to his stately red brick home in the upscale Hunter Mill Estates subdivision shortly before 5 a.m., police spokesman Eddy Azcarate said. The call was made by someone inside the home, which is on a tree-studded corner lot in the 1700 block of Raleigh Hill Road….
Kellermann previously served as senior vice president, corporate controller and principal accounting officer for Freddie Mac, the profile said.
Freddie Mac’s government-appointed chief executive, David Moffett, quit last month after squabbling with the regulator about its tight grip on company affairs. His temporary replacement is John A. Koskinen, who had been serving as Freddie Mac’s chairman. No permanent successor has been named.
Freddie Mac is essentially dead, too. So is Fannie Mae. The losses from rising bankruptcies in the wake of our biggest credit bubble, ever, are climbing. The most expensive housing markets are also the ones going down, in vacation places, retirement communities, California, etc. When shanties and slum houses were overvalued and allowed to be the repository of credit dumps, they were priced at the same price my mansion in New Jersey was at, 20 years ago.
Now, these over-valued cheap houses are returning to their normal, very low values. But banks that handed out money like candy on Halloween, passed these bad deals to Fannie Mae and Freddie Mac who are now stuck with a lot of foreclosed housing that is grossly overpriced on any scale. THERE IS NO FIX FOR THIS. Sometimes, we must ‘bite the bullet’ and suffer the consequences. We can’t wave our arms in the air and run away.
Mr. Kellerman thought, if he killed himself, he could run away. All he did was move even deeper into the Cave of Wealth and Death. Goldman Sachs took over the leadership of AIG in order to save themselves. But they and the others involved in creating the global financial collapse have nothing to win if they take over the problems inside Freddie Mac and Fannie Mae. So there is no one willing to be the executor of these two dead financial entities.
Since many of our foreign creditors also own a lot of bonds backed by these two organizations, the need for future credit from these same Sovereign Wealth powers is very great. So we will see our government scramble to find some trick, some system whereby they can still support these things even though they are no longer solvent. The present method is to move all losses onto the Federal Government’s bottom line.
Zimbabwe’s central bank raided the private accounts of companies and aid donors for hard currency to finance the government during the economic crisis, according to a central bank statement made available on Monday. The central bank’s governor, Gideon Gono, left, said the bank took foreign currency from private accounts to help make some $2 billion in loans to state-owned companies for power and grain imports. He said the government still had to repay about $1.2 billion to the central bank, which would allow it to repay money it owes private accounts.
Very, very little news about the Weimar nightmare of Zimbabwe makes US news. There has been remarkable little interest in the lessons we can learn from that nation’s hyperinflationary collapse. As I keep warning people, governments resort to open highway robbery when in serious trouble. Not to mention, as we see in Zimbabwe, goon squads turning violent or troops running through the city, smashing windows and looting.
Ever since the government declared war on the white farmers, the production of grains has collapsed and now, must be imported. This, in a country that made a lot of it money, exporting food. Despotic rule usually is very bad for farmers and most despotic countries quickly run out of food. One thing is certain: free farmers who are protected, not looted, by the state, are extremely productive.
Another word of warning: gold is useless in these sorts of collapses. This is because, food literally vanishes and farmers don’t want gold. They want markets and protection. If they collect gold, they simply are even bigger targets for thieves. This is why gold ceases to circulate in places where there is a collapse back into barbarism. We saw this when Rome fell, for example. Most gold was used to lay in the graves of the barbarians who wanted it so they could live forever, off of the gold, in the Afterlife.
Treasury Secretary Timothy Geithner said banks found to need additional capital at the conclusion of regulators’ stress tests will have a range of options for shoring up their balance sheets….In a prepared statement for the hearing in Washington, Geithner said “the vast majority of banks have more capital than they need to be considered well capitalized by their regulators.”
This all depends on what you call ‘capital’. Banks consider debts to be capital. It used to be, banks had to have NON DEBT as capital, i.e: savings. But paying savers for the use of their capital cuts into PROFITS. Profits used to be the fees and differentials between lending to borrowers versus the interest rate paid to the bond holders [certificate of deposit] and savers.
Thanks to the Fed dropping its own interest rates to zero, savers get nothing at all, if they put their money in a bank. Might as well…buy gold or hide it under a mattress. Holders of perpetuity bonds, on the other hand, are making out like bandits. This is why banks are ‘capitalized’ again.
His comments stoked a rally in stocks, with JPMorgan Chase & Co. and Wells Fargo & Co. rallying more than 7 percent, helping spur the Standard & Poor’s 500 Financials Index to climb 5.7 percent as of 3:49 p.m. in New York.
Hooray! Bravo! The expectation is, the bankers will continue to suck out wealth from the community and replace it with perpetual debts we can’t escape.
Geithner also said there were signs of “thawing” in credit markets and some indication that confidence was beginning to return.
Hooray! We will get more free funny money that will cost us an arm and a leg to pay off, if we can ever do this which is increasingly unlikely.
Even amid some improvement, bank reports show “significant declines” in commercial and industrial lending and consumer loans such as credit cards, Geithner said. Also, credit costs remain high, even if they recently have declined somewhat, he said.
DUH! Credit card companies need profits. So do other lenders. So they want as huge a spread between their costs of borrowing versus how much they can squeeze out of others, who they lend to. And since they only need to borrow 10% or even just 1% or less, to lend out again, they want a world where they can borrow from someone at 1% interest and then turn around and make it 90% more when lending to another party, at 4 times the interest rates. This is very profitable. And utterly insane.
Geithner, in a letter released today to the oversight panel’s chairwoman, Harvard Law Professor Elizabeth Warren, reiterated that the government has sufficient funds remaining in the $700 billion Troubled Asset Relief Program to aid U.S. banks. The oversight group was set up under the October rescue law to monitor the Treasury’s effort and has three members appointed by Democrats and two by Republicans…
The numbers flowing out of this mess are very hard to figure out. Even people watching this very closely are getting confused. Which is what Goldman Sachs wants.
Still, the Treasury secretary warned the panel that lawmakers’ efforts to revise the terms of the bailout and place additional restrictions on companies is hampering the program.
“If we’re going to get out of this crisis at less cost” and “risk to the taxpayer, we need the markets to be taking risk again,” Geithner said. “For them to be willing to take risk alongside the government, they need to have some confidence in the rules of the game, going forward.”
The biggest bankers hate rules. They spend billions of dollars, bribing others to eliminate rules or if rules are needed, they persuade everyone, the gnomes will police themselves when they raid the Cave of Wealth and Death! Geithner really pisses me off, when he lectures us about how we have to be ‘alongside’ these horrible creatures as they rig the rules of the game so they always, always win.
As for ‘less cost’: this is why we have prisons. It is cheaper to put these frauds and schemers in prison than to try to fix a wrecked system so they can resume screwing us. Why on earth do we have to borrow from THEM???? After all, Geithner and Paulson both made it perfectly clear, the real source of capital for these criminals is the Federal Government debt machine. Which they put into overdrive.
So we are taking on epic debts in order to bail out a bunch of crooks! I don’t want to waste our future tax revenues on this rescue operation at all. Let these guys go bankrupt. Then, close the Federal Reserve and return things to where they were before WWI. And this includes restarting the gold standard.
JUPITER, Fla.–(Business Wire)– Several of the nation`s largest banks, including JPMorgan Chase, Goldman Sachs, Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, plus more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts, according to Martin D. Weiss, Ph.D., president of Weiss Research, Inc., an independent research firm.
This is why bail outs are bad. When the FDIC was launched, it was to reassure savers, they would not lose their capital. But insuring the FAUX capital of the banks is a whole different kettle of rotting fishes! If our government insists on being the capital for all lending, then get rid of the fiction of private banks and make this all one, big bank. The analysis is based on Fourth Quarter 2008 data from TheStreet.Com and the Comptroller of the Currency (OCC). Several large institutions received significant ratings downgrades from the prior quarter, including Citibank, downgraded from C- to D; Wells Fargo, downgraded from C- to D+; and SunTrust Bank, downgraded from C- to D+….
Well! This is the end, isn’t it? Many of these banks are the biggest holders of the Derivative Beast’s toys. They thought they were oh-so-clever when they grew the Beast from a mere billion to over $60 trillion in less than 15 years. Arrest them all.
“Equally alarming,” writes Dr. Weiss, “is the fourth quarter OCC data demonstrating that record bank losses are spreading to interest-rate derivatives. Until now, bank derivatives losses have been limited almost exclusively to credit defaults swaps (CDS), which represent only 7.8 percent of the notional value U.S. derivatives held by all U.S. banks.
The vast majority of the size of the Beast is in the interest rate game room. This is over 80% of the derivatives business. This is INSANE. And the OCC tracked this for years and I published their reports and commented on how insane it was and NO ONE DID A BLASTED THING ABOUT THIS.
Instead, the bankers used this tool more and more. This is due to the lack of a gold standard that is steady against a strong currency.
In the fourth quarter, although the CDS losses continued at a near-record pace, we also witnessed record losses in the interest-rate sector, which represents 82 percent of the derivatives market: The nation`s banks lost $3.4 billion in interest-rate derivatives, or more than seven times their worst previous quarterly loss in this category.”
Time to review the latest OCC report. This is run by the Treasury. Remember, up until 1914 when a gang of banking gnomes secretly met at Jekyll Island to create a fake federal bank so they and a consortium of alien bankers could take over the US finances, the Treasury was the treasury, not a funnel for funny money pouring in and out of foreign and private hands.
The irony here is, the OCC was founding by President Lincoln during the Civil War to track paper money so it wouldn’t over-inflate! Eh? Wow. And it still tracks things and of course, the Fed Reserve, being a treasonous organization set in power so we can be quietly looted by aliens and domestic creeps, doesn’t track the stuff the helpless OCC tracks.
The OCC has been alarmed by the Derivatives Beast for several years now. But simply had to stand aside while the conspirators doing this crime worked hard to keep it unregulated by the OCC. Well, time to change that! Eh? Kill off the Fed and restore real power to the OCC which was supposed to supervise paper money! Got that?
Typical hockey stick graph. Hockey stick graphs have one purpose only: to warn us of an impending crash. When we see something head upwards like this, it is a warning that a system is out of control and is now a balloon, a bubble, heading to infinity which is impossible. Or rather, death.
INTEREST RATE DERIVATIVES are by far, far away, the worst. And it is the most tied in to the Federal Reserve which MANIPULATES interest rates! See how it works? Some of the biggest players in the interest rate derivatives happen to be….OWNERS OF THE FEDERAL RESERVE!!! Interesting, isn’t this? Sounds criminal.
Note also, these grew…immensely, in the last quarter! The same time the biggest players all ran off to Uncle Sam for protection! It is now almost $180 TRILLION!!! The bars went literally off the charts here!
Look at Goldman Sachs! More about their miraculous and magical profits the following quarter after their huge and very, very sudden, one quarter- exposure!
Sooooo….the biggest 5 holders of these derivatives and who hold 90% of these derivatives, took immense, record losses….and are now suddenly profitable? I have a dead donkey they can buy.
HSBC is dead. There is no way around this. They are dead, dead, dead. They are skeletal. Their knuckles are now dice for Lady Luck to throw as She runs her immense casino of chances. Citibank is only 100% dead, not 200% dead like HSBC…no, make that 500% dead. HSBC is still in business. Gads.
JP pirates are holding ‘only’ $87 trillion in exposure, it used to be nearly $90 trillion. Goldman Sachs as $30 trillion in credit interest rate deals to unwind…HAHAHA. And they are ‘profitable’? Arrest everyone who scammed this game. All of them.
Although the core financial intermediation business that is the cornerstone of trading activities in U.S. commercial banks was reasonably strong in the fourth quarter, the quarter was particularly difficult for number of reasons, and banks reported a sizable trading loss of $9.2 billion. Market liquidity suffered in the fourth quarter of 2008 and general economic conditions worsened, resulting in escalated write-downs in legacy credit positions, including CDOs, leveraged loans and mortgage-related exposures. These write-downs flowed through trading revenues and dwarfed the underlying strength in trade profitability from wide bid-ask spreads.
What the OCC is saying is, the profits reported by the banking gnomes were DWARFED [hahaha] by losses. Dwarves, you know, are the working class in the Cave of Wealth and Death. They fight the Dragon who sits on the hoard created by the dwarves. Trading results in the fourth quarter also suffered due to an unfavorable combination of rising overall corporate credit spreads and declining credit spreads for the bank dealers themselves. Rising counterparty credit spreads increase the risk of derivatives receivables. Banks account for this increased risk by lowering the fair value of those receivables. Banks report the rising credit costs associated with a write-down of receivables values as trading losses.
OK: the OCC is talking about what has been in the news all this week. Namely, the games played by the biggest derivative beast owners are this perverse system whereby they can display losses as profits. This is PURE CAVE OF WEALTH AND DEATH MAGIC.
Finances is magical. This is because they use the number ‘zero’ and other tools created by religious fanatics 2.000 years ago, in India, when the Buddhist religion was born and was seeking a new path to Nirvana that didn’t involve being born over and over again.
The magical aspects of money are on many levels. This is a classic example.
While these higher credit costs are a part of operating a derivatives business, they can (and in the fourth quarter did) mask otherwise profitable trading operations.
Got that? Good! The losses covered up very profitable business. Which we see today. The banksters all went screaming to Uncle Sam for protection, got it, unwound their AIG trades and then are now back to whining about government controls.
Typically, when credit spreads increase, much of the negative impact on bank trading results from write-downs of receivables can be offset by write- downs of derivatives payables.
We see the value of these ‘write-downs’ in today’s news, don’t we? Derivatives caused write-downs and derivatives cancel out these write-downs. The growth of all this is proof that the system was thrown badly out of whack by 2002. Instead of fixing it, everyone profited, yes, PROFITED from this disturbance by making the Derivatives Beast grow from several trillion to a rapid $180 trillion.
However, in the fourth quarter, government support for the banking industry resulted in lower bank credit spreads. As a result, the fair value of bank derivatives payables increased, and therefore banks reported additional trading losses.
Isn’t this ironic???? The rescue which had to be done to deal with AIG caused losses! Because their spreads triggered trades. Foreign exchange trading revenues rose 32% to a record $4,093 million. Foreign exchange contracts continue to provide the most consistent source of trading revenues. Credit trading continues to drive trading losses, as banks lost $9.0 billion in the fourth quarter, compared to $2.5 billion in third quarter gains. Banks had record losses trading both interest rate and equity contracts, losing $3,420 million and $1,229 million respectively. Revenues from commodity trading activities fell 1% to $338 million. The difficult trading environment in 2008 led to the first annual trading loss for the banking industry, as banks lost $836 million for 2008, compared to revenues of $5,489 million in 2007. While banks continue to suffer major losses in credit trading, the 2008 loss actually fell 1% to $12.6 billion. Foreign exchange revenues increased 63% to $11.4 billion, while commodity revenues advanced 424% to $1.5 billion.
In other words, the sudden surge in gold, oil and grain prices was due entirely and totally to these guys. They were major players in last summer’s sudden surge upwards in gold prices as well as the $140 a barrel oil prices.
The major change 2008 trading performance was poor performance in interest rate and equity contracts. Interest rate trading revenues fell 89%, or $7.0 billion, to $866 million. Banks incurred $2.0 billion in losses from equity contracts 2008, a change of $5.0 billion from 2007.
In other words, the interest rate trade collapsed. This is not finished, not at all. What are we going to do about this? It is a pressing question. One of my readers here says, he has been talking to his representative about all this.
Evidently, the Representative claims to know nothing. This baffles me. It is not hard to snoop into all this. Just talk to the OCC! Why isn’t the OCC in the news, every week? Again, no one wants to hear from any real Cassandras. And if there is a Cassandra who is the Fat Lady Singing, it is the Office of the Controller of the Currency!!!!
And what did we lose control of? The currency!!!! Since 1914. Bring the OCC back into power! Now! Here are two articles talking about all this:
So the banks have returned to profitability have they? That was the theme on the market last week. And if it were true, a recovery in bank balance sheets is just the sort of thing that might precede a recovery in the economy. But it probably isn’t true. Here’s why…
The big three banks reporting last week-Citibank, Goldman Sachs, and JP Morgan-all reported huge revenues from their trading desks. As we reported last week, Goldman’s $6.6 billion in trading revenues was not only 70% of total revenues, but it was also a ten billion dollar improvement on a $4 billion loss in the fourth quarter.
JP Morgan reported nearly $5 billion in revenues from fixed income securities trading. And Citigroup reported $4.69 billion in fixed income trading. In fact, all of Citigroup’s other major operating segments reported declining revenues for the quarter. Its global credit card revenues fell by 10%. Consumer banking revenues were down 18%. And Citi’s Global Wealth Management revenues were down 20%.
But something magic happened in the fixed income trading group for Citi. This is pure gold if you like arcane financial statements packed with fictional earnings. If you dig into the quarterly report, you’ll learn than fixed income trading revenues were boosted by a “net $2.5 billion positive CVA on derivative positions, excluding monoclines, mainly due to the widening of Citi’s CDS spread.
That takes some sorting out. A CVA is a “credit value adjustment.” As you can learn here, it’s the credit risk premium of a derivative contract. Once you sort it out, you learn that Citi “made” $2.5 billion on a derivatives position designed to profit when the companies own credit default swaps spreads widen.
Or, in plain English, Citi profited because it made a bet that the cost of insuring itself against a default would go up. The credit default swap market is the place where you can bet on the credit worthiness of a firm, or, essentially, the chance that a firm might default on its bonds. Citi appears to have reported a $2.5 billion trading gain in the fourth quarter precisely because the market thought the company stood a good chance of failing (hence the widening CDS spread).
This is starting to feel like amateur hour for aspiring magicians.
HAHAHA. It IS magical! And they are wretched magicians!
Another day, another attempt by a Wall Street bank to pull a bunny out of the hat, showing off an earnings report that it hopes will elicit oohs and aahs from the market. Goldman Sachs, JPMorgan Chase,Citigroup and, on Monday, Bank of America all tried to wow their audiences with what appeared to be — presto! — better-than-expected numbers.
But in each case, investors spotted the attempts at sleight of hand, and didn’t buy it for a second.
Magic tricks work until suspicious people go backstage and look at the OCC information.
With Goldman Sachs, the disappearing month of December didn’t quite disappear (it changed its reporting calendar, effectively erasing the impact of a $1.5 billion loss that month); JPMorgan Chase reported a dazzling profit partly because the price of its bonds dropped (theoretically, they could retire them and buy them back at a cheaper price; that’s sort of like saying you’re richer because the value of your home has dropped); Citigroup pulled the same trick….
This explains the sudden red line in the OCC data. % of total credit exposure for Goldman Sachs went from zero to 1,000% in ONE QUARTER which happens to include…December!
What’s particularly puzzling is why the banks don’t just try to make some money the old-fashioned way. Want to kill the gnomes with heart attacks? After all, earning it, if you could call it that, has never been easier with a business model sponsored by the federal government. That’s the one in which Uncle Sam and we taxpayers are offering the banks dirt-cheap money, which they can turn around and lend at much higher rates.
Doesn’t buy expensive yachts, private jets, expensive Russian fashion models or great works of art.
“If the federal government let me borrow money at zero percent interest, and then lend it out at 4 to 12 percent interest, even I could make a profit,” said Professor Finkelstein of the Tuck School. “And if a college professor can make money in banking in 2009, what should we expect from the highly paid C.E.O.’s that populate corner offices?”…
“I can’t think of a single, positive thing to say about the stress test concept — the process by which it will be carried out, or outcome it will produce, no matter what the outcome is,” Thomas K. Brown, an analyst at Bankstocks.com, wrote. “Nothing good can come of this and, under certain, non-far-fetched scenarios, it might end up making the banking system’s problems worse.”
The stress test is stressing out everyone because it is still secret. We fear it will be watered down, faked and goofed around with so reality doesn’t show up. But all we have to do is look at the DAMN OCC REPORTS ON DERIVATIVES!!!! And if the OCC ran our currency, would it be in this mess? I doubt it.
Charles Gibson, a gold expert at Edison Investment Research, argues in a new report that negative real interest rates (below inflation) in the US and beyond has upset the “leasing” machinery in the gold industry and led to a sustained market squeeze.
That was the plan, of course! Duh! This is what occurred in the late 1970s, driving gold prices to $850 and ounce – roughly $1,560 in today’s terms. Gold finished last week at $870…. In normal times, gold mining companies sell – or “hedge” – a chunk of their output in advance through bullion banks. These banks cover their positions by leasing gold from central banks. This bread-and-butter trade created excess supply of 500 tonnes each year until the start of this decade.
The drop in gold prices while there is a gold shortage upsets real gold traders and is making gold holders very disgruntled. It seems to make no sense and frankly, makes no sense. Low real interest rates have caused the process to reverse, creating a shortfall of about 500 tonnes. The process accelerates as rates turn negative, leading to a scramble by market players to find physical gold.
In normal times, what happens next? The price rises.
There are already reports that gold bars are becoming scarce, partly due to fears that futures contracts and other forms of paper gold may not prove reliable if there is a serious break-down in the global financial system.
All paper products are now suspect because all markets are being forced into true balance. None of the main players want this at all. They want a magical, unbalanced market that pours wealth into everyone’s pockets.
England is now in Japanese ZIRPland. They can’t escape. It is a dark closet. Inside are monsters that rip out your guts. Funny, England’s red ink is one tenth our own red ink. And the English are scared. So, what are we? Is this the bottom of the Great Depression II? Or just the beginning?
One rule of thumb: NOTHING is changing where it needs to change. The Federal Reserve must be killed off. The Treasury must resume its Constitutional role. The OCC must have greater power, not no power. And we need tariffs to pay for our red ink and kill off our immense trade deficits. Until all this is done, we are trying to bail out the Titanic while it sinks.
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