FED BANK BAILOUT: $29 TRILLION AND RISING

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EDITOR’S COMMENT: This is truly worthy of Jonathan Swift’s Gulliver’s Travels. (I recommend reading or re-reading it). If someone wrote this book a few years ago, critics would have said it strains credibility. The Federal Reserve, also known as the Fourth Branch of Government but completely immune from control or balance from the other three branches (and possibly unconstitutional as a result) has extended overnight loans that once upon a time might be rolled over once or  twice for a total of three days, to THREE YEARS. The total of all money given to the banks, $22 trillion, is about the same as all the money that was invested in mortgage backed bonds. ALL OF IT!

Of course it goes without saying that 99% of the 7,000 banks and credit unions in this country never get to touch or hear about this money. And the presence of massive amounts of non-interest loans to a few large banks means they can out-compete anyone on the price of a loan. A Handful of mega banks have turned the world of finance into their own personal playgrounds. The country is held hostage by their avarice and their arrogance. The government is owned by them so there is no place to redress grievances, except hopefully the Court system which moves ever so slowly the way it was intended to act.

The amount of the mega bank bailout keeps rising because the mega banks are not paying back the “loans” — at least not within the time that customarily applied — hours, or days, and rarely weeks. The money keeps going out to the banks to create the illusion that the mega banks are solvent. They are not solvent and never were since they started this farce called “securitization of debt” and applied it with reckless abandon to the effect of the destruction of our financial system and the collapse of other financial systems around the world. The crazy thing is everyone knows they are not solvent and those in power insist on buying into the notion that if 4-5 mega banks fail, the world will come to an end.

So let’s start with why they are not solvent. The principal reason is that they are holding entries on their balance sheet reflecting nonexistent or overvalued assets. They didn’t fund those mortgages and they were never at risk. They sold the mortgage bonds and THEN went looking for borrowers. The more money they had, the more pressure they put on the downstream originators of loans.

What would happen if the truth was treated as reality instead of the myth that everyone seems to insist upon placing their hopes and dreams? The resolution of these massive incoherent marketing machines would result in many investors getting far more money back than they could ever imagine. Confidence in the financial system would rise to levels not seen since 10 years ago or more.

And the creditors having received their money, the balance due from the “borrowers” whose signature was just a ploy to get money from investors and the government would be correspondingly reduced by PAYMENT. It is simple arithmetic. The balance due if any, would be easily susceptible to modification of the original invalid mortgage papers, thereby restoring the enforceable mortgages that were originally intended at values and pricing that are beneficial to both investors and borrowers.(You need to get rid of the servicers for this to happen, of course).

This would reverse household wealth depletion. Last quarter alone it was $2.4 trillion in the U.S. alone.

see http://www.housingwire.com/2011/12/08/mortgage-debt-and-household-wealth-decline-in-3q-fed

As household wealth and home equity starts to rise by eliminating foreclosures by intermediaries who have no interest in the mortgages, the confidence of consumers rises, tax revenues rise as more sales occur in the consumer sector, more jobs are created, and it becomes possible for an economic recovery to commence, whereas at the present time there is no such possibility.

We need only abandon illusion for reality. The hard truth is that this is really about power. If those who have the levers of power near to them wanted to change this, they would. But when you have tapped into the “mother lode” and you have received twice the amount of the Country’s GDP just for you and a couple of your friends, I guess it is hard to give that up.

SEE FULL ARTICLE FROM RITHOLZ.COM BLOG

There is a fascinating new study coming out of the Levy Economics Institute of Bard College.  Its titled “$29,000,000,000,000: A Detailed Look at the Fed’s Bail-out by Funding Facility and Recipient” by James Felkerson. The study looks at the lending, guarantees, facilities and spending of the Federal Reserve.

The researchers took all of the individual transactions across all facilities created to deal with the crisis, to figure out how much the Fed committed as a response to the crisis. This includes direct lending, asset purchases and all other assistance. (It does not include indirect costs such as rising price of goods due to inflation, weak dollar, etc.)

The net total? As of November 10, 2011, it was $29,616.4 billion dollars — (or 29 and a half trillion, if you prefer that nomenclature). Three facilities—CBLS, PDCF, and TAF— are responsible for the lion’s share — 71.1% of all Federal Reserve assistance ($22,826.8 billion).

One comment about some of the folks pushing back against this massive total: Yes, there is a big difference between a $100 lent for 3 days, and a $100 lent overnight rolled over 2 more times. And there is an enormous difference when temporary overnight lending lasts for three years.

Overnight lending, by its definition, is temporary, short term, lower risk, modest impact. It exists to allow slightly over-extended banks to meet their reserve requirements. But rolling overnight lending repeatedly for 3 years is none of those things. And it makes a mockery of these same reserve requirements, and the protective purposes they are supposed to serve.

The amount of overnight lending reflects how broken our financial system really is. A well capitalized, moderately leverage system does not require this massive liquidity from a central bank — interbank lending should be sufficient. What the data reveals is that the financial sector remains dangerously under-capitalized and overleveraged.

To pretend these were merely minor overnight loans, rolled over once or twice, is foolish, dangerous nonsense.

15 Responses

  1. Excellent statement, Neil, of the juxtaposition of illusion and reality. I really do think we understand the crime and the scope, what we’re lacking is a concerted effort and a plan to end this whole thing. I want to know why we can’t just stop paying on all debt, as consumers, and cut off their funding. Until we do, we are going to continue being robbed by giant corporations who think they rule the world. When there are no customers or the resulting revenue, they’ll crumble.

    The foreclosure crisis which is the main focus here, is just the tip of the iceberg–the seamy underside of a huge and ugly problem on a massive scale, with serfdom for the masses as the planned result.

    We need our own television network with unbiased, real reporting and coverage of the daily events to reach the people who are still living in the illusion, to reach the ones that have been brainwashed, because some people just can’t give up their TV. We need to start up our own
    newspaper both online and a print edition on the weekends–the modern day version of the Freedom Press.

    The one thing we shouldn’t do is cower in fear, and the one thing we should do is think critically about this situation. Government isn’t a protective entity; even the courts no longer protect our rights to due process, so why keep such a failure operating?

    Getting rid of all government agencies that exceed constitutional limits is the first step. Then we must get a plan into action for getting rid of the people who set themselves up to rule without being elected, and their plethora of 3 letter commissions like the CFR, IMF, BIS, ad nauseum.
    We must refuse to meddle in the political, social and economic business of other nations, and concentrate on the very real problems that plague us here at home. Tell Hillary to sit down and shut up, and apologize to Putin. We are about to be dragged into a war with a Nuclear super power because of her, and Obama. We need to straight up tell him they are no longer authorized to speak on our behalf.
    With all those Deep Underground Military Bases, the shadow government plans to ride out the nuclear holocaust in bunkers, while the rest of us die in the fallout on the surface. Are we going to sit around and let this happen? We’re worrying about houses when we should be worrying about survival in a literal sense. That’s the reality behind the illusion. We’re inches away from an avoidable catastrophe.

  2. @E.Toile,

    Tar and feathers… alright. Personally, I like the idea of the pillory for every bank CEO on Zuccoti Park. And everyone who was victimized by the banks invited to kick their ass. We’d have a line going all the way to Amariallo Texas.

    Those bankers wouldn’t be able to sit down for a few years…

  3. @ Enraged….what’s left that’s not burning, besides Wall Street?

    I’m right there with you on the blow up thing. If we try and rescue crap from this broken system we waste valuable time and resources that could go to a complete rebuild from the ground up. Anything else is like band-aids on gangrene/aspirin for cancer.

    System = way too broken

    Officials = way too corrupt

    My patience = microscopically thin.

    We need plenty of tar and feathers and people in the streets. Cantor would lose that bravado in a hurry facing down pitchforks. Bluster meet fear.

    It can’t be rebuilt from the existing framework, as it only works for the chosen. I don’t want to be rich, to be elevated to a position of power….I want the elite to be brought down from ivory towers where they rule with reckless abandon. They need to feel hunger to stoke their empathy for the rest of the people in the world who have been without for so long. I find no humor in their Antoinette demeanor. If they don’t come around, off with their heads.

    Obama = Putin. Only difference is longitude. All these so-called leaders of the world are the same empty 42 longs from GS. Screw them all. Time for the Great Upheaval. Rev. 2.0.

  4. @E. Toile,

    Burn everything and start from scratch? Doesn’t seem salvageable at all otherwise…

    Honestly, sometimes I think about it: I’m ready for everything to blow up. All I wish is that it will while I’m asleep and I won’t feel, hear or see a thing and my kid will go the same way wherever she is when it does.

  5. think a little deeper: I reckon the European Central Bank needed a way to find parity against the dollar. Since they couldn’t do it with their economies, they did it with their currencies. My Wells loan funded with the Deutsche check and HSBC Trustee using Citigroup Global Markets (US PATSY BANK) to sell the certs. And I think CITI is the one who took the blower on these deals. All while the Wells consortium confiscates the land with the copies of the extinguished (borrower) obligations they carry as assets in multiple places. The CDO’s (LOCHSONG, Salisbury Limited, Cayman Registry) were the double-whammy. If the sponsor-originator-servicer controlled (as in no “surrender of control” or “true sale”) the deal, that incestuous relationship creates an inherent conflict of interest. The originator/sponsor/servicer/depositor (read obligee) could service the loans into default for profit. The top tranches (pronounced trawnchez) were always intended to be bank (sponsor) owned, as they contained the “prime loan” pool(s). Most trusts had 10% prime loans to get the AAA rating on the top tier tranches. All the crap was used in the lower tranches. The CDO’s would follow suit, as the bonds are used as “reference obligations”. Wreck the bonds, you wreck the CDO too. BING BING BINGO. They win, and, they win (because they bought it short while selling long to their customers). And as Solly said, they knew what the crap was because they funded it and originated it. Bought plenty of insurance, booked the future servicing rights as profits, collected the pmi, took the houses, and defaulted the bonds (kept the money, though). Good work if you can get it.
    And I’m pretty damn sure that .0075% mortgage servicing rights do not give them the right to record the mortgage in their name.

    Does it? No, the servicer doesn’t hold the mortgage until after borrower defaults (with proper assignment/poa). Another problem. Hmmmmmm.

    Going into BK screaming “False Claims”.

    SOMEBODY STOP ME!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  6. So, my position gets stronger by the day: we each (newborn to senior citizen and everyone in between) paid $90,625 per person that we are not about to see again, if my calculations are correct. And in addition, we still have to fork up legal expenses to defend ourselves.

    Banks used those 29 trillions to seize our homes, pay dearly attorneys to commit fraud upon the court, ramsack all the pension plans, etc. In short, to ruin this country and the rest of the world.

  7. And now for the news….

    – Obama proclaims no illegalities on Wall Street

    – Newt who tutored Freddie Mac leads GOP

    – Congress does inside trading with no apologies

    – Eric Holder has difficulty defining perjury

    – The SEC believes financial crimes too difficult to prosecute

    – The Maine Supreme Court won’t sanction fraud

    – The Feds are the leading foreclosing agent

    – Banks got $29 thousand billion dollars of our money

    – Geithner won’t release TARP $$ Congress allocated for borrowers

    – GOP nixes CFPB pick Cordray

    – Former DOJ exec says expect no TBTF prosecutions

    – John Walsh masturbates to B of A/Chase logos

    – 5087 American citizens arrested for exercising free speech

    And we put up with this why?

    No Peace

  8. NY Supreme Court – US Bank v. Bressler – an assignment from MERS to plaintiff is defective, as MERS had no right or authority to assign the mortgage or the note

    This case also calls Steven J. Baum’s master “Robo-Signer” Elpiniki Bechakas into question again. When is somebody going to depose her and make an example of this behavior!

    excerpts:
    “Secondly, an assignment from MERS to plaintiff is defective, as MERS had no right or authority to assign the mortgage or the note. Bank of NY v Silverberg, supra. “The plaintiff, which merely stepped into the shoes of MERS, its assignor, and gained only that to which its assignor was entitled . . . did not acquire the power to foreclose by way of the . . . assignment.” Id. ”

    “Further, it must be noted that the execution of an Assignment of Mortgage by MERS is barred by the Settlement Agreement between the US Attorney’s Office on behalf of the United States of America and the Office of Steven J. Baum P.C. and Pillar Processing, LLC, dated October 6, 2011, which states at paragraph 14 that “Baum shall no longer permit anyone employed by or contracted by Baum to execute any assignment of a mortgage as an officer, director, employee, agent or other representative of MERSCORP, Inc., and/or Mortgage Electronic Registration Systems, Inc.” The office of Mr. Baum was the attorney for the plaintiff when this matter was commenced, the assignment at issue is stamped “Pillar Processing LLC” and is signed on behalf of MERS by Elpiniki M. Bechakas, an attorney in the office of Steven J. Baum, according to the public internet attorney registration website maintained by the State of New York.”
    Here is the link to the decision.
    http://www.nycourts.gov/reporter/3dseries/2011/2011_52183.htm

  9. How can they do that if they do not have interests on those properties?

    http://www.housingwire.com/2011/12/09/bofa-developing-foreclosure-rental-programs-to-deal-with-distressed-properties

  10. Lies and Denial: the 2012 GOP Strategy
    posted by Adam Levitin

    http://www.creditslips.org/creditslips/2011/12/lies-and-denial-the-2012-gop-strategy.html

  11. Bernie Sanders Introduces Constitutional Amendment: Corporations Are Not People
    December 9, 2011

    Senator Bernie Sanders has just introduced a Constitutional amendment, S.J. Res 33, to ban corporate contributions to candidates and end their influence in the political process. The Hill has a good summary:

    Sanders’s amendment, S.J.Res. 33, would state that corporations do not have the same constitutional rights as persons, that corporations are subject to regulation, that corporations may not make campaign contributions and that Congress has the power to regulate campaign finance.

    While the Citizens United case affected corporations, unions and other entities, the Sanders amendment focuses only on “for-profit corporations, limited liability companies or other private entities established for business purposes or to promote business interests.”

    Sanders said he has never proposed an amendment to the Constitution before, but said he sees no other alternative to reversing the Citizens United decision.

    “In my view, corporations should not be able to go into their treasuries and spend millions and millions of dollars on a campaign in order to buy elections,” he said. “I do not believe that is what American democracy is supposed to be about.”

    This past summer, GOP presidential candidate Mitt Romney said “corporations are people,” when fielding a question about whether taxes should be raised in order to increase federal revenues, which drew sharp reactions from Democrats.

    The Sanders amendment is co-sponsored by Sen. Mark Begich (D-Alaska), and a similar amendment has been proposed in the House by Rep. Ted Deutch (D-Fla.).

    What do you think?

    http://www.dylanratigan.com/2011/12/09/bernie-sanders-introduces-constitutional-amendment-corporations-are-not-people/

  12. Solly, did you see my post? re: surrender of control

    somebody posted something about “non-qualified-financial-contracts”, I.e. “debt collections”. Care to weigh in on that one?

  13. $30 trillion – thats the number I projected (while an analyst) as the cost of the war.Hmmmm Its also the number that vanished the day the market for sub prime crimes disolved. Hmmm Hmmm

    If you sit an count backwards to $1 billion it would take 10 years!

    If you count to $1 trillion backwards …it would take you back to the ice Age.

    $29 trillion is the same as $100 Ka-jillion, Pa-zillion in corn kernal soup and Ka – frillion …gibberish . Bankrupt No world GDP or other measurment can offset that type of debt.

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