- As the US Treasury Department continues to brag that
the US has not yet been forced to make good on its guarantees of toxic
debt held by the major insider banks (Citigroup, JP Morgan, Bank of America,
etc) we find they have been using a back door to funnel money to their
friends--AIG the world insurance giant holding the largest share of derivative
contracts that guarantee those toxic debts against default. In point of
fact, those debts are defaulting in ever increasing number, and AIG is
having to pay out billions. But, those billions are being replenished by
additional bailout funds from the Treasury--while the rest of the nation
suffers from lack of credit. Why should the American taxpayer be bailing
out gambling bets based on promises to pay that were utterly fraudulent?
Now we find out that AIG is also the preferred avenue of funneling money
into European banks. Lastly, what do all these insider banks have in common?
They constitute the private owners of the Federal Reserve. It all begins
to make sense why only the largest banks are receiving these funds and
why the regulators continue to squeeze the smaller banks with millions
in new surcharges--forcing them into liquidation. The fix is in.
- International law professor Richard Cummings, writing
for Lew Rockwell.com, says, "Fed Chairman Ben Bernanke has resisted
calls from Congress that he release the names of the banks that were recipients
of the bailout money the Fed gave to AIG to prevent it from collapsing.
AIG insured its counterparties against losses from mortgage-backed derivatives.
The Fed poured $85 billion into AIG, which paid out $37.3 billion of that
money to counterparties that had purchased a certain type of derivative-based
protection from AIG, called multi-sector credit default swaps.
- "The counterparties have never been disclosed but
the Wall Street Journal reported that they included Goldman Sachs, Merrill
Lynch, UBS and Deutsche Bank. AIG and the Federal Reserve Bank of New York
have unwound many of these contracts. To do this, they offered to buy the
CDOs (collateralized debt obligations) that were originally insured by
those agreements. The counterparties sold these assets at a discount, but
were compensated in full in return for allowing AIG to extricate itself
from the obligations. The counterparties also got to keep the $37.3 billion
in collateral, according to the Wall Street Journal.
- "While Bear Stearns was collapsing, Goldman Sachs
boasted that it had insulated itself by buying insurance against the mortgage-backed
derivatives. As it turns out, it was, in fact, rescued by the Fed when
it bailed out AIG. In 2007, Lloyd Blankfein, Goldman Sachs' CEO, received
$70 million in compensation, including bonuses, $27 million in cash...
At the time the New York Fed came to AIG's assistance, Secretary of the
Treasury Timothy Geithner was its head. Blankfein is still drawing down
millions in compensation. The rationale for his compensation is the alleged
profitability of Goldman Sachs, which raked in over $9 billion in 2006.
It should also be noted that the bailout stopped Goldman stock from plummeting,
thereby protecting not only Blankfein's fortune, but that of Hank Paulson,
the former chairman of Goldman Sachs, who was Secretary of the Treasury
under George W. Bush.
- "This is perhaps the greatest financial scandal
in American history but most Americans are totally ignorant of it. On top
of this, the AIG bailout enabled John Thain to pay out billions in bonuses
while he headed Merrill Lynch, just prior to its sale to Bank of America,
a recipient of billions of bailout money, this while the unemployment rate
is headed towards ten percent and the market collapse has caused losses
in the trillions. Were the names of the banks made officially public, there
would be cries of outrage so loud as to be deafening, making any further
bailouts dubious for political reasons. And while Bernanke has said that
he would not permit the big banks to fail, the looting of America by some
of the richest and most powerful people, such as Blankfein and Thain, goes
on, with no end in sight. Pandit the bandit now says Citigroup is profitable,
enabling its stock to rise above a dollar, generating a temporary euphoria
in the market. The cheers going up on CNBC can be heard all the way to
Warren Buffett's coffers. And American tax payers are not only bailing
out the American banks, they are also bailing out Europe."
- Toni Reinhold of Reuters answers "Who got AIG's
bailout billions?" "The Wall Street Journal reported... that
some of the banks paid by AIG since the insurer started getting taxpayer
funds were: Goldman Sachs Group Inc, Deutsche Bank AG, Merrill Lynch, Societe
Generale, Calyon, Barclays Plc, Rabobank, Danske, HSBC, Royal Bank of Scotland,
Banco Santander, Morgan Stanley, Wachovia, Bank of America, and Lloyds
Banking Group." I think it's the large number of foreign banks that
would be particularly irritating to the public if it knew the extent of
- WHO OWNS THE FED?
- Jim Quinn unravels for us the real link between all this
insider dealing. Who really owns the Federal Reserve. It's not the US government
and its not you the taxpayer. "The average American does not know
much about the Federal Reserve. The government and the Federal Reserve
prefer to operate in the shadows. If the American public understood what
their policies have done to their lives, they would be rioting in the streets.
Henry Ford had a similar opinion: 'It is well that the people of the nation
do not understand our banking and monetary system, for if they did, I believe
there would be a revolution before tomorrow morning.'
- "Most Americans believe that the Federal Reserve
is part of the government. They are wrong. It is a privately held corporation
owned by stockholders. The Federal Reserve System is owned by the largest
banks in the United States. There are Class A, B, and C shareholders. The
owner banks and their shares in the Federal Reserve are a secret. Why is
this a secret? It is likely that the biggest banks in the country are the
major shareholders. Does this explain why Citicorp, Bank of America and
JP Morgan, despite being insolvent, are being propped up by Ben Bernanke
and Timothy Geithner?" It does, indeed.
- Tony Rheinholt continues: "The U.S. Federal Reserve
has refused to publicize a list of AIG's derivative counterparties and
what they have been paid since the bailout, riling the U.S. Senate Banking
Committee. Federal Reserve Vice Chairman Donald Kohn testified before that
committee on Thursday that revealing names risked jeopardizing AIG's continuing
business. Kohn said there were millions of counterparties around the globe,
including pension funds and U.S. households." What this means is that
AIG is only paying out on SOME of its obligations, and US Pension funds
are NOT on that list. In other words, the bailout monies are only going
to a select few. AIG has absorbed $180B so far, with no end in sight, no
transparency, and no sign of changing this pattern.
- Proof that we haven't even turned the corner yet comes
from Greg Gordon and Kevin G. Hall of McClatchy Newspapers (itself a losing
enterprise like dozens of other print media): "America's five largest
banks, which already have received $145 billion in taxpayer bailout dollars,
still face potentially catastrophic losses from exotic investments if economic
conditions substantially worsen, their latest financial reports show. Citibank,
Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase
reported that their 'current' net loss risks from derivatives ---- insurance-like
bets tied to a loan or other underlying asset ---- surged to $587 billion
as of Dec. 31. Buried in end-of-the-year regulatory reports that McClatchy
has reviewed, the figures reflect a jump of 49 percent in just 90 days."
- Not counted in those write downs, of course, are the
funds they are getting through the back door, which are not accounted for
publicly. "While the potential loss totals include risks reported
by Wachovia Bank, which Wells Fargo agreed to acquire in October, they
don't reflect another Pandora's Box: the impact of Bank of America's Jan.
1 acquisition of tottering investment bank Merrill Lynch, a major derivatives
- SQUEEZING THE SMALL SOLVENT BANKS
- The next part of the fix is the most evil, in my opinion.
The Fed and the US Treasury have given trillions of paper dollars to insider
banks, and yet they are letting the FDIC run short of money so that this
"insurer" of the public's deposits ($250,000 and below) can have
an excuse to jack up the insurance premiums (surcharges) to member banks.
These new "temporary" fees are more than most small bank profits,
and will ensure that these banks fail.
- As Paul Kiel writes in ProPublica, "It's looking
increasingly like the FDIC will have to turn to Treasury to help it weather
the storm... FDIC's deposit insurance fund has plummeted in the past year
as a growing number of banks have failed. The fund relies on fees from
member banks, and Bair held out hope that a recent bump in those feeswould
provide enough cushion. But if it doesn't, Bair said, people shouldn't
be nervous about their FDIC-insured accounts: 'It is important for people
to understand, we're backed by the full faith and credit of the United
States government. The money will always be there. We can't run out of
money.'" Then why has the fee increased? Why penalize the banks that
have been conservative, and limited their growth for safety?
- Bill Butler describes the "squeeze play" going
on: "FDIC Chairwoman Sheila Bair announced last week that the quasi-public
insurance monopoly would become insolvent in the next few months if it
is not allowed to implement a one-time, draconian surcharge on all U.S.
banks. This charge will, in some cases, wipe out last year's profits. At
the same time, the FDIC has requested an additional $500 billion 'loan'
from Congress [notice that a loan requires the member banks to pay it off.
A bailout would not. They choose to ask only for the loan as a justification
for the surcharge].
- "Small, solvent, well-run local and regional banks
have objected. They rightly claim that they are not the problem. These
banks have a solid and growing deposit base and many of them service their
own loans and so did not get caught in the trap of originating bad loans
and dumping them on the secondary mortgage market in federally-guaranteed
bundles. Whether they know it or not, these banks intuit that, like Social
Security, there is no FDIC "fund." FDIC insurance, like social
security, is just another government-coerced Ponzi scheme -- a tax that,
according to former FDIC commissioner Bill Isaac, goes immediately to the
Treasury to buy "spending . . . on missiles, school lunches, water
projects, and the like."
- "Rather than increasing their taxes and punishing
their relatively good behavior, these small banks suggest that the FDIC
look first to Bailout Banks, the Wall Street mega-banks that have received
nearly a trillion dollars in unearned, government-supplied capital via
the printing press, for any increased insurance premium/tax. Ms. Bair rejected
these pleas by claiming that FDIC law does not allow her to 'discriminate'
against banks based on their size. Clever [Actually, there is a basis for
discrimination since the larger one's 1) caused the problem and 2) are
the recipients of taxpayer backed funds]. What is really going is that
the Bailout Banks are using the government and its insurance monopoly to
help them gain market share by drastically increasing the operating costs
of their smaller, better-run and scrappy competitors." We are about
to see the worst banks absorb the smaller sound banks--a great injustice,
and totally engineered.
- (End Excerpt)
- World Affairs Brief - Commentary and Insights on
a Troubled World.
- Copyright Joel Skousen. Partial quotations with attribution
- Cite source as Joel Skousen's World Affairs Brief http://www.worldaffairsbrief.com
- World Affairs Brief, 290 West 580 South, Orem, Ut 84058,