Friday, February 13, 2009

Re: [PDI] [Fwd: Obama: The Market Is Issuing You A WARNING]

That's about the size of it, but actually it is worse.

For one thing, I seriously doubt Obama has even a rudimentary economic education or the slightest idea of how the US financial structure functions.

His father was a Kenyan economist, to be sure, but he knew him only until two years old.

Perhaps his father should have been elected.

Last summer the US total debt of record was 53 trillion.

I have got no recent figures but it is my guess it may be 30 trillion more by now.  I know that sounds like science fiction but it is entirely possible in terms of "old" USD.

At this rate catastrophe is unavoidable.

The Fascists around and behind Obama are terminally incompetent and think that it all can be handled by "PR" and mass psychology.

I am still not ready to write off Obama completely.  There may be other factors in the mix.

But only time will tell.

L'observation consiste simplement
en l'intérêt jubilant montré par l'enfant
à la vue de sa propre image dans un miroir....

--- On Thu, 2/12/09, Geraldine Perry <> wrote:
From: Geraldine Perry <>
Subject: [PDI] [Fwd: Obama: The Market Is Issuing You A WARNING]
To: "Gene Costa" <>
Date: Thursday, February 12, 2009, 6:49 PM

Hi all,

In case you did not get the article below I am forwarding. It is long but well
worth the read.

You might also want to read my article which parallels but adds to the one
below (and note, I will be revising the first paragraph to make it more readable
before posting elsewhere):


-------- Original Message --------

Tuesday, February 10. 2009

Posted by Karl Denninger
<> at 06:56

Obama: The Market Is Issuing You A WARNING


Put the kids away - this is not going to be pleasant.

I'm done Mr. President.

You stood in front of the American Public *and lied through your damn teeth.
*You claim that America faces a "catastrophe" if we don't pass
*your bill* - but its not *YOUR BILL*, its Pelosi's and Reid's bill - a
bill full of PORK and BS.

I'm tired of the lies, America is tired of the lies, *and we the people are
not going to sit still for it any longer.*

You promised us change. This is what we got for "change":

Your Treasury Secretary, Geithner, cheated on his taxes. He was caught. He then
failed to pay *the other two years* of tax for the same thing he got caught
doing, until you told him you wanted him to be the tax *collector*. But
that's not the worst of it. No, the worst part is that when Bear Stearns
got in trouble *he, as the head of the NY Fed, knew full well that The Federal
Reserve intended to open the discount window to investment banks THE VERY NEXT
DAY and yet this fact was NOT disclosed to Bear Stearns, forcing them into a
merger they would not have otherwise consummated
FACT. Here is the quote
<> from the
NY Times:*

"But the night that Bear signed the original bid, *the Fed opened
what's known as the discount window to companies like Goldman Sachs
and Lehman Brothers - oh, yes, and to Bear, too. Except that the Fed
didn't tell Bear that it planned to open the window when it was
signing its deal with JPMorgan. *

Had Bear known it might have access to the discount window - a
crucial source of liquidity - it might have been able to hold out
for a couple more days or at least had enough leverage to seek a
higher bid. But the Fed clearly preferred the original bid."

You *WISH* The Internet wasn't around to hold your butt over the pot of hot
oil and dunk you on this one. Sorry Mr. President, *_NO DICE_*.

We dealt with George W. Bush playing "disaster capitalism" with us
for more than *_eighteen months_*. Now you're doing it. Nice try, no
donut. I have been writing for close to *_two years_* in /The Market Ticker/
about the *_fact_* that The Fed, Treasury and the former administration were
*directly responsible* for this mess through various machinations such as
"23A Exemption Letters", Paulson's entreaties to remove leverage
limits and the OCC's move (including asserting federal preemption in court!)
to preempt state regulation of subprime and ALT-A mortgages. You've put
forward plans to address *exactly none* of these frauds and yet they are *the
root of the problem*.

Further, you can't claim to "not know" because as a Senator your
office got copies of my petitions, faxes, and other communications. Your
constituents from Illinois asked me to send *_thousands_* of petition signatures
over those two years, and you *did* get them. Don't run a grand line of BS
on America that this all "came out of nowhere" and "it was all
Bush's fault." That's nice political theatre but it is also a
grand lie.

America has a *confidence problem* with the Capital Markets. So does the rest
of the world. That problem exists because of the *outright fraud* and *idiocy
*that has been undertaken and *permitted* by all levels of our government,
including the Executive. These frauds included knowingly using bad model data
to "rate" securities, shopping ratings, shorting securities you're
selling to your own customers in the next room (without telling them you think
they're overvalued, of course) and getting "23A Exemptions" so you
can lever up your exposure to *failing parts of your business, thereby creating
systemic risk where it did not already exist*. Go have a look Mr. Obama - there
are literally *dozens* of "23A Exemption" letters now on file with The
Fed. *Virtually all of these institutions, if not all, have either failed or
received public support, yet exemption from safety and soundness banking
regulation has made their plight worse and their drain on the taxpayer more
onerous.* You have done *_exactly nothing_* to address this outrage nor is
there any reason to believe you will.

These "exotic financing products" were not* bought* Mr. President -
*they were sold by so-called "professionals" who knew full well that
the borrower could _never_ complete the original term as contracted. * Yet the
firms who packaged up these securities and sold them *knowing this fact* remain
in business, their executives remain in the corner office and they siphoned off
*$70 billion in bonuses from the first half of the TARP. *You have done
*exactly nothing* to disgorge those funds nor have you directed the FBI to bring
indictments or brought pressure to remove these individuals from their
positions. You have not revoked one banking charter from any of these firms
despite the fact that these practices are *the precise reason we are here*.

These same firms have literal *trillions* in off-balance-sheet securitizations
that remain undisclosed and opaque. You have taken *no step* to force their
consolidation back onto the balance sheet, nor have you announced any intention
to do so. These conduits and SIVs are *_literal_* ticking financial nuclear
weapons and they *_will explode_* as defaults continue to increase.

You continue to pretend that these firms "need some help" and
"need a backstop." Increasingly it is becoming clear to market
observers such as Nouriel Roubini, FT's Wolf
myself and others that the fact is that *these firms are and have been bankrupt
and you are conspiring with others to intentionally deceive the public by
refusing to demand that regulators and examiners to go in, do their jobs, and
report the _true_ capital levels of these companies - an act that would result
in their _immediate_ seizure by the FDIC.*

You believe you can pull the wool over Americans' eyes with your new
"TARP II" and "TALF" programs. *_The truth_* is that you
intend to use Treasury and Fed credit to allow *hedge funds* to make obscene
profits while *essentially all risk of loss is born by the taxpayer, shifting
off these bankrupt firm's liabilities _TO US_ while the executives and firms
continue to operate!*

This is yet *another outrage and is nothing more than an attempt to shift the
liabilities of _BANKRUPT_ institutions that have become insolvent _by their own
hand and acts_ to The American Taxpayer. *

Now let me explain what is almost certain to happen *_if_* you are foolish
enough to let Taxcheat Timmy pull this garbage.

See, these assets really are trash. Yeah, right now they are kicking off cash
flow. For now. But they're impaired and while their coupon will pay for a
while they will ultimately default on their face value and recovery is pennies
(and in the case of synthetics, zero) when they do.

So what happens here is that you provide 95% non-recourse financing. Sir Hedge
Fund buys a buttload of this garbage having only 5-10% of the face at risk, and
that's all they need to put up as well, since the government is going to
provide the financing - as a "no recourse" loan (presumably very
cheaply.) They get a 6-7% coupon which means that in one year they're
covered, and in two they're making money like a madman, up 200% or more on
their original risk capital.

But what happens when these instruments default?

Treasury is sitting on several *trillion* in backstops and financing of loans
to cover "assets" that are in fact worth zero. It winds up *_eating_*
the entire face value, while the Hedge Funds have made off with *_all_* of the
coupon money in the meantime!
The risk here is that Treasury is backed into a corner due to ramping yields
and perhaps even inability to roll over this debt at all and we find ourselves
forced into immediate cash accounting as a nation. This in turn causes the
instantaneous cessation *of Social Security and Medicare payments*, as that is
the only bucket big enough to cover the shortfall.

Do you *_really_* want to go down that road Mr. President, because that is
*precisely* what's at the end of it, and it may be only a year or two out!

If you think nobody beyond your vaunted administration has figured it out *_YOU
If you think Americans will pay taxes to an institution that intends to
knowingly allow Hedge Funds to make hundreds of billions of dollars in profit
while sticking the taxpayer with upwards of $2 trillion in losses and destroying
all entitlements in a few years' time I suggest you have a mental
examination and get your lithium dose adjusted.

Your approval rating and in fact American's tolerance of this blatant
fraud, theft and chicanery is about to go straight down the toilet.

If you have an interest in having a successful Presidency (not to mention any
chance of a second term or even a stable, sound America to be President *of*)
you must immediately do all of the following:

* Revoke *_ALL_* of the so-called "23A Exemptions." Bernanke
them, you need to direct him to revoke them. *Safety and
soundness of the banking system must come before any one firm or
group of firms. *There are literally hundreds of banks that are
perfectly sound. There are also a bunch of big campaign
contributing banks that are *_bankrupt_* and have been for the
last eighteen months. *Americans know this - the secret is out and
its time to quit LYING*.
* Send in the examiners. Yeah, I know, you're talking about
tests". Uh huh. Let's have those examinations now and
forevermore in the future be *public information*. If a bank
wants to operate under our laws and have the *privilege* of
fractional reserve banking, they can open their books and
examinations *at all times* to the public. Period.
* No more conduits, no more SIVs, no more games. If your "assets"
are worth 20 cents on the dollar today *that is their price*. If
that makes you insolvent *then you are* - period. We have an FDIC
and we have the authority to "cram down" failed institutions
a reason*. Use it.
* Send in *the cops*. The actions of major institutions up and down
the line since this crisis began in mid 2007 and in the years
leading up to it is at best grossly negligent and at worst
felonious. We the people are *_done_* with being the patsies of a
handful of thieves and frauds enabled by the 535 crooks in our
Capitol. *_STOP IT NOW_* and start jailing the crooks or be
judged as *_one of the felons_*. Your choice.

We are approaching *_yet another_ market implosion just like the one in
September and October*.

While it may come today or tomorrow, I wouldn't take that bet. In fact I
expect that people will "rejoice" that you didn't wipe every
common stockholder's equity stake in firms like Citibank, Bank America and
Goldman Sachs - even though you should. Because I expected you to do the
*_wrong_* thing, I actually bought some Citibank stock a short while ago. Were
you to do the right thing my position would be worthless. It should be
worthless. I'll bet its not - at least not immediately (and that I'll
make a profit as a consequence of your idiocy.)

When and if this dislocation comes, however, it will *destroy* what is left of
the American Banking System, it will expose that Bernanke has *over one trillion
dollars of garbage on The Fed's Balance Sheet*, and that in turn will
destroy the international market for United States Treasury Debt.

In the best case we wind up like Japan and have a bunch of zombies sucking up
capital and doing nothing of value for our economy. In the worst case we get
much higher yields in the bond market and the near-immediate bankruptcy of
*_hundreds_* of midsize and larger firms, including *virtually all financial
firms in the S&P 500 and DOW, along with all major multinationals that have
a captive financing function.*

The Government *_cannot_* backstop it all. If you try the government fails
outright. The market is bigger than you, it is bigger than The Fed, it is
bigger than Treasury. You are subservient to The Market, not the other way
around. Go ask Bill Clinton about The Bond Market when he tried to ramrod his
Hillarycare plan through and what the reaction was. That's 1/100th of what
you're about to experience.

If Bernanke tries to "cap" yields into such a dislocation (he has
threatened to) he will cause *everyone *who owns Treasury debt to tender it to
him with the consequence that he will be forced to print *_five trillion
dollars_* in "new money". This will result in an *eighty percent
devaluation of the dollar almost instantaneously; *gasoline will go to
$10/gallon, Milk to $15/gallon, a loaf of bread to $10 and a hamburger at
McDonalds will likewise be $10. Due to global wage arbitrage *wages will not
increase*; this will as a consequence immediately render 50% or more of
Americans homeless, hungry and jobless. *What do you think happens next Mr.

The disease in our financial system is lying, too much leverage, outright fraud
and hidden bankruptcy - all of it perpetrated through and with the *_explicit_*
permission of government agencies including Congress, The Executive and The Fed.
We have lived beyond our means through fraud for nearly 20 years *and this is
no longer possible*. As a direct consequence trust has been destroyed and
private capital has fled our credit markets *and will not return* so long as
these diseases remain in the system.
*Hiding the facts cannot cure the disease*; the excessive debt must be
*defaulted*; you cannot fix it by transferring where the leverage goes, such as
to Treasury or The Fed. The liars and frauds must be *exposed, charged and
locked up*, not protected and bailed out. Standards of living *will contract*
and people must learn to live within their ability to earn, *including the
government*, irrespective of politicians that think they can promise to borrow
ever-increasing sums forever.

President Obama, this next crash in the markets, if it occurs, *is your sole
responsibility. *

*It will come as a consequence of _your policies_ where you intend to try to
shift the BANKRUPT institutions' losses to The Taxpayer - a debt that
America _cannot finance_ and which _foreign governments and investors WILL NOT_

I'm well-aware of the Washington DC policy called "kick the can"
but the can is now full of cement and if you think you'll get through your
term before this all comes home to roost you are, to be polite, nuts.

You must stop the stupidity and you must stop it *_NOW_*.

The game of obfuscation and literally violating investors both foreign and
domestic as a consequence of fraud countenanced by our government is *_over_*/.

Both Americans and foreigners *know *about the lying and fraud; it is pointless
to continue to dissemble and obfuscate as you are merely making a fool of

If you do not understand this and are being led by your "advisers",
many of whom are the very people who advocated the changes in policy over the
last 20 years that brought us here, you need new advisers, and you need them

By tomorrow it may not matter, and it will *_certainly_* be your fault.

/Stephanie S. Jasky, /Founder, Director -

/"/*/"If the American people ever allow private banks to control the
issue of their money, first by inflation and then by deflation, the banks and
corporations that will grow up around them, will deprive the people of their
property until their children will wake up homeless on the continent their
fathers conquered." /*-- Thomas Jefferson, Letter 1802 to Secretary of the
Treasury, Albert Gallatin

*Sick of the Lies?** Do Something NOW**! (click logo below):** *



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