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): http://911awakening.com/?p=766
gerip
-------- Original Message --------
Tuesday, February 10. 2009
Posted by Karl Denninger
<http://market-ticker.org/authors/2-Karl-Denninger> at 06:56
<http://market-ticker.org/archives/783-Obama-The-Market-Is-Issuing-You-A-WARNING.html>
Obama: The Market Is Issuing You A WARNING
<http://market-ticker.org/archives/783-Obama-The-Market-Is-Issuing-You-A-WARNING.html>
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
<http://market-ticker.org/archives/73-Not-Durable-Durable-Goods,-And-More-Bear-Stearns.html>.
THOUSANDS OF AMERICANS LOST THEIR JOBS AS A DIRECT CONSEQUENCE OF TIM
GEITHNER'S AND BEN BERNANKE'S INTENTIONAL CONCEALMENT OF THIS MATERIAL
FACT. Here is the quote
<http://www.nytimes.com/2008/03/25/business/25sorkin.html?_r=1> 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_*.
*GEITHNER MUST RESIGN NOW; HE IS UNFIT TO HOLD THE OFFICE TO WHICH YOU
APPOINTED HIM. PERIOD.*
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
<http://finance.yahoo.com/tech-ticker/article/172003/FT%27s-Wolf-U.S.-Too-%22Politically-Frightened%22-to-Admit-Truth-About-Banks-Part-I?tickers=XLF,C,RBS,LYG,BCS,FAZ,SKF>,
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 ARE WRONG_*.
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 issued
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 "stress
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 *for
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. President?*
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_ cover.*
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 yourself.
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 today.
By tomorrow it may not matter, and it will *_certainly_* be your fault.
/Stephanie S. Jasky, /Founder, Director - FedUpUSA.org
/"/*/"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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