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New York Federal Reserve Bank President William Dudley said it is too early to talk about curtailing the central bank's long-term security purchases while the U.S. economic recovery is fragile.
"As financial conditions improve, which seems to be the trajectory, it's a legitimate point to consider what you want to do in terms of your purchase programs," Dudley told CNBC in an interview broadcast on Monday.
Our story continues… According to the popular version, Ben Bernanke, our flawed hero, has averted a Second Great Depression. When the crisis came in ’07-’08, he calmly took out the text he had written himself: “Dummies’ Guide to Avoiding a Japan-style Deflation”…or something like that.
The Federal Reserve has made $14 billion in profits on loans made in the last two years.
The U.S. central bank also earned about $19 billion from interest and fees charged to institutions that tapped liquidity facilities during the global financial crisis, the report said.
If the Fed had invested the same amounted loaned out in three-month Treasury bills since August 2007, it would have earned $5 billion in interest, the FT said.
Central banking is today universal, excluding Andorra, Monte Carlo, and Panama.
That a Congressman who is regarded by his peers as a highly principled eccentric could get a bill to audit the Federal Reserve accepted by a substantial majority in the House of Representatives is nothing short of sensational. He was the right man at the right time.
Consider Mr. Bernanke's track record against his stated goals as Fed chairman. In opposition to his predecessor, Alan Greenspan, Bernanke said that he would communicate clearly and openly with the investment community. This, he said, would remove an element of uncertainty for investors. However, it didn't take long for him to do an about-face on this issue. He learned that even the smallest utterance could shake markets. Today he embraces the jargon and ambiguities of his forerunner. Barack Obama, whose presidential campaign focused on a more open and transparent government, seems untroubled by Mr. Bernanke's repeal of his own earlier plea for increased transparency.
This past quarter American banks have set aside billions of dollars against non-performing home loans (foreclosures). One of the objectives is to have reserves that equal 100% of problem loans, but American banks fall far short of that goal. Bair’s agency has $13.3 trillion of assets to protect. But her reserve treasure chest has shrunk to around $10.4 billion, certainly not enough to bear the brunt of a thousand failed banks. Any day the FDIC could deplete its insurance fund and have to tap into a line of credit at the US Treasury (which is also insolvent and needs $1.8 trillion to meet this year’s US budgetary obligations). The FDIC has up to $500 billion at its disposal, but this is not likely to be money loaned from other sources but rather newly printed money that would fan the flames of inflation. So for now, the FDIC is holding off the inevitable. If Americans discover the true dire state of American banks, this might trigger a massive bank run, so the agency plods slow
In a 47-page judgement, U.S. District Judge Lorena Preska recently ruled that the Federal Reserve, America's quasi-private central bank, must reply to Bloomberg News's request under the Freedom of Information Act (FOIA) by August 31st. The senior legal counsel for the FED, Ms. Yvonne Mizusawa, claims that the Fed and U.S. banks would suffer irreparable harm if details of the loan programs were made public. The claim was initially filed by Bloomberg last year during the public outcry following October's Banker Bailout. So far the names of the recipients of over $2 Trillion USD in off-balance sheet transactions are secret. The FED has the authority to create new money by writing a check on itself, a power that has been described as creating money "out of thin air." More details can be learned from this mini-series, "Fractional Reserve Banking in Pictures PART 1/2" and "Yes, Virginia, There Are No Reserve Requirements PART 2/2."
Gross Negligence at the Fed. The drama unfolds slowly at first, so be patient and please watch it in its entirety. First-term (anti-bailout candidate) Democrat Alan Grayson questions Elizabeth Coleman, Inspector General of the Federal Reserve. The issue is oversight of the Fed's ever-expanding balance sheet, and the potential multi-trillion dollar loss that would be borne by you. You can easily send this video to your representatives in Washington. Their email addresses and phone numbers can be found here. There's no doubt we face an uphill battle, but if we are to have any realistic shot of breaking Wall Street's hold over Washington, it's going to happen through awareness. It's that simple. The more that voters learn about these abuses, the more noise we can all make. And you are making that happen with your emails. I've been amazed. Thank you!
HEADS UP IF YOU HAVE FUNDS IN A MONEY MARKET ACCOUNT! In all the inevitable hoopla surrounding the coming anniversary of “Lehman weekend” — those fateful days in mid-September 2008, when the financial world seemed on the brink of collapse — here’s an important event that will almost surely be overlooked: On Sept. 18, just a few days after the anniversary, the Treasury Department will end a program that essentially gave the same kind of protection to money market investors that the Federal Deposit Insurance Corporation gives to bank depositors. The government guaranteed that investors wouldn’t lose a penny.
Missing Sentence in Transcript Causes Premature HR 1207 Victory Celebration.Several blogs and forums reported during the past 24 hours that Chairman of the House Financial Services Committee, Barney Frank, said that Ron Paul’s bill to audit the Federal Reserve, HR 1207, will pass in October.
Three more banks were closed by regulators Friday, bringing the 2009 toll to 84. The largest of Friday's three closures announced by the Federal Deposit Insurance Corp. was Affinity Bank, based in Ventura, Calif. Affinity, which had total assets of $1 billion, deposits of $922 million and 10 branches in Northern and Southern California as of July 10, will be taken over by San Diego-based Pacific Western Bank, the FDIC announced. The FDIC said former Affinity branch offices in San Francisco and San Mateo will be-open Saturday and the rest will re-open on Sunday. The FDIC said it and Pacific Western entered into a loss-share transaction of approximately $934 million of Affinity Bank's assets. The federal agency estimated the cost to the Deposit Insurance Fund at $254 million. Earlier Friday, regulars closed Baltimore-based Bradford Bank and Forest Lake, Minn.-based Mainstreet Bank. Bradford Bank, the second bank to fail in Maryland this year, had $452 million
I’ve watched with first amusement, then disgust, and ultimately outrage as various pundits proclaimed Bernanke’s efforts “saved the financialsystem” or helped the US “weather the storm.” Bernanke did NO such thing. You could train a chimpanzee to hit the “print money” button at the Fed every-time the Fed phone rings with a Wall Street number and get the same results. To date, Bernanke has spent or put the taxpayer on the hook for some $24 TRILLION in bailouts, lending windows, and off balance sheet arrangements. AND HE’S FIXED NOTHING. Banks remain insolvent (if you marked their assets at market value, they’d all wipe out equity in a second), mortgages remain underwater, hundreds of thousands of Americans continue to lose their jobs every month, foreign investors grow increasingly distrustful of the dollar, and the financial system continues to have multiple black swans… all of which could bring about another CRASH.
If we are to learn anything from this sordid episode in our nation's economic history one lesson must come through: It is the presence of these "under the covers" backstops that cause asset bubbles to be blown to the degree that we saw occur, because without them nobody in their right mind ever allows a commitment of money to dodgy assets to the degree that is necessary for a bubble of the magnitude we saw in housing to occur. Between those "side letters" (or their moral equivalents) and accounting fraud you have a recipe for disaster. We have now seen two bubbles - The Internet and Housing - occur due almost entirely to these factors. ENRON occurred due to the ability of the firm to run off-balance sheet deals that turned out to be an outright scam, and the housing bubble occurred due to what amounted to the same thing: massive off-balance-sheet exposures and vehicles that were effectively financed the same way (that is, sans disclosure.) We sorely need
When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system. Today, the biggest of those banks are even bigger. The crisis may be turning out very well for many of the behemoths that dominate U.S. finance. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit.
The Fed is supporting institutionalized lying - that is, the intentional mis-marking of assets. If The Fed was an honest regulator and monitor of market risk it would insist that no bank carry an asset at a value materially higher than its "haircut" off par at the window. After all, the penalty rate for discount window use already discourages banks from coming there; the "haircuts" must (and I argue do) reflect what The Fed actually believes about the quality of these alleged "baskets" of asset classifications. If The Fed believes that these asset classes have this sort of haircut from face value in the market how does it justify allowing any bank under its jurisdiction holding such "assets" at a higher value on their balance sheet? The claim that people shouldn't worry about a bank that needs an emergency loan at a penalty rate and with a haircut that in some cases is 30% or more below declared "balance sheet value" is crim
Video at site Another prediction for how many small and medium-sized banks are bound to fall. It seems everyone has an opinion. The Real Deal passes along this video of Harrison Lefrak predicting 500 bank failures resulting from commercial real estate problems. He predicts that thigns will really start getting bad in 2010 and beyond, as the five-year loans that started up in 2005 go sour. That's more than Dick Bove sees and half of John Kanas. We'll be keeping score.
Misinformation Alert: Barney Frank Never Said That HR 1207 Will Pass In October I apologize to my readers I trusted the Washington Times source below. Please Read This from R. Ron Paul! Like I said in my original post it is hard to understand Frank he always talks like his mouth is full of something. Missing Sentence in Transcript Causes Premature HR 1207 Victory Celebration Several blogs and forums reported during the past 24 hours that Chairman of the House Financial Services Committee, Barney Frank, said that Ron Paul’s bill to audit theFederal Reserve, HR 1207, will pass in October. Incorrect Reports about Barney Frank’s Statement on HR 1207 Washington Times: Barney Frank says Ron Paul bill will pass Politico: Barney: Fed audit bill will pass in October Business Insider: Barney Frank: Yes, We Will Pass Ron Paul’s “Audit The Fed” Bill United Liberty: Frank: Vote on HR 1207 in October Daily Paul: Video: Barney Frank Says House Will Pass HR1207 in October ZeroHedg
What this country needs is a Fed Chairman that is immensely unpopular, backed by a courageous President. Under Paul Volcker and Ronald Reagan, this model proved effective at avoiding a complete economic collapse in the early 1980's. In case posterity's resounding approval has clouded anyone's memory, Volcker was vilified and threatened with impeachment at the height of that crisis. Reagan's decision to stand behind Volcker allowed the Chairman to persevere. It has never been popular to be responsible. Only after the markets settled and the country experienced twenty years of prosperity was history's final judgment made about Volcker. Bernanke's re-nomination is a politically safe decision for President Obama, and at least Bernanke is a devil we know. However, this lack of a "change" for the better should squash any "hope" for a genuine recovery. If the Bush years were as bad as the Democrats claim, then it is curious that they are mimickin
And so the guns come out blazing. The Clearing House Association, another name for all the banks that were bailed out over the past year with the generous contributions from all of you, dear taxpayers, are now threatening with another instance of complete systemic collapse if Bloomberg's lawsuit is allowed to proceed unchallenged, let alone if any of the "Audit The Fed" measures are actually implemented. As a reminder, The Clearing House Association consists of ABN Amro, Bank Of America, The Bank Of New York, Deutsche Bank, HSBC, JP Morgan Chase, US Bank and Wells Fargo. In a declaration filed in the Bloomberg Case (08-CV-9595, Southern District of New York), the banks demonstrate no shame in attempting to perpetuate the status quo with regard to the Federal Reserve and demand that the wool over the eyes of the general population remain firmly planted in perpetuity. The Clearing House submits this declaration because the Court's Order threatens to impair the
You knew it wouldn't be that easy..... Aug. 27 (Bloomberg) -- The Federal Reserve argued yesterday that identifying the financial institutions that benefited from its emergency loans would harm the companies and render the central bank’s planned appeal of a court ruling moot. "Harm the companies" eh? You mean reveal that they are and have been insolvent, and The Fed has been engaged in covering them up? “What has the Fed got to hide?” said Senator Bernie Sanders, a Vermont independent who sponsored a bill to require the Fed to submit to an audit by the Government Accountability Office. “The time has come for the Fed to stop stonewalling and hand this information over to the public,” he said in an e-mail. The Fed is hiding the insolvency of banks. They, along with their handmaidens in Congress (which is where you work Mr. Sanders) even went further and twisted the arm of FASB to legalize intentional accounting distortions that I argue amount to fraud. The
Ayn Rand wrote, "when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed."
America is not doomed, but the fellows in Washington are pushing for that outcome. It seems that all the characters that encouraged this financial crisis are being rewarded, and Ben Bernanke's re-nomination is no exception to this rule. He was on the Board of Governors when Alan Greenspan grew our bubble economy. Known as 'Helicopter Ben,' Bernanke was the most vocal supporter of low interest rates to combat the bogus threat of deflation, even if it meant dropping cash from helicopters. He succeeded in his aim – as it is hard for prices to decline while the money supply is growing by double digits.
Of course, much of that new money went into speculative bubbles, first in tech and then real estate. When the misallocation became too great to ignore, the credit markets froze and leveraged instit
Are you tempted? The Temptations – Get Ready: Remember me? Wall Street repackages toxic debt. Wall Street may have discovered a way out from under the bad debt and risky mortgages that have clogged the financial markets. The would-be solution probably sounds familiar: It's a lot like what got banks in trouble in the first place. In recent months investment banks have been repackaging old mortgage securities and offering to sell them as new products, a plan that's nearly identical to the complicated investment packages at the heart of the market's collapse. "There is a little bit of deja vu in this," said Arizona State University economics professor Herbert Kaufman.
Now the summer days are dwindling down to a precious few. This morning, it is overcast and chilly here in central France. The leaves on the aspen and linden trees have turned yellow already and whenever the wind blows, they flutter to the ground as if they were trying to get away from something.
It's Barack Obama's economy now. For the seven months since his inauguration, Mr. Obama and his economic team have pushed the blame for everything bad onto former President George W. Bush and taken credit for everything good. The gaping hole in the federal budget for the next decade? Team Obama blames Mr. Bush's tax cuts, the Medicare prescription-drug benefit he signed and the recession he bequeathed. The encouraging signs that the economy and banks are stabilizing? Team Obama credits its captain's fiscal stimulus and Treasury Secretary Timothy Geithner's stress tests and the bank capital-raising that ensued. That argument worked for a while. Mr. Obama did inherit a collapsing economy, a near-paralyzed financial system and an unsustainable fiscal policy, plus wars in Iraq and Afghanistan. He did quickly push through a $787 billion stimulus. Despite its unpopularity and time-release design -- only a quarter of the money will be out the door by the end of Se
The real US unemployment rate is 16 percent if persons who have dropped out of the labor pool and those working less than they would like are counted, a Federal Reserve official said Wednesday. Lockhart pointed out in a speech to a chamber of commerce in Chattanooga, Tennessee that those two categories of people are not taken into account in the Labor Department's monthly report on the unemployment rate. The official July jobless rate was 9.4 percent. Lockhart, who heads the Atlanta, Georgia, division of the Fed, is the first central bank official to acknowledge the depth of unemployment amid the worst US recession since the Great Depression. "If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart.
The Federal Reserve Board’s decision today to elevate Denis Hughes, a New York labor union leader, to the role of chairman of the board of the Federal Reserve Bank of New York is an unusual choice, and also shines a light on a sometimes cumbersome law overseeing the governance of the Federal Reserve. The Federal Reserve Act (section 4, paragraph 20) says that chairmen of boards overseeing regional Fed banks need to have “tested banking experience.” Mr. Hughes, who is head of the New York branch of the AFL-CIO labor union, doesn’t seem to have that kind of banking experience on his resume. He’s spent most of his professional life as an electrician and union leader. The law, written in 1913, puts the Fed in a difficult position, because it also dictates (section 4, paragraph 15) that a chairman of a district bank can’t be an officer, director, employee or shareholder in a private bank, a hurdle Mr. Hughes easily clears. The century-old rules, in other words, say chairmen of regi
The subprime lenders that helped send the financial system -- and broader economy -- into a tailspin are now getting billions of taxpayer dollars to help fix the housing crisis. A new report by the Center for Public Integrity shows Washington is subsidizing them in what could be the next major credit bubble:
Mortgage-backed securities—and the bankers who loved them—wreaked havoc last year, helping to pitch us into the deepest downturn since the Great Depression. Are you ready for a replay? Gird your loins. The signs are growing that there's a new Wall Street gold rush under way—for those complex bundles of mortgage loans that fueled banks' profits between 2005 and 2007. This year, prices for mortgage-backed securities are rocketing as federal stimulus dollars flood the market. But the difference with this "boom" is the center of gravity has shifted: from giddy, cowboy bankers to the Federal Reserve. The Fed is so eager to save banks, create a demand for these securities, and stabilize the housing market that it's taking troubled loans and mortgages onto its own books. The problem is the Fed may be in well over its head. The Fed is cleaning up the old mortgage securities in the market—mostly old residential mortgage loans backed by Fannie Mae and Freddie Mac. But
Video at site Peter Schiff seems to think so. QUOTATIONS ON LIBERTY When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed. -Ayn Rand
Video "Problematic for the country" Tim? May I educate you on this petty little document you swore an oath to uphold against all enemies, foreign and domestic? The US Constitution, Article I, Section 8: To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures; End of discussion. That power rests in the United States Congress, NOT THE FEDERAL RESERVE OR TREASURY. Congress is free to delegate that power as it sees fit but you are absolutely not empowered to interfere via bluster, threat or any other means Congressional Authority in this regard. If you are unwilling to discharge your oath of office you must resign immediately. If you attempt to subvert The Constitution of The United States you must be impeached, removed from office and, if there is evidence that the $24 trillion you are attempting to cover up the disposition of is in any way linked to any sort of favoritism or game-playing I argue tha
