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Archive for the ‘Banking’ Category

Central bank body warns of Great Depression

Posted by Charlie Kilo on June 16th, 2008

A stunning warning from the central bank of central banks:

The Bank for International Settlements (BIS), the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.

In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.

According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.

The report points out that between March and May of this year, interbank lending continued to show signs of extreme stress and that this could be set to continue well into the future.

It also raises concerns about the Chinese economy and questions whether China may be repeating mistakes made by Japan, with its so called bubble economy of the late 1980s.

Bad times get worse for Ben

Posted by Charlie Kilo on June 9th, 2008

Sucks to be Ben:

Last month, I noted the apparent change in the Federal Reserve’s policy emphasis from their last meeting on April 30 (Self-Inflicted US Misery Asia Times Online, May 28, 2008). Finally, the Fed had become cognizant of the growing world inflation threat, a threat seemingly exacerbated and intensified by the Federal Reserve’s rapid fire “shock therapy” policy of cutting interest rates, which was initiated in response to the subprime/structured finance crisis that hit the markets late last summer. From September to April, the Federal Reserve’s benchmark Federal Funds Target rate was repeatedly and rapidly slashed, from 5.25% to 2%. Eschewing the slow and steady policy of his predecessor Alan Greenspan, who cut 25 basis points at a time, Bernanke cut fast and hard, twice, on January 22 and March 18, reducing the rate a full 75 basis points at a time.

Did it work, did it save the US and the world economy from the howling chasm of the subprime/structured finance crisis? For a while, or, at least until Friday, the application by the Fed of electric defibrillation paddles to the markets seemed to have had its proper effect, helped by the Fed’s switch of role in mid-March to be the preacher at the shotgun wedding of brokerage houses Bear Stearns and JP Morgan…

Panic Time at the Fed

Posted by Charlie Kilo on April 17th, 2008

Forbes:

U.S. Treasury Secretary Henry Paulson’s blundering is becoming more breathtaking with each passing week. At the end of March he rolled out a grand plan to crown the Federal Reserve as the nation’s new financial stabilizer. The Fed a stabilizer? That’s who created the financial mess we’re in.

If this wasn’t bad enough, Secretary Paulson then donned his cheerleader’s uniform and encouraged Beijing to let the Chinese yuan appreciate against the greenback. All the while favoring in this fashion a debasement of the U.S. currency, Paulson proclaimed that we should remain calm and confident because the economic fundamentals are sound. He reminds me of the stockbroker who performed a valuable service to his partners by always being wrong.

When the Fed Goes into the Investment Business

Posted by Charlie Kilo on April 13th, 2008

“The power to determine the quantity of money… is too important, too pervasive, to be exercised by a few people, however public-spirited, if there is any feasible alternative. There is no need for such arbitrary power… Any system which gives so much power and so much discretion to a few men, [so] that mistakes - excusable or not - can have such far reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic - this is the key political argument against an independent central bank.”

-Milton Friedman

From TheNewAmericanEmpire:

In so doing, the Fed has nationalized a portion of the portfolio of Bear Stearns, and become an “investor of last resort” rather than a “lender of last resort”, besides facilitating the take-over of this investment bank by JP Morgan Chase. A private company, BlackRock Financial Management, was also hired to administer the new Delaware-based corporation and will attempt to liquidate the acquired securities gradually over time. The Fed could then recuperate part or all of its non-recourse “loan” to JP Morgan Chase, and would retain any excess amount on its unusual “investment”, in the event there is a profit.

There you have it. For the first time since its creation in 1913, the Fed has turned itself into a government of the banks, and has invested risky public capital in a business that was in need to be saved quickly from bankruptcy and liquidation. Thus, the Fed has not only decided that it is its duty to solve “liquidity crises”, but also “solvency crises” in the regulated and non-regulated banking sector. In other countries, such public investments to resolve a solvency crisis are decided and handled by the Treasury and the Government, and are later voted into law. Even in the U.S., that is the way the Resolution Trust Corp. was created by the Reagan administration in the late 1990’s. In fact, the current banking crisis is very reminiscent of the U.S. Savings and Loan crisis of the 1980’s and 1990’s, although this time the banking crisis is much more severe and much more widespread.

Thomas Jefferson on centralized banking

Posted by Charlie Kilo on April 8th, 2008

Thomas Jefferson said:

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

The man was a prophet.

Quick notes on the economy today

Posted by Charlie Kilo on April 8th, 2008

Is the worst over or has it all just begun?

Fed auctions another $50 billion to cash strapped banks

Banks split on whether the worst is over

Pending home sales fall to record low

Oil at $109 a barrel

WAMU get $7 billion infusion, cuts jobs

I’m going to go out on a limb and say that we’re not even close to the light at the end of the tunnel.

Bush’s rescue plan would help some avoid foreclosure

Posted by Charlie Kilo on April 2nd, 2008

This could be a bonanza for those left in the mortgage business - especially the FHA mortgage business:

The Bush administration is finalizing details of a plan to rescue thousands of homeowners at risk of foreclosure by helping them refinance into more affordable mortgages backed by public funds, government officials said.

The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth due to plummeting home prices, an issue at the heart of the nation’s housing crisis. Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of those loans and issue new, smaller mortgages in exchange for the financial backing of the federal government.

When socialists take Wall Street

Posted by Charlie Kilo on March 31st, 2008

Via Inteldaily:

Wall Street, which historically has been a bastion of vehement opposition to government intervention in the so-called free market, now takes it as a matter of right that the U. S. government and its central bank (as well as the central banks of other countries) will come to its rescue. The principle invoked–if it can be called that–is that Wall Street’s institutions are too big to fail without causing a worldwide financial panic. This is an interesting form of extortion: “We’ll bring down the world economy unless you bail us out. Never mind that we paid ourselves huge bonuses using other people’s money while creating this mess.”

The mother of all bailouts

Posted by patriot on March 30th, 2008

Jim at the Survival Blog has a post discussing the latest “mothers of all bailouts”, using taxpayer funds to correct the mistakes of business owners and banking empires. One of the summary paragraphs reads:

All of these macro-level implications might seem fairly abstract, so let me put them in real world terms and take the risk of extrapolating on some trends that I’ve observed: There will be a recession, and it will be deep, and long-lasting. A recession will mean that there will be some big corporate layoffs. Be ready. There will be bank runs and banking “holidays”. Be ready. There will be huge flows of “bailout” funds that will effectively nationalize many industries. Be ready. There will probably be a stock market collapse. Be ready. There will be a further collapse in residential real estate that will make the recent declines seem small, by comparison. Be ready. Credit delinquencies and foreclosures (on car loans, home loans, credit card bills, etc.) will dramatically increase. Be ready. There will be a collapse of the commercial real estate market. Be ready. Even though the credit available for IPOs and private mergers and acquisitions has dried up, there will be news of some large and seemingly inexplicable acquisitions in the near future, all sanctioned by and in some cases, underwritten by, and even funded by, the Federal government. Be ready. There will be shortages of key commodities including fuel and food. Be ready. Strapped for cash, America’s highway, rail, water, sewer, telecommunications, and power infrastructures will degenerate. Be ready. There will be mass inflation of the US Dollar that will devalue any dollar denominated investments. Be ready.

In case you missed it, the main idea to glean from the article is to be ready.

Bush proposes financial regulation overhaul

Posted by Charlie Kilo on March 29th, 2008

Plan would expand powers of Federal Reserve

It looks like the Powers That Be are making a move on the entire U.S. banking system through the Federal Reserve. As Lenin himself once pointed out - all you have to do to control a population is to control the banks. From MSNBC:

The Bush administration is proposing a sweeping overhaul of the way the U.S. financial industry is regulated.

In an effort to deal with the problems highlighted by the current severe credit crisis, the new plan would give major new powers to the Federal Reserve, according to a 22-page executive summary obtained Friday by The Associated Press.

The proposal would designate the Fed as the primary regulator of market stability, greatly expanding the central bank’s ability to examine not just commercial banks but all segments of the financial services industry.

Continue to story

Here’s more coverage of this story over at Cryptogon.

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