12 October 2008

Raspedia update 13, sunday edition

Ras Note):: You might wish to pour an extra-large cup of coffee this morning, because I have greatly edited this verison of the Rasipedia to reflect the rapidly-changing situation regarding the global, systemic, synchronized financial and economic collapse.

To that end, I have extensively revised and updated several sections of this massive missive, especially:

Section 3: What will Happen, even though the Hanktator Act has been Passed"

...as well as updating and revising some of the other sections in a futile attempt to keep abreast of what is turning into a once-in-a-century, historic, financial panic.

In additon to the revamping of the regular Rasipedia, I have also included a special treat for those who are kind enough to tolerate my rantings and ravings. (Please see Point 3 of the Updates below.)

Rasipedia Updates:

1. It appears that The U.K., Germany AND France are all set to announce the nationalization of their respective banking systems. Furthermore, there is a "trial balloon" being floated that perhaps the U.K. will close their banking and financial system for a period of time to avoid the continuation of the mass panic and stock market selloff.

Heh. Nothing like locking the exits in a crowded, burning casino to instill a sense of "calm" in the gamblers, I say. In any event, this simulataneous nationalization should convince even the blindest, dumbest, "buy the dips" bulls that there is a problem in the global economy. Duh.

2.I fully expect a similar announcement of nationalization of the U.S. banking system as early as Monday as well. Luckily for us, Monday is ALREADY an official bank holiday (Columbus Day), so TPTB won't have to declare the banks closing under emergency order. However, on Tuesday all bets are off.

3.Finally, as yet another reward for your kind tolerance of my posting these massive, unwieldy, rambling rants, I have this morning included a special section entitled "Cliff Notes Version" of the Rasipedia. This is a simple, boiled-down-to-its essence, six-point synopsis of the situation. I provide this abbreviated version for two purposes:

1. For those readers who are tired of having to navigate the increasingly-Byzantine labrynthe that the regular Rasipedia has become

...and:

2. For perhaps sharing with the ADD/ADHD, clueless and willfully ignorant masses who STILL are not getting the message that the world's financial system has collapsed.

So, without further ado, here is the "Cliff Notes Version" of the Rasipedia:

"Cliff Notes Version" of Rasipedia.


1. The "Ponzi Pyramid of Debt Death/Bretton Woods II" that was the world's financial system collapsed five weeks ago today. Tens of trillions of electronic fiatscos were evaporated from the servers and spreadsheets housing them.

2. Literally every single large financial instution failed, simultaneously. Worldwide.

3. The world's governments and central banks have been performing ever-greater and more desperate maneuvers to revive the now-decaying corpse, pumping in seven trillion fiatscos.

4. So far, their efforts have shown little success as the spillover effects on the credit and equity markets can no longer be hidden.

A full blown, up-in-your-face credit collapse and stock market colllapse has ensued. Again, worldwide.

5. Coming next: "Great Depression II Meets Mad Max".

6. Therefore, we're scroomed.

(Ras): So, there you have it. The "short-and-sweet version" of Rasipedia.

Perhaps you might have better luck getting through to the sheeple if you send them this version, as opposed to the opressive, boring "Sunday Edition" of the Rasipedia. At least there is some hope that the sheeple will read it, even if they don't understand or believe it.

LOL.

Now, onto the "Sunday Edition" of the Rasipedia:


UPDATED RASIPEDIA (10-12-08):


Table of Contents:

Section 1: Layman's explanation of the systemic, worldwide financial collapse

Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse

Section 3: What will happen even though the "Hanktator Act" was enacted.

Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"

Section 5: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector

Section 6: All government and central bank efforts to date to combat the systemic global financial institution collapse

Section 7: Other Countries' Efforts to Fight the Financial Collapse:



Individual Sections of the Rasipedia:


Section 1: Layman's explanation of the systemic, worldwide financial system collapse

Layman's explanation of our situation:

1. The current "Ponzi Pyramid of Death" monetary system is crumbling. This system was constructed from the following "sections", each one of them more dangerous and fraudulent than the one below it. Here are the sections in top-to-bottom order:

Derivatives ($600trillion)
Securitization ($10-$15 trillion)
Central Banking
Fractional Reserve Lending
Fiat Currency


2. Right now, virtually every single large bank, medium-sized bank, hedge fund, pension fund, mutual fund, money market fund, stock broker and insurance company on the planet has failed or is failing. All the trillions of dollars phony paper they have been trading back and forth is virtually worthless.

3. Somewhere between $10-$20 TRILLION (estimates are hard to make due to the opaque nature of the derivatives markets) in debt and derivatives "value" has been wiped off the books of the above-mentioned players.

4. The players are failing left-and-tight. ALL of the biggest, oldest Wall Street banks, plus the largest insurance company plus the two largest mortgage companies (Fannie and Freddie), plus the entire money market, plus the largest U.S. S&L (WaMu) and the fouth-largest U.S. bank (Wachovia), the largest U.S. insurance company (AIG), all failed in the span of five weeks. The rest of the thousands of institutions worldwide were also mortally wounded and are now toppling over, en masse.

5. Governments and central banks worldwide have already pumped approximately $7 trillion collectively into the failed financial system to date to fight this systemic, sychronized, worldwide, complete, utter collapse. So far, their efforts have failed. Credit is not flowing between banks and stock markets are crashing worldwide. Many stock exchanges have been closed outright. Entire banking systems have been nationalized, or will be shortly.

6. At this point, the fight will continue to the death. During these next few weeks, months, and even years the "economic convulsions" between the "Ponzi Pyramid" debt collapse destruction-deflation and government and central bank reflation/monetization/nationalization efforts will rage, with the back-and-forth battles getting wilder and wilder, until:

7. The entire world will plunge into a final financial demise, with the people of all the nations suffering mightily. "Great Depression II" will ensue for the next five to ten years.

8. During this time, if the world doesn't blow itself up in all the wars that will surely follow, tens of millions of people in the U.S. are going to learn to fear debt and living beyond their means. This is a good thing.

9.Eventually, hopefully, the U.S. pulls through in one piece, the people's stock, bond, and housing assets are decimated, many have lost their jobs, but we all learn discipline, humility and sobriety and as a result, our national character grows.

10. We emerge as a chastened and humble nation, and so do the other nations who have contributed to this Ponzi Pyramid of Debt and Derivatives Death". Exactly what we need.



Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse

In order to help put into context the rapidly-moving events surrounding this systemic worldwide financial collapse, below is a timeline of the "Fannie/Freddie Big Bang" that touched off the derivatives implosion, which is why so many instituions failed simultaneously, worldwide.

To wit:

Timeline of "Fannie/Freddie Big Bang" CDS implosion, leading to current total, systemic, global financial collapse:

1. September 7th, 2007: Treasury takes over the failed Fannie and Freddie and FHLBs.

2. September 7th, 2008: All counterparties to the multiple tens-of-trillions of fiatscos of CDS positions are instantly thrown into chaos since many of these OTC private contracts are poorly documented and the gamblers are poorly capitalized and unable to pay up on the bets. (Many players immediately start failing that very week).

3. September 8th, ISDA issues an emergency press release confirming that there are huge (but undisclosed) amounts of CDS trades outstanding on Fannie/Freddie debt. ISDA urges emergency conference call with Federal Reserve New York in attendance be undertaken immediately. The call takes place that very morning.

4. September 8th to present: The failed gamblers scramble to construct a list of the failed trades.

5. September 16th: The Fed, feds, and ISDA step in and try one last ditch attempt to make a market in all the destroyed derivatives positions during the emergency "ISDA Sunday Swap Meet", which is a complete, abject, utter failure

6. Immediately after this failed "Sunday Swap Meet", the following players instantly are ruined (but not all topple over immediately) :

a. Lehman Brothers
b. Merrill Lynch
c. AIG
d. Morgan Stanley
e. Goldman Sachs
f. (Update): WaMu topples less than three weeks later
g. (Update): Wachovia bit the dust exactly three weeks later

And the Grand Total of just the top financial institution failures so far:

1. Fannie Mae failed ($2.5 tril.)

2. Freddie Mac failed ($2.5 tril.)

3. FHLB system failed ($1.3 tril)

5. Merril failed ($800 bil.)

4. Lehman failed ($700 bil)

5. AIG failed ($500 bil. in CDS)

6. Goldman Sachs effectively failed ($2 tril)

7. Morgan Stanley effectively failed ($1.5 tril)

8. WaMu failed ($300 billion)

9 Wachovia failed ($800 billion)

Sub Total: Approximately $13.1 trillion

(And now the simultaneous collapse of virtually ALL of Europe's biggest banks, followed by the unprecedented move to nationalize all the fallen financial freaks by the European governments. Please see:Grand Total ALL Reflation/Nationalization/Monetization Costs to Date,worldwide )

Time-frame for this epic collapse of virtually every major financial institution in the U.S. AND now Europe:

Less than five weeks

...which clearly is a record.

(Ras Update: On October 2nd, ISDA held an "auction" to attempt to settle failed CDS positions on Fannie/Freddie underlying debt. Actual notional amounts were NEVER released, so we don't know how high the losses actually were to the parties who wrote the CDS "insurance". However, given the ratios of CDS-to-underlying debt of 10-to-1 and the supposed 90% percent recovery rate, I estimate that hundreds of billions of fiatscos are owed by the losers. A similar auction was held on October 10th on Lehman CDS positions. Again, my estimate is at least $400 billion is owed by the losers. Grand total all losses currently owed but not yet paid: $1 trillion.)



However, that's not all: also vaporized were virtually every:

1. Hedge fund
2. Pension fund
3. Insurance company
4. Mutual fund
5. Money Market funds, both in the U.S. and in all other major countries, worldwide.

Sub Total: Who knows? Probably trillions more


ALSO crushed, and even more dangerously so:

1. Some percentage of the $62 trillion credit default swaps market (Ras Note: Immediately after the "Fannie/Freddie Big Bang", ISDA began reporting that the swaps market was $54 trillion instead of the former $62 trillion--$8 trillion in positions evaporated--and offered NO explanation for this stunning drop.)

2. Some percentage of the $650 trillion overall derivatives markets

Sub Total: Who knows? I don't even want to guess anymore.



Section 3: What will happen even though the "Hanktator Act" was enacted

Now that the Hanktator Act has been officially passed, I am modifying my predictions for what will happen going forward--even though at this point it's anybody's guess as to what the heck will take place next in this insane economic environment.

To wit:


1. As of October 12th, I am no longer sure that bank runs won't be coming soon to a neighborhood near you. Especially since the U.K., Germany and France are this weekend set to announce the effective nationalization of their banking systems and the U.S. expressed similar intentions this weekend. These governments would not be making these unprecdented moves in unison if they were not concerned that the banks were about to experience a panic run on them, in my opinion.

2. I am also no longer sure that the Federal Reserve will be the first one lined up at Treasury's window to start trading in the now-almost-one trillion or so fiatscos worth of totally dead assets it took on its balance sheet from failed financial institutions around the world. This is because the entire U.S. banking system is on the brink of failure and Hank Paulson is now stating that he will use the TRILLIONS of fiatscos authorized by Congress to try to stave off collapse and a run on the banks. So, the Fed may have to wait--perhaps forever--to ever deal off these dead "assets".


3. One thing is for certain: The U.S. government has made it a top priority that house prices will not fall any further. Instituting everything from outright foreclosure forebearance to the authorizing of Fannie and Freddie to start purchasing dead, toxic MBS, the feds are desperately trying to keep the housing collapse from continuing unabated. Whether or not they will be successful remains to be seen. However, if these latest actions fail, you be absolutely assured they WILL resort to even more radical measures--even including the federal government literally buying empty houses outright and moving sheeple into them at no cost.

4. Clearly the U.S. automobile industry has failed and will be nationalized in one form or another. Whether GM absorbs Ford and Chryslyer first and then is absorbed by the federal government or whether they are all nationalized individually (with perhaps one of them allowed to be dissolved), it is absolutely guaranteed that there will be a government bailout of the U.S. auto industry.

5. Sorry to have to report this, but I still see tens of millions of people thrown out of work and/or losing their business. Especially in the bloated, useless "F.I.R.E" (Financial, Insurance and Real Estate) sector.

6. I am now fairly confident that that the sheeple's 401(k)/IRA mutual funds are going to be destroyed one way or another. Either through the continued stock collapse (as of this writing the DJIA, S&P and NASDAQ have all crashed apprroximately 40%) or through confiscation/taxation of their funds/gains. There are already discussions going on in Washinton D.C. as to how the feds might start tapping into the trillions of fiatscos currently trapped in the 401(k)/IRA system.

7. I still can't decide whether the U.S. bond market crashes or skies. If our Asian and OPEC debt-enablers keep buying up the multiple-trillions-more fiatscos of Treasury debt we will be issuing to fund all the bailouts, then perhaps interest rates stay low.

However, if our debt-enablers demand higher interest rates to compenasate them for the risk, or the Federal Reserve have to step up and fling some fresh fiatscos to buy the debt, then all bets are off and we could see a full-blown bond crash.

8. While the U.S. fiatsco has been on an upward rocket shot these last few weeks as other currencies collapse, I cannot make a confident prediction that this trend will continue. I just don't know how the debt funding will play out and this will be a large determinate as to the relative value of the U.S. fiatsco going forward.



Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"

The four questions that were never asked during the Congressional hearings on the "Hankzooka Act" were:

1. Of WHAT exactly do all these instruments consist? (Categorically: MBS, CDOs/Squareds/Cubeds, CDS, other derivativtes)

2. Exactly WHO is holding them?:

3. WHAT are the actual, verifiable, CASH FLOWS on the instruments that the destroyed financial sector are trying to foist on the American taxpayer?

3.(a) WHAT is a reasonable estimate of the "worth" of these assets, based upon number 3 above?

4. WHAT "assets" has the Federal Reserve accepted in exchange for the fiat/Treasuries flung under the various "TAF-like" programs? From WHOM has the Fed accepted these "assets?" WHAT is the cashflow from these "assets?" At WHAT price did the Fed value these "assets"? Will the Fed be swapping these "assets" back out to the players with whom they did these deals? (And then will the players be dumping these assets onto the Treasury under the "Hanktator Act"?)

(Ras): Four simple questions. The truthful answers to which would instantly collapse our entire economy and financial system even more so than it already has, because the truth is just too ugly to reveal.

Which is why we haven't heard them asked, nor will we hear them answered.



Section 5: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector

The Fed's unprecedented move to backstop all Money Market funds:

First, a link to the Fed's "Interim Final Rule" on their loaning to the failed financial institutions enough fiatscos to try to revive the moribund ABCP scheme:

But we''re not desperate or anything. We just thought we''d do this outta the blue, on a Friday morning, because we weren''t very busy

Now, the KEY phrase from this document is this (with my emphasis added):

"To reduce liquidity and other strains being experienced by money market mutual funds, the Federal Reserve System adopted on September 19, 2008, a special lending facility that enables depository institutions and bank holding companies to borrow from the Federal Reserve Bank of Boston on a NON-RECOURSE basis if they use the proceeds of the loan to purchase certain types of asset-backed commercial paper (ABCP) from money market mutual funds (ABCP Lending Facility)."


Did you catch that part about "non-recourse"?

Do you know what that means?

Well, it means that when--not if--the ABCP the institutions hand the Fed in return for freshly-flung fiatscos goes bad, then THE FED WILL JUST EAT THE LOSS AND NOT, I REPEAT NOT, TRY TO RECOVER THE FIATSCOS FROM THE INSITUTIONS!!!


Section 6: All government and central bank efforts to date to combat the systemic, global financial system collapse

Government and Central Bank efforts from March, 2008 to present to fight the financial Collapse:

The sum, fiatsco-wise and in terms of actual actions, of the efforts of the various TPTB branches to fight the debt destruction convulsions and the related costs incurred to do so (so far) is presented below.

To wit:

Federal Reserve efforts undertaken to fight the credit collapse:

1. Dropped Fed Funds rates a total of 375 basis points, some of these moves being surprise rate cuts.

2. Also pounded down discount rates by similar amounts and means.

3. Created unprecedented, even borderline Constitution-contravening, now-trillion fiatsco TAF, TSLF, PDCF,"Fed,LLC", "Fed, AIG", "Fed Euro-swap" programs Then, extended time-frames, amounts and frequency of many of those programs.

4. Instituted the stunning "Fed-FDIC" program on Friday, September 19th, whereby the Fed backstops ALL money market funds (total fiatsco exposure amount: over $4 trillion by itself), accepting worthless ABCP paper with NO-RECOURSEto try to stop a run on the funds by panicked bagholders.

5. Accepted hundreds and hundreds of billions (and now perhaps trillions) of fiatscos of totally dead "assets" from failed Wall Street firms and will not disclose what those "assets" are, nor from whom they were accepted.

6. Offered JPM "sweatheart $75 billion loan" as part of Lehman liquidation (probably to square up some failed CDS positions)

7. Suspended "Rule 23(a)", allowing commercial banks to fling fiatscos to their failed investment banking arms

8. Began outright purchases of Agency debt on Friday, September 19th

9. Allowed Goldman Sachs and Morgan Stanley to--with no waiting period--change from investment banks into commercial banks. Changed "rules" so that Morgan Stanley can continue to perform investment banking functions. Changed the "rules" regarding minority ownership of these giants

10. Did a special $25 billion "TAF" to Goldman and Morgan

11. Raised "SOMA" account credit limits by 25% from $3 billion to $4 billion

12. In an unprecedented move, on September 29th, the Fed committed to injecting $630 BILLION in "liquidity" into the world's financial system. This injection took the form of increased "TAF-like" injections (also extended in duration) as well as MASSIVE "Fed Euro Swap" injections--probably to help fight the collapse of all the European institutions that are stuffed to the gills with bad paper sold to them by Wall Street.

13. Announced, on October 7th, that the Fed will be acting in concert with foreign central banks to extend the size and duration of the previous "TAF-Like" program. Also announced an unprecedented coordinated overnight funds rate cut in conjunction with the ECB, BofE, Canadian central bank, Sweden and Swiss national banks.

14. In a move that can only be decribed as "Crossing the Rubicon" the Fed, for the first time ever, announced on October 7th that it will create an "SIV" and directly loan fiatscos to corporations that participate in the commercial paper market. NO "collateral" is even necessary for the players to borrow from the "Fed SIV". Furthermore, NO limit to the amount of fiatscos provided by the Fed was announced. However, not even this ground-breaking, breath-taking step taken by the increasingly-panicked Fed lowered LIBOR rates. In fact, LIBOR rates actually ROSE on the day of the announcement.

15. On October 8th, The Fed pumped an additional $38 billion into AIG, raising the total to an astounding $123 billion so far. This latest, massive, injection coincidentally was made just twenty-four hours before the ISDA's scheduled auction to settle perhaps as much as hundreds of billions of fiatscos of failed CDS positions. AIG is reported to be sitting on $500 billion-plus in CDS "insurance" they sold to counterparties.


(Total liquidity/reflation/monetization effort costs on the part of the Fed):

Now multiple trillions of fiatscos, and no sign of let up, since they have proven they are willing to fling fiatscos in all directions to prop the money market funds and other failures. So don't for a minute believe that the Fed (or other central banks) are anywhere near throwing in the towel.

(Ras): That is one impressive list of accomplishments by the Fed in their battle against the debt destruction convulsions. Breaking all previous rules, precedents and protocols, the Fed is well on its way to playing out Bernanke''s promised "Roadmap to Weimar" as laid out in his famous 2002 speech:

"Deflation: Making Sure it Doesn't Happen Here".

However, these massive stunning, creative, and even nefarious moves on the part of the Federal Reserve don''t represent the total effort by TPTB to stave off economic collapse.

Far from it.

Next we will focus on the Treasury/Administration/SEC/FDIC gang's efforts and see just what rabbits they have pulled out of their collective hats. Trust me, they have produced an entire litter of "reflation bunnies" in their attempts to keep this collapsing system intact.

And here they are:


Treasury/Administration/Congress/SEC/FDIC efforts:

1. Congress proffered "Economic Stimulus Checks for Sheeple" program of $150 billion

2. Treasury floated various failed "Super SIV" programs before turning to the "big gun" efforts described below

3. Treasury (Hank Paulson) demanded, and received, from Congress an $800 billion (so far) "Bazooka" to nationalize Fannie, Freddie, FHLBs

4. Within six-weeks, Hank used that bazooka to take over the GSEs, injecting an initial $200 billion into these fallen frauds and also instituted a Federal Reserve-like function of monetizing GSE MBS. Also, offering "liquidity" for MBS

5. Treasury pulled off two emergency funding Treasury auctions totalling $200 billion to give Federal Reserve more ammo to fire at collapsing financial institutions worldwide

6. Treasury demanded "Hanktator" emergency legislation from Congress, giving Treasury literally dictatorial powers over the entire financial system. Further demanded authority to keep shuffling dead assets from Wall Street banks into government (and taxpayer's) lap

7. Treasury/FDIC/SEC arranged "shotgun weddings" between failed Wall Street banks, commercial banks and major mortgage originators

8. On Friday,September 19th., Treasury announced they were turning the GSEs loose to once again start snapping up dead MBS from the failed financial system

9.The FDIC quietly allowed banks and S&Ls to practice "foreclosure forebearance" which gives these failed institutions the authority to pretend that all their deadbeat real estate loans are "performing". Also, have quietly shut down or married off failed banks (And are just beginning this last effort, with perhaps thousands more to go.)

10.The SEC ruled that "Short-Selling Seditionists" are a financial threat and released a 799-member "untouchable" list of failed financial institutions which cannot be shorted. This action came after a smaller version of same was instituted in July. Have continually added to this list, including many non-financial stocks

11. The FDIC arranged an unusual THURSDAY NIGHT takeover of WaMu, dealing off its deposits to JPM. Additionally, and no surprise at all, WaMu's derivatives positions were also transferred to JPM

12. FDIC decided that the collapse of WaMu did NOT constitute a "Credit Default" therefore no CDS payments need be triggered. This is a HUGE event because the FDIC just basically negated ALL CDS contracts, in my opinion.

13. On September 29, the FDIC authorized that Citi take over the failed Wachovia. And, in what is becoming par for the course, Citi was allowed to "cherry pick" Wachovia's deposits and some of the debt, and the rest of the rotting carcass will be strewn across the backs of the taxpayers to be carried like so much rotting meat, similar to the recently-failed WaMu.

And who knows what further CDS bombs were set off by this latest failure of one of Wachovia, which is the world's largest financial institutions? My sense is that Wachovia's collapse was "not helpful" to the already devastated credit default swaps market in particular and the whole derivatives space in general.

14. ON September 30th, in yet another stunning move by the increasingly-desperate TPTB, the SEC and FASB decided to make it even easier for the failed gamblers holding dead, toxic "assets" to completely abandon any and all pretense of "mark-to-market" and just allow the mortally-wounded institutions to literally make up any "value" for these "assets" they deem necessary to shore up the ol' balance sheet.

The SEC and FASB offered a press release, found here:

But Rules are for little taxpaying sheeple, NOT big, failed, Wall Street gamblers.

...whereby they explain that it is perfectly okay for the destroyed financial institutions to simply make up whatever valuation they desire for the trillions of fiatscos worth of dead, rotting "assets" currently stuffed in the dungeons of their balance sheets.

This latest desperation move is obviously intended to obscure the massive, multi-trillion fiatsco losses which have crushed the gambler's corrupt enterprises until the Hanktator Act can be passed and these rotting corpses can be laundered through the new entity.

15. The SEC has extended the "Anti Short Selling Seditionist" emergency rule has been so successful in fixing all stock, bond, currency, debt-derivatives problems that they are extending it for another few weeks or so. Sheesh, and to think TPTB could have saved themselves all this heartache and stress of having to take the OTHER thirty or so unprecedented, emergency actions if they just would have implemented this one simple rule up front. Whod'a thunk it?

Oh well, better late than never I say.

16. IRS rules were changed to make the deal more palatable tax-wise for Wells. Here is the actual ruling:

"For purposes of Code Sec. 382(h), any deduction properly allowed after an ownership change of a corporation that is a bank with respect to losses on loans or bad debts, including any deduction for a reasonable addition to a reserve for bad debts, shall not be treated as a built-in loss or a deduction attributable to periods before the change date. This guidance does not affect the application of any provision of the IRC except Code Sec. 382. Banks may rely on this guidance until further guidance is issued."

...which, according to calculatedrisk blog, allows Wells to accelerate the tax write-offs associated with absorbing the failed Wachovia's "assets".

17. The Treasury is allowing Fannie and Freddie to buy FHLB MBS. I'm not sure why they are doing this since all the GSEs have been effectively nationalized, but there must be some nefarious method to this madness.

18. October 8th:The Treasury Department announced a "technical correction" that would allow them to backstop additional money market funds under Treasury's "Temporary Money Market Fund Guarantee Program". According to Treasury, MMFs that have a "policy of maintaining a stable net asset value or share price that is greater than $1.00 and had such policy on September 19, 2008" are now eligible to participate, provided the fund meets all of the other original requirements, which basically translates to: they haven't folded up shop yet.

19. October 10th: The G7 goons are at it again. After a reportedly contentious meeting on Friday, they released a statement, which can be found here:

A little fuzzy on details, but still scary nonethless.

And here is the "Money Quote Paragraph" from the statement:

"We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed necessary to promote financial market stability.


As we develop plans to purchase equity, as in the approach we are taking to broad mortgage asset purchases, we are working to develop a standardized program that is open to a broad array of financial institutions.

Such a program would be designed to encourage the raising of new private capital to complement public capital.

Consistent with the legislation, any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market standard terms to protect our rights as investors."


(Ras): If I am interpreting this paragraph correctly, the Treasury is going to purchase "equity" in a "BROAD ARRAY OF FINANCIAL INSTITUIONS" which to my little conspiratorial Rasputin mind says they will be buying into more than just the failed banks. It looks to me like they will buy into anything even remotely resembling a "financial institution".

Regarding the "private capital" thingy, it is my understanding that they are working on some kinda "Matching Funds" program whereby the Pigmen and the Treasury will do joint bailouts (and looting) of distressed institutions and perhaps entire sectors.

Once again I remind the reader to please not make the fatal mistake that these guys are anywhere NEAR finished in this epic battle. They have only begun to fight. And I can hardly bear to contemplate what they will do next, but you can bet your last fiatsco they WILL be doing something. In fact, they will be doing a whole lot of "somethings". And soon. And most of them probably bad.

20. Since Fannie and Freddie did such a bang up job of destroying the world's economy, the U.S. Treasury decided to reward these two Frankenstein monsters by allowing them to snap up $40 billion A MONTH in dead dog mortgages from failed financial institutions and then hold the toxic trash in their own portfolios, according to Bloomberg.

Of course, one has to ponder as to why this sopping up of these worthless loans owed by deadbeat homedebtors, most of whom will NEVER pay their mortgages is being done, but at this point why even bother trying to figure out what makes sense and what doesn't? I will state this for the record, however: It's clear that your federal government wants to keep house prices artificially inflated. Therefore, you will be paying more of your net income to have a roof over your head, as well as pay more property taxes, insurance/maintenance/upkeep costs, and HOAs as well. And somehow this is supposed to be a GOOD thing?

Hmmmm, okaaaaay.


(Total nationalization/stimulus/reflation effort costs on the part of Treasury):

Estimated $2.3-plus trillion so far, with open-ended commitment going forward.

(Ras):Once again I have to confess pure,unbridled shock and awe at the impressive array of weapons that this particular branch of TPTB has amassed--and used--in their battle against the evil forces of deflationary debt collapse convulsions.

Yet, despite outlining the above massive and unprecedented steps taken, we''ve not yet completed our quest to document all TPTB''s powers and programs undertaken to date.

Let us do so now:

Congressional efforts:

1. Passed the proposed $150 billion "economic stimulus" program suggested by Treasury/Administration

2. Passed the "Save the Homedebting Sheeple Act" with an estimated cost of $300 billion (but will surely be much more)

3. Then tacked on the "Bazooka" provision to allow Treasury to nationalize Fannie/Freddie for another $800 billion (so far)

4. passed the afore-mentioned "Hanktator" act, giving Treasury unprecedented dictatorial powers over the failed financial system and perhaps multiple-trillions of fiatscos to do so.

so that we can buy ourselves a few more weeks or months worth of reprieve before "Great Depression II" continues unabated.

5. Just passed $25 billion aid to auto manufacturers

(Total stimulus/reflation effort costs on the part of Congress, avoiding double-counting costs already attributed to Fed/Treasury above):

$300 billion to $1 trillion.

(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, U.S. only):

Approximately $ 7 trillion. So far.


Section 7: European Efforts to Fight the Financial Collapse:


In addition to the nationalization of Northern Rock in 2007, Europe has been in a mad scramble to try to revive their equally-as-collapsed-as-the-United states'. financial system. Virtually every single big bank throughout Europe in the last week.

And the governments have responded with unprecedented moves to nationalize the broken banks.

To wit:

1. Monday. September 29th Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate.

2.Belgium, changing their stance from a mere "liquidity injection" decided that nationalized Fortis, a 300-year odl institution that survived everything except the "Great Real Estate Bubble" of 2002-2008, was a better idea.

3. And a day later, a bail-out for Dexia took place.

4. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s.

5. The government of Greece folllowed Ireland and announced that it was guaranteeing all deposits in all banks.

6. On October 7th,Iceland's entire banking system failed. Russia stepped in and provided a five billion fiatsco injection to try to revive the Iceland banking system. Alas, but this emergency measure was to no avail. The Icelandic government had to step in and shut down all the banks and has announced they will nationalize the entire banking system.

7. Again, on October 7th, the Russians stated that they were pumping in thirty-six billion fiatscos into their failing banking system.

8. Spain revealed their version of the American "TARP", a fifty billion Euratsco fund to soak up dead "assets" from failed financial institutions.

9. Australia's central bank, in a surprise move, dropped their overnight funds rate by 100 basis points. Hong Kong followed shortly with a rate cut of their own.

10.On October 8th, the U.K. pumped the equivalent of 87 billion U.S. fiatscos into their failed banking system in a desperate attempt to revive their failed financial institutions. At least the U.K. was kind enough to their taxpayers to demand preferred stock which MIGHT one day pay some paltry dividend back to their Treasury--unlike the U.S. TARP plan, which will basically offer nothing to U.S. bagholding taxpayers.

11. Various halts to trading on indices around the world have taken place in the first week of October as stock indices crash upwards of ten-percent per day.

12.On October 8th, The People's Bank of China dropped their overnight lending rates twenty-seven basis points--sneaking in under the cover of the excitement generated by the massive, unprecedented, coordinated move by the Fed and other European (and the Canadian) to drop overnight lending rates fifty basis points. Not to be outdone in creating more fire to burn their currencies to the ground along with everyone else, On October 9th, the central banks of Hong Kong, South Korea and Taiwan also dropped their overnight rates twenty-five basis points.

13.On Oct. 9th, The European Central Bank is offering banks "unlimited cash" and pumped an unprecedented (there's that word, "unprecedented" again!) 100 billion fiatscos in overnight funds into the financial system. This latest panic move came the one day after an interest-rate cut failed to soothe tensions in money markets.

The ECB said it will lend banks as many fiatscos for which the failed gamblers can provide "collateral", which one can only imagine what the "collateral" consists of these days: Beanie Babies? Pet Rocks?

14. October 9th: Iceland's government froze (sorry for the bad pun, but I can't resist) trading on its stock exchange for two days and took control of the country's largest bank (the third one in a row). Whoda thunk that tiny little Iceland would be knee-deep in the derivatives hoopla and now has a banking system that is totally in tatters? I guess when one lives in a country that is freezing cold 9 months a year, what else is there to do than gamble?

(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, worldwide):

Best estimate: Tens of trillions of fiatscos pumped into or committed to being pumped into the system?

And even more as Europe's collective governments continue nationalization of their biggest banks.

Why even bother to hazard a guess anymore?

1 comment:

Carla said...

Mind boggling stuff here. I applaud your efforts. I've seen this posted on several forums and it literally blows the mind of everyone reading it.