(Ras Note):Here is update #7 (as of 10-3-08) to the Rasipedia, which at this point has officially crossed over into the "Twilight Zone" in its efforts to chronicle the simultaneous failure of the world's entire financial system.
The unprecedented collapse has become so surreal in its size, scope and speed--and the responses by the world's CBs and governments have become so nightmarish (growing from from mostly-under-the-table reflation to outright monetization/nationalization of the failed players/gamblers)--that this Rasipedia has morphed into some kind of other-worldly news daily instead of being a historical account of the systemic financial collapse.
However, the beauty of this publication is its flexibility...if not its style and content.
Okay, enough smalltalk. It's now time to move onto the latest updates to this issue of the Rasipedia, which include:
1. The Hanktator Act non-bailout (please remember: it has now been been run through the "Orwellian Filter" and has been renamed "The Rescue for the Masses" bill) will be voted on today by the U.S. House. (Please see Section 1, "Update on the Hanktator Act" bailout bill and Section 3: What will happen if the "Hanktator Act is not enacted.)
2. I've added another category to the Rasipedia: Section 8: "European Efforts to Fight the Financial Collapse". Since this epic bust has gone global, so must the Rasipedia. And, in another unprecedented series of events, virtually every single large European Bank has collapsed outright, in the span of less than a week. Hmmm, do YOU see a trend here?... (Also, please see: Section 2 "Timeline of Fannie/Freddie Big Bang..." for the European updates to the total of financial system failures that I am attributing DIRECTLY to the collapse of the GSEs on September 7th, 2008.)
3. The Federal Reserve has Has strained its balance sheet to an astounding, unprecedented 1.25 TRILLION fiatscos in its increasingly-desperate attempt to resurrect the world's failed financial system.
I have provided no particular update below in Section 7; just thought I'd mention that the U.S. central bank is now, absolutely, unequivocally, in actual monetization mode since they have grown three-hundred billion fiatscos beyond their original nine-hundred billion fiatscos on their balance sheet when this worldwide collapse started a year ago).
Of course, arguments could be made that this is all "temporary" on the Fed's part, but unless the Hanktator Act is passed (allowing the laundering of TRILLIONS of fiatscos of dead assets through the U.S.Treasury) then the Fed will NEVER be able to unwind these swaps it made for toxic trash.
For, should the Fed try to hand back all the rotting,toxic, dead "assets" it accepted in exchange for U.S. Treasuries and feshly-flung fiatscos, it would instantly RE-collapse the world's financial system again.
4.Typos? What typos? I don't see ANY dang typos! If you do, then there must be something wrong with your eyes because Ras NEVER makes mistakes! LOL!
Now, onto the Rasipedia:
UPDATED RASIPEDIA (10-3-08):
Table of Contents:
Section 1: Update (currently as of 10-03-08) on the "Hanktator Act" bailout bill
Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse
Section 3: What will happen/is happening as the "Hanktator Act" is not enacted
Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"
Section 5: Layman's explanation of the systemic, worldwide financial collapse
Section 6: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector
Section 7: All government and central bank efforts to date to combat the systemic global financial system collapse
Section 8: European Efforts to Fight the Financial Collapse:
Individual Sections of the Rasipedia:
Section 1: Update (currently as of 10-0-08) regarding the "Hanktator Act" bailout bill
After the Senate ressurected the battered corpse of the Hanktator Act on Wednesday and added a few new sugarplums such as:
1. Tax credits for businesses and alternate energy, as well as raising the threshold for qualification of the Alternative Minimum Tax
2. Raising FDIC coverage on bank accounts to $250k AND allowing the FDIC to borrow WITHOUT LIMIT from the Treasury if needed (Ras note: Hmmm, one has to ponder as to whether they are expecting any bank runs or anything...naw, that would never happen here!)
...the bill is now back in the lap of the House for the yet another vote on the "rescue"--which has grown from the original three-page demand from Treasury into this four-hundred page, pork-filled monster.
I watched the House hearing yesterday evening regarding the bill and it appears that there MIGHT be a major provision change to the "Infinite Fiat" portion which would limit the TOTAL amount of fiatscos that Hank could fling to $250 billion between the passage of the bill and November, when Congress again convenes.
(Side note: there was an obvious backlash from the voters regarding all the pork stuffed into the bill by the Senate, as some of the house legislators stated during the hearing. However, I don't see this backlash as being able to kill the bill this time.)
In any event, should the limit to "Infinite Fiat" provision change be made to the bill, then "Great Depression II" continues unabated, so it will be interesting to see whether it survives AND the bill is passed today.
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 billion tril)
4. Lehman failed ($700 tril)
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 four weeks,
...which clearly is a record.
However, that's not all: also vaporized were virtually every:
1. Hedge fund
2. Pension fund
3. Insurance fund
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
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/is happening if the "Hanktator Act" is not enacted
Not passing the "Hanktator Act" will cause the near instantaneous collapse of:
1. All bank accounts by 95%
2. All 401(k)/IRA/mutual fund/money market fund by the same amount
3. Collapse of all McMansion prices by at least 70%
4. No more car loans or other loans for five years, or at interest rates that would be outrageously expensive.
5. A virtual guarantee that tens of millions would be thrown out of work.
...a glimpse of which was seen on September 29th as the DJIA imploded and collapsed over seven hundred points immediately when the U.S. House of Representatives voted down the Act.
However, even when the "Hanktor Act" is passed (which it will), these horrid events probably won't be prevented, just delayed for a few weeks to months.
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: 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.
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 has failed or is failing. All the 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 S&L (WaMu) and the fouth-largest bank (Wachovia), all failed in the span of three weeks. The rest of the thousands of institutions worldwide are mortally wounded will be toppling over soon.
5. Governments and central banks worldwide have already pumped approximately $5 trillion collectively to date to fight this systemic, sychronized, worldwide, complete, utter collapse. So far, their efforts have failed.
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 is plunged into 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. Exactly what we need.
Section 6: 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 7: 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 325 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.
(Total liquidity/reflation/monetization effort costs on the part of the Fed):
Now over one trillion 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 rranged "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.
(And once more for the record: The bill is NOT "only" $700 billion, but rather will allow Treasury to run TRILLIONS of fiatscos worth of useless "assets" through the system.)
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.
(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. Are currently wrangling with passing the afore-mentioned "Hanktator" act, giving Treasury unprecedented dictatorial powers over the failed financial system and perhaps multiple-trillions of fiatscos to do so.
Although this legislation is currently in doubt (as of October 1, 2008 due to the U.S. House of Representatives failing to pass the bill), the Senate seems likely to pick up the tattered bill and ram it through their chamber tonight. Hopefully, the House will then finally see the light and pass the legislation
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 $ 5 trillion. So far.
Section 8: 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:
Monday. September 29th Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate.
Belgium als nationalized Fortis, a 300-year odl institution that survived everything except the "Great Real Estate Bubble" of 2002-2008
And a day later, a bail-out for Dexia took place.
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.
The government of Greece folllowed Ireland and announced that it was guaranteeing all deposits in all banks.
(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, worldwide):
Approximately $ 8 trillion so far (which includes the addition of Europe's collective government nationalization of their biggest banks).
.
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