10/14/08 - FSME/Denninger Report

So what happened with our bailout money? For all the hoopla about how the $700B was suppossed to be used, a third of it just went somewhere else from a one line loophole in the darn thing.


10/14/08 Ticker

But the law was in fact to allow the buying of $700 billion of "troubled mortgages" and related assets.

Or was it?

See, buried in that bill was a nasty little catch-all "any other asset the Treasury says promotes financial stability."

One little sentence, with which you surrendered forever the principles of economic capitalism and replaced them with government totalitarianism.

Fascism.

And a week later half of that money was instead spent on a massive bailout of Wall Street through the injection of perpetual preferred stock, saving every single nickel of executive stock and options. No dilution of existing shareholders, nor any haircut for their bondholders, thereby preventing the capital structure of the firms from absorbing the losses as is intended and required under the law.

In other words, you, The Taxpayer, have been intentionally looted by the puppet-masters at Treasury (Hank Paulson) and The Fed (Bernanke, Geithner, et.al) to the tune of $250 billion dollars, while these folks in the so-called "private sector" keep each and every nickel of the money they stole from you while peddling their fraudulently-sold and packaged subprime and Option ARM mortgages.

Yep, the first move they made, was nothing what they told us it would be used for. Not to mention the American people said they didn't want the Bill in the first place. (For all the implications of this move made 10/14, see the full link.)

America's House and Senate, just a couple of short weeks ago, passed a law that was denounced by The American People, where representatives and senators were receiving calls 50:50 against - 50% "No" and 50% "Hell No".

So why did our Representatives do it?

The bill passed after Henry Paulson and Ben Bernanke threatened Congress with the imposition of Martial Law. Yeah. Tanks in the streets stuff. Literally.

This was disclosed in the well of the house by a few brave representatives, including Representative Sherman.

Were you told this was how Congress was browbeaten into passing this law? Were you told that Congress was essentially threatened that tanks would be deployed into our cities and towns if Congress did not pass this bad law that Paulson and Bernanke demanded?

You probably didn't catch this on the news, but there is a video clip in the Ticker of Representative Sherman actually telling us this happened.

When and how will the US tell our government we've had enough? Is the voting out of the ones facing the ballot in less than amonth be enough, or is it going to be too late? Do they dare mess with this money and our futures any further before the election?

Did that rise in the Dow fool you into thinking they fixed it?

I bet, in fact, you cheered the nearly 1000 point rise in the DOW yesterday, even though it came from the expectation that you would be robbed blind to pay for the foibles of these bankers that arose from their felonious and outrageous conduct.

Brought to you with permission of Karl Denninger & tickerforum.org


[edit on 10/15/2008 by Relentless]

The entire bill is one big loophole. It doesn't surprise me at all that it has been used this way.

I didn't cheer the 1000pt rise either because deep down, I suspect we will give it all back and more in the coming weeks.

There's also a follow-up Ticker that is worth the read for those interested.

Now What Hank?

Sounds kinda Swedish.

Except its not, because the Swedes, when they had this same sort of problem with their banks, did two things you didn't:

Forced shareholders to take all loss before taxpayer money was used.
Forced full, complete balance sheet transparency.
The second is the critical item and the one that you and Bernanke have continually refused to address.

Yet this is the root of the problem with trust, when you get down to it.

Once again, good post Relentless, glad to see you didn't go.

The coverage of the markets had nearly vanished due to the GFL hoax. I'm glad that's over and we're back to things that matter.

The short burst of recovery in the markets has started to dissipate in the FTSE, we'll have to see what the effect is on the US markets later today.

It's just mind boggling that we're all sitting around letting this Bush lacky pour billions of our tax dollars into the broken banking system. They don't even have a guarantee that the banks will start lending this money out, in fact there's much more incentive for them to keep stockpiling the money to keep themselves solvent, be in a position to snatch up more failed banks, and frack the taxpayers once again.

We were SUPPOSED to get mortgages in return for this money, so at least it was an investment that's backed by real assets. Instead we've got shares in banks that are about 3 days away from collapse and we'll have NOTHING.

Just wait till they start forcing your 401(k) money into US government bonds.

Tinfoil hat stuff? I am not so sure.

Congress should let workers trade their 401(k) assets for guaranteed retirement accounts made up of government bonds, suggested Teresa Ghilarducci, an economics professor at The New School for Social Research in New York.

Congress Mulls Major 401(k) Changes

reply to post by Lurkerzrule


That is actually a good idea. Not everyone has the same risk tolerance, and there is no reason 401ks should not have fixed interest rate investment capabilities..

The safest portfolio no matter your trading skill is a harmonic balance between fixed investment, and risk investment.

In a 10 year span, had you invested in treasuries and bonds, you would most likely be ahead, percentage gain wise, with your original money then if you invested only in stocks.

reply to post by Relentless

From what I understood the money was to be used for many different things, not just to buy troubled mortgage assests, but to do whatever necessary to prevent this mess from getting worse. I understood this from the beginning. Also by them buying stock it also is highly likely three years from now they will be able to sell that stock at a much higher price. I also like the fact that these banks will have to limit compensation to exec's and there will be no golden parachuts. If it works and this free's up lending it is an excellent idea.

The preferred stock that each bank will have to issue will pay special dividends, at a 5 percent interest rate that will be increased to 9 percent after five years. The government will also receive warrants worth 15 percent of the face value of the preferred stock. For instance, if the government makes a $10 billion investment, then the government will receive $1.5 billion in warrants. If the stock goes up, taxpayers will share the benefits. If the stock goes down, the warrants will be worthless.

Maybe it will work, maybe it wont. I guess we will all see sometime in the near future. Probably months from now!

Does anyone know if the $700B 'bailout' money, and the newly-purchased bank assets, count as a 'Sovereign Wealth Fund' under the newly-drafted Santiago Principles?

Originally posted by Lurkerzrule
Just wait till they start forcing your 401(k) money into US government bonds.

Tinfoil hat stuff? I am not so sure.

Congress should let workers trade their 401(k) assets for guaranteed retirement accounts made up of government bonds, suggested Teresa Ghilarducci, an economics professor at The New School for Social Research in New York.

Congress Mulls Major 401(k) Changes

good info to know

with lower oil prices, OPEC /GCC country's will have less petro dollars to recylce into treasury debt combined with the fallout and distrust of the financial system and the underlying economic fundamentals of the u.s , treasury debt purchases have been falling in japan and russia and other country's that have been "net buyers" in the past, I think even China's time will be near (to reduce purchasing)

The bond market is the largest market in the world, the gov't WILL get the leverage to PUT our money there to TRY and postpone or delay the exodus of bond behemoth's money due to the fallout of the bailout. Not sure this will do anything *EXCEPT help them wipe the future entitelment liability's OFF there balane sheet (when the bond market implodes)*

Want to remember what happens when large amount of money flows into "smaller asset classes" look at oil and the amount of money that piled in between 2003-2007 and look at the price in that time frame.

Want to imagine what happens to the price of physical gold and silver when the Bond market get's spooked (by devaluation and inflation) and money no longer has two "safe havens" to hide in.

1. The first gigantic safe haven is treasury bills/notes/bonds especially t-bills

2. the second much smaller (by total $ invested) safe haven is precious metals

should the huge flows of money shift from the #1 to #2 gold should rise exponentially!! (then of course it will be confiscated LOL) expect these purchaes to be tracked closer (even high $ jewelry purchases)

not sure if the second thing the gov't /military of the U.S.A would try to do to save the bond market is threaten Soverign Wealth Funds at the point of a GUN/ATTACK into investing more into treasury debt ?

[edit on 15-10-2008 by cpdaman]

I cheered the hell out of the close to 1000 point gain. Mostly because I told my dad to buy certain stocks thursday afternoon, to hold on fridays massive drop, and he sold them tuesday afternoon for a pretty penny. They were all financial stocks I knew were going to rebound.

I told him to sell yesterday afternoon because I knew the bounce was artificial and the losses would start to come in on the last 1-2 hours of trading. That would follow into today and tomorrow. Not sure about friday yet. Maybe a modest gain, maybe a modest loss. If there is no big news, probably a modest loss.

Either way, we made money on the stocks this week, ESPECIALLY MS who pretty much doubled our investment in them.

[edit on 15-10-2008 by grimreaper797]

Originally posted by Relentless
So what happened with our bailout money?

I think the best way to find out is to contact these folks:
www.swconsult.ch...

Warren Buffet and Bill Gates may no longer be the two richest people in the world . . .

They stood in front of Congress and threatened tanks in our streets?

And everyone in Congress was too chicken to stand up and remind them who's authority it is to declare war in this country?

Someone in Congress should have scribbled an amendment on a napkin right then and there stripping those men of all their power.

I don't think they said "sign this bill or there will be martial law". I think it was more like "sign this bill or there will be an economic collapse leading to possible martial law". Subtle difference... but typical fear mongering none the less.

reply to post by mecheng


Is it fear mongering, or telling the truth? To be quite frank, I think is more closer to the truth than ANY of us feel comfortable with.

Originally posted by tide88

 

From what I understood the money was to be used for many different things, not just to buy troubled mortgage assests, but to do whatever necessary to prevent this mess from getting worse.

i object.... the Fed/Treasury told the congress they needed $700bn, for
One Reason !.....to save the mortgage markets....
that was the Fed/Treasury 'selling point' and their 'leverage', to get the $700bn package of money, passed by Congress (oops 'passed' should be Threatened-to-Congress...

.... Also by them buying stock it also is highly likely three years from now they will be able to sell that stock at a much higher price.

No... by forcibly getting 'Senior - preferred stock' to the tune of $25bn...
at 5% then 9% after 5 years...that is an 'open' whatever....
because the Fed/Treasury (oligarchy) is Guaranteeing all loans to the banks, keeping them from financial failure ---> It may come to be,
that a 9% dividend paid to the 'Preferred Stocks', will seem like a bargain-> when the markets are requiring a 15% return on loaned monies !!

The preferred stock that each bank will have to issue will pay special dividends, at a 5 percent interest rate that will be increased to 9 percent after five years. The government will also receive warrants worth 15 percent of the face value of the preferred stock. For instance, if the government makes a $10 billion investment, then the government will receive $1.5 billion in warrants. If the stock goes up, taxpayers will share the benefits. If the stock goes down, the warrants will be worthless.

Maybe it will work, maybe it wont. I guess we will all see sometime in the near future. ->Probably months from now

i'll try my answer again...
it won't be months... it will be 2 years...
if one follows the DOW trend line... we get back into the trend-line in Oct 2009 ... which will be around 8,600...
the markets will not rebound till 2010 at the earliest



[edit on 15-10-2008 by St Udio]

Remember these people?

The fundamental business of the country, that is, production and distribution of commodities, is on a sound and prosperous basis.

Herbert Hoover, October 1929

I see nothing in the present situation that is either menacing or warrants pessimism.

Treasury Secretary Andrew Mellon, early 1930

Would you entrust America’s financial well-being to people like this?

I remain convinced America's fundamentals are sound—not just the economic indicators that I mentioned a few moments ago, but the broad fundamentals that sustain American society.

George Bush senior, December 1991

(O)ur basic fundamentals are very sound.

Treasury Under-secretary John Taylor, October 2001

...it's an economy that is large, flexible and resilient... And so I want the American people to take a good look at this economy of ours. The world is strong -- the world economy is strong. I happen to believe one of the main reasons why is because we remain strong. And my pledge to the American people is we will keep your taxes low to make sure the economy continues to remain strong, and we'll be wise about how we spend your money in Washington, D.C.

President Bush, The White House July 2007

This is far and away the strongest global economy I've seen in my business lifetime

Treasury Secretary Henry Paulson, The Greatest Economic Boom Ever: CNN Money July 2007

When I came into office in 2001, our nation was headed into a recession. So we cut the taxes across the board. And hard working Americans have used this tax relief to produce strong and lasting economic growth... The American economy is the envy of the world... Now, what I focus on are the fundamentals of our economy... And the fundamentals of our economy are strong... Another factor one has got to look at is the amount of liquidity in the system... And I am told there is enough liquidity in the system to enable markets to correct.

President Bush, The White House August 2007

...monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year.

Federal Reserve Chairman Ben Bernanke, April 2008

...the American people can remain confident in the soundness and the resilience of our financial system.

Treasury Secretary Henry Paulson, September 2008

...the fundamentals of our economy are strong

John McCain, Washington Post, Washington Post September 2008

Or somebody like this?

Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections.

Ron Paul, March 2007

The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation.

Ron Paul, April 2007

The American empire is going to fail. It is in the process of failing. And I just want to get out of that empire building smoothly rather than waiting for a catastrophic event like a bankruptcy of this country.

Ron Paul, July 2007

I think we’re going to have a collapse before they come around to really thinking seriously about monetary policy and why we have to revamp it.

reply to post by Lurkerzrule


Man there is more truth to your statement than you know.Continuing from this point in history we will be "subject " to the whims of the FED.
A Government "above" the people,"beyond "the people an "forget" the people.That will be the new Government mantra.

reply to post by Rockpuck


In normal circumstances, and given the choice, I'd agree that treasury bonds do yield safe returns. However, lately what I have been seeing during the course of these wild downturns is a bond sell off. Who, and why they are occurring is speculation, but my guess (and just a guess) is you are seeing people, who may see inflation coming, exit the market and into something like gold.

Why should I let the Gov put my money into anything resembling an unstable bond market. Especially since the lunatics in Washington have such a firm grasp of this countries' economic situation. By what right does the government have to take what is by definition, MY MONEY, and use it as a backstop to fund their banker buddies.

I, and many others, have no trust in our government to adhere to the constitution anymore.

Originally posted by Rockpuck
In a 10 year span, had you invested in treasuries and bonds, you would most likely be ahead, percentage gain wise, with your original money then if you invested only in stocks.

Till now