Jon Stewart explains the LIBOR Scandal

Great segment from Jon Stewart of the Daily Show in giving a brief explanation of the LIBOR scandal.

In Canada you can watch it here.

If you are in the United States, the clip is available here.

As faithful readers will recall we originally raised this topic back on July 8th. 

Stewart offers a comical, but relevant examination of the topic and why it's important.

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Fri Post #2: Jon Stewart and the secret $7.7 Trillion bank bailout

Last night Jon Stewart explored the US Federal Reserve's secret $7.7 Trillion bailout of the banks that was revealled last week.

The US Federal Reserve basically provided free loans of $7.7 Trillion to wall street banks so that they could turn around and buy US Treasuries and made a profit on the interest difference - about $13 Billion (a profit which comes off the backs of the US taxpayers, of course).

This is how the Federal Reserve is helping banks make money in this massive liquidity squeeze.

Stewart's comedy piece is perhaps one of the most succinct analysis of what is wrong with the US Federal Reserve and how they are raping the American Taxpayer.

The clip cannot be embedded here so follow the link above or click here to watch it (clip link is via Canada's Comedy Network. Not sure if it is viewable outside of Canada. Canadians cannot watch clip on US's Comedy Central so you may have to source the clip if you are outside Canada).

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Jon Stewart on Derivatives and the Greek Crisis

Last night Jon Stewart had a great take on the Greek Crisis which summarized many of the points from yesterday's post, including how America's debt situation is actually worse that Greece and how no one knows the impact of the derivatives mess.

Unfortunately I can't embed a clip from the show, however if you follow this link you can watch the segment (if you are viewing from Canada) on the Comedy Network.

If you are in the United States, go to http://www.thedailyshow.com and it's the first segment on the June 22nd, 2011 show.

There is an audio version of the segment on youtube put to assorted pictures here:

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Ben Bernanke meet Jon Stewart

In case you didn't see it, Jon Stewart offered his observations on US Federal Reserve Chairman Ben Bernanke's Sunday interview with 60 Minutes.

I can't embed the clip, but you can watch by clicking here.

Bernanke said on Sunday that "one myth that is out there is that we are doing is printing money. We're not printing money."

Bernanke made this statement in response to the Fed's actions of creating money out of thin air and buying government bonds.

Stewart juxtaposes Ben's latest 60 Minutes interview against another 60 Minutes interview the Chairman gave just 21 months ago when he was justifying buying corporate assets from the banks.

• Bernanke: "To lend to a bank we simply use the computer to mark up the size of the account that they have with the Fed, so it's much more akin, although not exactly the same, it's much more akin to printing money than it is to borrowing."
  
  Interviewer: "You've been printing money then?"
  
  Bernanke: "Well... effectively and we need to do that"

So, as Stewart notes, the difference was that then the Fed was creating money out of thin air to buy corporate assets and now it's buying government bonds.

How is it that you were printing money then, but now you're not?

Stewart observes, "I guess Bernanke was looking at the average age of the 60 Minutes viewer and betting that anyone who saw him last year is dead now."

While humorous, it does expose something that many critics are sharply focusing on: Bernanke came on national TV and lied to the American people.

In fact, as Michael Pento of Euro Pacific Captial writes, Bernanke came out and told 2 big lies.

• Lie #1 - The Fed isn’t printing money. Bernanke stated: “The amount of currency in circulation is not changing…the money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying Treasury securities.” Given that it is the Treasury Department’s Bureau of Engraving and Printing, not the Fed, that actually prints paper money, his statement is technically correct while substantively false. However, Bernanke is buying bank assets with Fed credit. With such an arrangement, printing becomes unnecessary.
  
  According to gentle Ben, credit created to buy something should not be considered money and has no affect on asset prices? But if that’s true, why is he concentrating his buying in the middle of the Treasury yield curve. His stated purpose is to boost bond prices and lower yields in order to stimulate borrowing and aggregate demand. So pushing up bond prices is an act of inflation. Bernanke similarly contradicts himself by saying that he isn’t creating inflation, while at the same time claiming that his easing campaign is designed to boost asset prices to combat the phantom of deflation.
  
  And by the way, the Fed is causing money supply to increase significantly. The compounded annual growth rate of M2 is over 7% in the last quarter. Apparently in the eyes of the Chairman, a 7% annualized increase in the broad money supply isn’t considered significant.
  
  Lie #2- Bernanke is “100 % confident” that, when necessary, the Fed can control inflation and reverse its accommodative monetary policy. He stated, “We’ve been very, very clear that we will not allow inflation to rise above 2 percent. We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time.” He failed to mention that the Fed doesn’t have the will to drain money from the system, without which all tools are useless. The Fed has consistently demonstrated its unwillingness to take the appropriate actions when necessary. In claiming he is 100% confident in his ability to control inflation, Mr. Bernanke ignores the record that during his tenure he has misdiagnosed the economy.
  
  In June of 2006, Bernanke culminated his inflation fighting efforts by raising the Fed Funds target rate to 5.25%, after CPI inflation reached 4.2%. But that interest rate was enough to help burst the housing bubble and to spark an international credit crisis. Bernanke was completely unaware that the Fed actions had created an economy that had become completely addicted to artificially-produced low interest rates and inflation.
  
  Shortly after the collapse of the real estate market and the ensuing truncated deflationary-depression, Bernanke took interest rates to near zero percent. But if the Fed was ever really serious about unwinding excessive leverage, the time had clearly arrived. Instead, the U.S. economy has become more addicted to free money than at any other time in our history.
  
  Commodity prices are soaring once again and the real estate market, banking sector, and the overall economy cling precariously on the arm of government induced bailouts and low interest rates. Even worse, our government has massively increased its level of debt, which now stands at just below $14 trillion. Once the rate of inflation eclipses the Fed’s 2% target rate, which appears likely, how then will the Fed raise rates to contain it? Could the economy then withstand an increase in the cost of home ownership? Most importantly, when will Mr. Bernanke find it politically tenable to dramatically increase debt service payments for the Federal government? In truth, there is never a convenient time to have a severe recession or a depression. Unfortunately, reality can be extremely inconvenient.
  
  Bernanke was accurate in saying that the economy is not expanding at a sustainable pace. Of course, his prescription was the same as it always is; print more money in the misguided belief that inflation will lead to growth. As such, he indicated that it’s possible that the Fed may actually expand bond purchases beyond the $600 billion announced last month. (Remember that the $600 billion comes after the $1.7 trillion that has already been printed, which failed to produce anything much beyond a weaker dollar). Therefore, the country can look forward to yet more inflation, continued anemic GDP growth, a poorer citizenry, and a vastly lower standard of living.

All of this is followed by news that US Treasuries have suffered their biggest sell off since the collapse of Lehman Bros (see reprint of Financial Times story on this blog).

Thus when QE is supposed to be lowering interest rates, they are rising.

This dynamic is the one which all the R/E shills in the Village on the Edge of the Rainforest remain oblivious/ignorant to.

Bernanke can say he will keep interest rates low for years to come. But the market vigilantes have the ultimate say.

I've posted on this blog numerous times the fears stated by former Federal Reserve Chairman Greenspan that this could happen.

Dramatically higher interest rates are coming. It's only a matter of time.

And when they come, as Bank of Canada Governor Mark Carney has been warning for months now, you don't want to be holding debt of any significance that you can't service at interest rates at the historic norm (8.25% or higher).

People mock the Bears because the collapse has not come yet and anyone who has bought in the last 7 years is way ahead than if they had listened to the Bears.

But unless they cash in on that equity now, hardly any of those buyers will survive what is coming.

Which is why two and a half years ago I became a staunch real estate bear and highly advocate liquidating debt, eschewing debt accumulation and investing to prepare for what is coming.

Regrettably few will appreciate the advice until it is too late.

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Sunday Afternoon Update.

You knew this was coming.

This infamous clip from 'Hitler's Last Days' has been used for housing bubble parodies before and now has been re-worked for the Foreclosure Crisis. Hitler is portrayed as a big banker furious with the whole fiasco blowing up and is so up-to-date it even works President Obama's pocket veto of the Interstate Recognition of Notarizations Act (HR 3808) which would have made the entire robosigning fiasco legal (see last Thursday's post).

I expect that this week will see the entire issue intensify. Will it be the proverbial straw on the camel's back of the faux recovery and house of cards that has been constructed?

As the start of all this last week I explained the Mortgage Electronic Registration Systems (MERS) to you. This was how banks, trusts and lending institutions digitized the land title process (and by-passed local state real estate laws) for title transfer.

MERS has now come out with a statement that not only acknowledges, for the first time, its involvement in this whole fiasco but has made it all too clear just how deep the problem truly runs.

MERS's defense is remarkably like that of the high frequency traders involved in the flash crash of the stock markets. In essence they argue that its all just technological advancement, and if you want to blame it on someone, blame it on technology.

• "What we're seeing now is that the foreclosure process itself was not designed to withstand the extraordinary volume of foreclosures that the mortgage industry and local governments must now handle."
  

The explosion of securitization over the past 10 years has created a massive $10 trillion in first level debt and exponentially more in layered debt after that.

As more people realize that the fake title transfer aspect of foreclosure fraud is just the tip of the iceberg, I believe you will see that the repercussions are severe.

As overnight trading begins (16:00 Pacific Time), Gold has jumped up over $7 an ounce ($1353.40), Silver by $0.30 an ounce ($23.55) and the US Dollar index has dropped below 77.00. The charts are on the right hand side of this blog and will be watched with keen interest.

Meanwhile, if you are in Canada, you can click on this link for clip #1 from the Daily Show with Jon Stewart. As part of his first segment on October 7th, Stewart offers an interesting look at the Foreclosure Crisis. Then there is this link to clip #2 which is from the second segment of the same show.

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Cramer Praises Bernanke

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Ahh... Jim Cramer.

Faithful readers will recall the imfamous Mr. Cramer as the wild eyed, bald headed, investment gonzo-schtick king from CNBC who was utterly eviscerated by Jon Stewart back in March.

If you missed the classic piece, Stewart took Cramer (and CNBC) apart for his bad investment advice which totally missed the market crash. You can see the Steward Daily Show segment that started it all here...



Unabated Cramer has continued on with his investment show (Mad Money) and continues to be pillored for his not-so-prescient stock market advice.

Now comes word that the King of Poor Stock Picks penned an OP-Ed piece in the New York Magazine this past week and once again is going against the flow of popular opinion.

While many (including your faithful scribe) are highly critical of US Fed Chairman Ben Bernanke's policies of quantative easing (and the potential they create for high inflation), Cramer hearld's the Federal Reserve Chairman as a vertible saviour. From the New York Magazine article...

"More than Obama, more than Geithner, more than anyone, it is the once-maligned Federal Reserve chairman who has saved us from the second Great Depression. ... I'll just come right out and say it: Ben Bernanke will go down as the greatest Federal Reserve chairman in history. The soft-spoken academic who has toiled in the shadows of his legendarily self-promoting predecessor, Alan Greenspan, will be known as the man who averted the Great Depression Two, a sequel that could have eliminated the United States as a world financial superpower and reduced us to this century's Britain. Make no mistake about the parentage of this success story."

"President Obama pushed through a stimulus plan that will ultimately help the economy later this year, and Treasury Secretary Tim Geithner chose to adopt Bernanke's strategy of allowing banks to raise money themselves rather than bowing to calls from politicians and pundits to have taxpayers bail them out even more than they already had. But it was the 55-year-old former Princeton professor who spent his teaching career studying how the Great Depression could have been prevented who deserves the bulk of the credit."

"As credit froze and production and stocks plummeted as fast as they had between 1929 and 1932, Bernanke broke ranks with the complacency crowd and the inflationistas and relied on the lessons he'd learned back at Princeton to quickly take interest rates to an unheard-of zero percent. He turned on the Fed's printing presses, forcing dollars into the banking system, and began to buy $500 billion in mortgage bonds to force rates down to stop runaway foreclosures and keep people in their homes. That was the most aggressive policy change in the Fed's history, something that amounted to nothing short of an economic putsch that bridged the interregnum between presidents and continues to this day. And we needed it."

Cramer is a regular writer for New York Magazine and with this article he has provided an astonishing defense of Bernanke and today's central banking strategies. We will wait and see if he changes his tune if Bernanke's "aggressive policy change" produces massive inflation. I wonder how hopeful Cramer will remain if, in reaction to inflation, former Fed Chairman Paul Volcker or some other tough guy steps in and raises interest rates through the roof, setting off another slump.

Jon Stewart, I'm sure, has Jim Cramer set on TIVO. Where else does your material write itself?

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Another whirlwind week ends with 'Irrational Fear'? It's Bank Failure Friday and... a priceless youtube clip.

Laurel Magri: lying, deceptive, manipulative whore.
UPDATE: Bank Failure #17: Freedom Bank of Georgia, Commerce, Georgia (the weekend can officially begin now)

The day after the DOW plunges to fresh 12-year lows we reflect on quite a week.

The grim news reads like a police blotter: GM said its survival is in doubt, bank shares took a beating, Citigroup fell below a buck and China defied expectations by failing to boost its economic stimulus program (and that's just yesterday's news).

Meanwhile layoffs were the story of the week. Adding to the list yesterday was the Toronto Star, the biggest Canadian daily, who issued pink slips to 60 employees, all from sales and marketing. 3,400 Canadians have now lost their jobs over the past four days.

Bank of Canada deputy governor Pierre Duguay came out and warned Canadians not to be spooked by "irrational fear" over the economy but then goes on to tell the House of Commons finance committee that "there will be more bad economic news coming".

[Remember that if you are laid off. You can meet with your bank manager after failing to make three consecutive mortage payments and say, "hey, chill dude... don't be spooked by irrational fear, man"]

But it's Friday so let's turn our attention to our neighbours to the south as we keenly await the carnage from Bank Failure Friday.

As faithful readers know, bank failures in the US always seemed to be delayed until late on Friday afternoons, prompting Friday to be renamed 'Bank Failure Friday' by many economic blogs.

And it appears it might be a banner year of Friday's.

The Wall Street Journal reports that the Senate Banking Commission wants to give the FDIC $500 Billion from the Treasury Department Seems the FDIC's deposit-insurance fund has fallen precipitously with 25 bank failures last year and 16 so far in 2009. Loading up for the coming barrage, perhaps?

Maybe the Commission caught American CoreLogic's just released report on households with negative equity. They report 8.3 million US mortgage holders are underwater. Many analysts expect that the number of households with negative equity could rise to 17 to 23 million by the end of 2010. That means more US homes foreclosed, more US banks failing, and more bad economic news for America's largest trading partner: Canada.

Updates from the FDIC as they come in, check back late this afternoon.

In the meantime you may recall the rant from Rick Santelli that we posted on February 19th. Santelli is a former derivaties trader who reports for CNBC from the Chicago Mercantile Exchange. On Feb. 19th, Santelli took issue with President Obama's plan to bailout homeowners.

This provided quite the backlash since Santelli, as former derivatives trader, embodies the Wall Street wormhole into which much of the bailout money has gone.

In response, Jon Stewart eviscerates CNBC and Santelli in this soon-to-be-classic 8 minute clip.

It's worth the time to check it out while we wait for the FDIC.



Bank Failure #17

From the FDIC: Northeast Georgia Bank, Lavonia, Georgia, Acquires All of the Deposits of Freedom Bank of Georgia, Commerce, Georgia

Freedom Bank of Georgia, Commerce, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Northeast Georgia Bank, Lavonia, Georgia, to assume all of the deposits of Freedom Bank of Georgia.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $36.2 million. Freedom Bank of Georgia is the seventeenth FDIC-insured institution to fail in the nation this year. The last bank to fail in Georgia was FirstBank Financial Services, McDonough, on February 6, 2009.

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