Friday, December 12, 2008

Government Embezzlement

Dec. 12 (Bloomberg) -- The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.
Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.
Let’s just take a guess where the money is, maybe 1/3rd was loaned to the very big banks, 1/3rd was used to buy credit card debt instruments and 1/3rd was used and is still being used to keep the stock market from tanking.

Consider each bank consolidation, not as an opportunity to increase in size, but rather as a payback to the federal government for money lent. As a fair guess, most of the big banks probably have 10 to 30 billion of negative net worth. Consider every bank on this list below as doomed.


The second place that the government has to cover is credit card transactions. This is the new system of economic commerce. Everything is done by credit cards. If there is no cash to loan out (everyone is in zero percent T-bills) that part of the system would lose its liquidity and seize up. Assume massive cash infusion to keep the market from locking up.

The third place is one I really worry about. Bear with me on this one, it is pure conjecture on my part. Paulson once headed of one of the biggest brokerage houses in town. Why not create several very big brokerage accounts in these troubled banks (don’t divulge the purpose of them to anyone) and make computer trades on the DOW just like the big boys. The goal is to be a super market maker. Keep the markets from taking the big plunge by injecting liquidity and buying when there are no buyers. There is a need for complete secrecy; Cheney has been all but invisible since October and in this proposed theory of what is going on, would be the man behind the curtain.

The problem is Two Trillion is not enough to handle the current situation. It could be enough to keep the credit card system functioning and the banks, so I could be in error here suggesting that the stock market is being manipulated. But I have never seen a market like this. If they were manipulating the market, figure another 2 trillion. My best guess at why Bloomberg got refused the information, was that the figures are absurdly higher than what is assumed, rather than because of who received the funds.

We saw today part of the house of cards collapsing that the Government and all of the king’s horses can’t fix. Ponzi schemes like Bernard Madoff’s fund are the first of many to hit the fan. In the past I have suggested that probably 50% of the 10,000 mutual funds world wide are insolvent or broke. The monthly statement is done on a computer and printed out and mailed to the subscriber, how gullible can they get?

The information everyone is getting is what they want to hear. The problem is, the information being withheld could spell your ruin. As I have stated in the past, a rich man and his embezzler can go to the same resort, the only difference is the rich man has no idea that he is broke, the embezzler knows whose money he is spending, and they both will have a great time.

Copyright 2008 All rights reserved

3 comments:

Shankar said...

We'll start learning soon how deep the rabbit hole goes.

Jim in San Marcos said...

Hi Shankar

You do have to marvel at the utter incompetency of government in this whole mess.

The irritating thing is to know what will happen because of this. You can't send someone to jail for wanting to do the "right thing."

Doing nothing just doesn't instill or project a feeling of confidence that the government is in control.

Anonymous said...

Jim,

I posted a many months back that it seemed strange that the markets were acting opposite to our "fundamentally sound economy" being preached by the MSN. It really seems that the government has a hand in holding up the markets.

No one wants conspiracies or to believe that our government is capable of waving magic wands... but based on how the markets have behaved since October 1st gives the impression that our corrupt and powerful government has the capability of doing almost anything it wants.

If an Iraqi reporter in a Bush press conference can not only throw one, but two shoes at our president gives rise to a notion that ANYTHING is possible. You would think that even before the first shoe had left his hand the Secret Service would have plugged him with at least 5 rounds.

Point is... if the government cant even protect the President of the USA, how in the hell can anyone expect our government to solve our economic problems? (BTW, purely a rhetorical question)

Tom