Andy
Sutton
submits:
As some of the disclosures required by the financial reform bill
are made, everyday Americans are starting to figure out what many
zealous economy and market watchers have known since 2008: The
Fed's rescue programs weren't just aimed at domestic banks with
Manhattan headquarters. The aid stretched far into the reaches of
everyday America, with the recipients of approximately $885 billion
in loans still not disclosed.
For those who had not already arrived at this conclusion, it
should now be crystal clear: the collapse of 2008 was a mini
financial coup d' etat. The very institutions and individuals
charged with the oversight of our financial system were the same
people who were helping to blow up asset bubbles and perpetuating
cheap, easy credit. I think that it is very important to understand
that these folks have been systematically doing the exact same
thing to our willing government in the form of debt monetization.
In the 1990's and forward, they sucked in a willing consumer with
massive expansion of available credit and sleazy marketing
campaigns aimed at convincing people that it was really ok to owe
$15,000 on a credit card at 19.9% interest.
The American people and their government both readily embraced
the concept of deficit spending and debt accumulation as a viable
path to prosperity. The Federal Reserve and its member (owner)
banks have been the primary facilitators in this great transition
from prosperity to poverty. Its actions in 2008 and 2009 were
nothing more than an attempt to snare even more control of the
financial system and the economy, while kicking the can down the
road just a little further. Banks have gone from their traditional
role as financial intermediaries to micromanagers of the economy.
And this has all taken place in a little over a generation.
The startling part of what has transpired is that more and more
of our economic destiny than ever now falls under the direct
control of a panel of unelected and virtually unaccountable banking
aristocrats. These bankers made decisions in 2008 not only to
shower electronic dollars created from nothing on Wall Street
banks, but on international banks, and companies like Harley
Davidson (
HOG
), Caterpillar (
CAT
), GE (
GE
), and Verizon (
VZ
). GE is an easy one since it has a huge exposure to default risk
through its banking operations. But what of the rest? These
supposedly healthy companies couldn't make it through a few months
of tight credit without running to the Fed for assistance?
Here's a breakdown of the assistance: The Fed purchased
commercial paper ((
CP
)) from Harley Davidson 33 times in 2008 and early 2009 for a grand
total of $2.3 Billion. It purchased commercial paper from Verizon
twice for a total of $1.5 Billion. GE was the big winner at the
time, selling to the Fed 12 times for a grand total of $16 Billion.
However, the biggest winner of all is Uncle Sam who is has already
sold and will continue to sell to the Fed for at least another $600
Billion.
The mere existence of this activity should, in and of itself,
reveal the very phony nature of a fiat paper money system. However,
in all the mainstream news articles (many of which are owned by GE
incidentally), nobody has bothered to ask where the Fed got the
$3.3 Trillion it used to conduct the bailouts.
Putting It in Perspective
Back in April of this year, Will Hutton of the London Observer
wrote:
The global financial crisis, it is now clear, was caused not
just by the bankers' colossal mismanagement. No, it was due also
to the new financial complexity offering up the opportunity for
widespread, systemic fraud. Friday's announcement that the
world's most famous investment bank, Goldman Sachs, is to face
civil charges for fraud brought by the American regulator is but
the latest of a series of investigations that have been launched,
arrests made and charges made against financial institutions
around the world. Big Finance in the 21st century turns out to
have been Big Fraud. Yet Britain, centre of the world financial
system, has not yet leveled charges against any bank; all that
we've seen is the allegation of a high-level insider dealing ring
which, embarrassingly, involves a banker advising the government.
We have to live with the fiction that our banks and bankers are
whiter than white, and any attempt to investigate them and their
institutions will lead to a mass exodus to the mountains of
Switzerland. The politicians of the Labour and Tory party alike
are Bambis amid the wolves.
Just consider the roll call beyond Goldman Sachs. In Ireland
Sean Fitzpatrick, the ex-chair of the Anglo Irish bank - a bank
which looks after the Post Office's financial services - was
arrested last month and questioned over alleged fraud. In Iceland
last week a dossier assembled by its parliament on the Icelandic
banks - huge lenders in Britain - was handed to its public
prosecution service. A court-appointed examiner found that
collapsed investment bank Lehman knowingly manipulated its
balance sheet to make it look stronger than it was - accounts
originally audited by the British firm Ernst and Young and given
the legal green light by the British firm Linklaters. In
Switzerland UBS has been defending itself from the US's Inland
Revenue Service for allegedly running 17,000 offshore accounts to
evade tax. Be sure there are more revelations to come - except in
saintly Britain.
Hutton pretty much summed up what most of the sentiment here in
the US is: The crisis of 2008 is starting to stink - bad. Remember
that, at the time, the Fed assured everyone that it was saving the
financial system. How many companies did the Fed end up buying CP
from anyway? I don't think for a minute that we even
now
have the full story on what went on. And that begs the question as
to how many other firms were allowed to languish and become ripe
for government takeover. Not to mention the small businesses that
didn't have access to the Fed's supposed charity. And they still
don't since many are still unable to get credit, except via their
small business credit cards and the accompanying astronomical
rates. More than two years after the beginning of the credit
crunch, this situation has still not been resolved. This is allowed
to continue while banks rake in huge profits by skinning fractions
of pennies from each other by front-running transactions on the
exchanges. The same folks have been amassing huge reserves at the
Fed itself. I have been begging people to ask the important
questions for two years now: Where did the bailout money go? We now
have what at best can be considered a partial answer there. Why is
the Fed paying banks to keep reserves at the central bank and
incentivizing them to do so by paying interest? This is a very
important question given the fact that Bernanke's talking points
have centered on making credit available to small businesses!
There are two main (and possibly more) reasons for this
accumulation of reserves. The first is that banks are lying through
their teeth and expect further massive losses from bad loans, bad
bets, and trillions more in OTC derivative beatings. The second
potential reason is that banks (and the Fed) are preparing for a
fire sale of the American economy. This is by far the worst of the
two scenarios and would fall squarely into the category of a
financial coup d' etat.
The bottom line in all of this is that eventually a critical
mass is reached and the truth is demanded. Even then, it will be
slow to come out, and will be a process. We're lucky if we know 10%
of what went on during the second half of 2008. If we want the rest
we're going to have to fight tooth and nail for it. Above all else
the financial establishment is well versed in self-preservation
tactics. However, what we do know certainly makes it clear that the
survival of the financial 'system' was put well ahead of the
economy that should be sustaining it. Not the other way around.
See also
10 Financial Stocks With Bearish Options
Sentiment
on seekingalpha.com