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Is the U.S. Going Broke?
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Author Topic: Is the U.S. Going Broke?  (Read 54605 times)
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« Reply #75 on: November 10, 2008, 06:28:52 AM »

Fed Defies Transparency Aim in Refusal to Disclose (Update1)

By Mark Pittman, Bob Ivry and Alison Fitzgerald


 Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

``The collateral is not being adequately disclosed, and that's a big problem,'' said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. ``In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.''

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

``It's your money; it's not the Fed's money,'' said billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York. ``Of course there should be transparency.''

Federal Reserve spokeswoman Michelle Smith declined to comment on the loans or the Bloomberg lawsuit. Treasury spokeswoman Michele Davis didn't respond to a phone call and an e-mail seeking comment.

$2 Trillion

The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program, or TARP, bailout plan -- without safeguards put into the TARP legislation by Congress.

Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. The difference includes a $788 billion increase in loans to banks through the Fed and $474 billion in other lending, mostly through the central bank's purchase of Fannie Mae and Freddie Mac bonds.

Before Sept. 14, the Fed accepted mostly top-rated government and asset-backed securities as collateral. After that date, the central bank widened standards to accept other kinds of securities, some with lower ratings. The Fed collects interest on all its loans.

`We Need Transparency'

The plan to purchase distressed securities through TARP called for buying at the ``lowest price that the secretary (of the Treasury) determines to be consistent with the purposes of this Act,'' according to the Emergency Economic Stabilization Act of 2008, the law that covers TARP.

The legislation didn't require any specific method for the purchases beyond saying mechanisms such as auctions or reverse auctions should be used ``when appropriate.'' In a reverse auction, bidders offer to sell securities at successively lower prices, helping to ensure that the Fed would pay less. The measure also included a five-member oversight board that includes Paulson and Bernanke.

At a Sept. 23 Senate Banking Committee hearing in Washington, Paulson called for transparency in the purchase of distressed assets under the TARP program.

``We need oversight,'' Paulson told lawmakers. ``We need protection. We need transparency. I want it. We all want it.''

Banks Resist Disclosure

At a joint House-Senate hearing the next day, Bernanke also stressed the importance of openness in the program. ``Transparency is a big issue,'' he said.

The Fed lent cash and government bonds to banks, which gave the Fed collateral in the form of equities and debt, including subprime and structured securities such as collateralized debt obligations, according to the Fed Web site. The borrowers have included the now-bankrupt Lehman Brothers Holdings Inc., Citigroup Inc. and JPMorgan Chase & Co.

Banks oppose any release of information because it might signal weakness and spur short-selling or a run by depositors, said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a Washington trade group.

Frank Backs Fed

``You have to balance the need for transparency with protecting the public interest,'' Talbott said. ``Taxpayers have a right to know where their tax dollars are going, but one piece of information standing alone could undermine public confidence in the system.''

The nation's biggest banks, Citigroup, Bank of America Corp., JPMorgan Chase, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley, declined to comment on whether they have borrowed money from the Fed. They received $120 billion in capital from the TARP, which was signed into law Oct. 3.

In an interview Nov. 6, House Financial Services Committee Chairman Barney Frank said the Fed's disclosure is sufficient and that the risk the central bank is taking on is appropriate in the current economic climate. Frank said he has discussed the program with Timothy F. Geithner, president and chief executive officer of the Federal Reserve Bank of New York and a possible candidate to succeed Paulson as Treasury secretary.

``I talk to Geithner and he was pretty sure that they're OK,'' said Frank, a Massachusetts Democrat. ``If the risk is that the Fed takes a little bit of a haircut, well that's regrettable.'' Such losses would be acceptable, he said, if the program helps revive the economy.

`Unclog the Market'

Frank said the Fed shouldn't reveal the assets it holds or how it values them because of ``delicacy with respect to pricing.'' He said such disclosure would ``give people clues to what your pricing is and what they might be able to sell us and what your estimates are.'' He wouldn't say why he thought that information would be problematic.

Revealing how the Fed values collateral could help thaw frozen credit markets, said Ron D'Vari, chief executive officer of NewOak Capital LLC in New York and the former head of structured finance at BlackRock Inc.

``I'd love to hear the methodology, how the Fed priced the assets,'' D'Vari said. ``That would unclog the market very quickly.''

TARP's $700 billion so far is being used to buy preferred shares in banks to shore up their capital. The program was originally intended to hold banks' troubled assets while markets were frozen.

AIG Lending

The Bloomberg lawsuit argues that the collateral lists ``are central to understanding and assessing the government's response to the most cataclysmic financial crisis in America since the Great Depression.''

The Fed has lent at least $81 billion to American International Group Inc., the world's largest insurer, so that it can pay obligations to banks. AIG today said it received an expanded government rescue package valued at more than $150 billion.

The central bank is also responsible for losses on a $26.8 billion portfolio guaranteed after Bear Stearns Cos. was bought by JPMorgan.

``As a taxpayer, it is absolutely important that we know how they're lending money and who they're lending it to,'' said Lucy Dalglish, executive director of the Arlington, Virginia- based Reporters Committee for Freedom of the Press.

Ultimately, the Fed will have to remove some securities held as collateral from some programs because the central bank's rules call for instruments rated below investment grade to be taken back by the borrower and marked down in value. Losses on those assets could then be written off, partly through the capital recently injected into those banks by the Treasury.

Ratings Cuts

Moody's Investors Service alone has cut its ratings on 926 mortgage-backed securities worth $42 billion to junk from investment grade since Sept. 14, making them ineligible for collateral on some Fed loans.

The Fed's collateral ``absolutely should be made public,'' said Mark Cuban, an activist investor, the owner of the Dallas Mavericks professional basketball team and the creator of the Web site BailoutSleuth.com, which focuses on the secrecy shrouding the Fed's moves.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide
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I.M.E.
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« Reply #76 on: April 08, 2011, 07:02:05 PM »

Well, it's been more than two years.  Obama has been POTUS for two, the democrats controlled both houses of congress for four.  Have you noticed how much healthier the economy is now?  Rand Paul is starting to sound reasonable.
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« Reply #77 on: April 18, 2011, 08:19:19 AM »

Standard and Poor has downgraded America's debt rating from stable to negative. The CBO said under Obama's budget, the debt wil reach 75% of GDP by 2012. The Treasury Dept. said we will hit the debt limit of $14.3 trillion by May 16th. Obama and the democrats created the worst recession since the great depression and are determined to continue spending America into the second great depression.
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« Reply #78 on: April 18, 2011, 09:22:05 PM »

Government debt problems started a long time ago. Reagan started the party back in the 80's. Obama's no better than those who came before him. I'm still waiting for the change he promised. So far it's been business as usual.


http://nationalpriorities.org/en/resources/federal-budget-101/charts/deficits-and-debt/federal-debt-1940-2015-in-2010-dollars/


Total Credit market Debt as a % of US GDP



This chart illustrates that both republican and democrat administrations were guilty of runaway spending.

http://www.ritholtz.com/blog/2009/07/the-jalopy-economy/
« Last Edit: April 20, 2011, 07:57:48 AM by Admin » Logged
billy-bob
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« Reply #79 on: April 19, 2011, 10:52:11 AM »

Yep, all of them were scoundrels.
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« Reply #80 on: April 19, 2011, 03:35:14 PM »

Yeah that's what I believe too. I don't buy the liberal versus democrat BS.
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« Reply #81 on: April 19, 2011, 04:41:30 PM »

If they are ALL determined to financially ruin America, then there is not much point in talking about it.
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« Reply #82 on: April 19, 2011, 06:23:19 PM »

I don't think their intentions are to financially ruin America. These things are happening as a result of human nature being what it is. Greed, abuse of power, not enough oversight lead to situations like the subprime debacle which mushroomed into the biggest financial disaster since the great depression. Politicians making promises they can't keep, pension funds with unrealistic expectations of returns that fall millions or billions? of dollars short of their goals. Lobbying is nothing more than legalized bribery. Elected officials are not there to serve the people, they must serve the corporations who funded their campaigns with billions of dollars if they want their re-election campaign funded. The government just like joe 6 pack on the street has been living and operating beyond its means.
« Last Edit: April 20, 2011, 08:13:13 AM by Admin » Logged
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« Reply #83 on: April 20, 2011, 07:48:35 AM »

There’s Another Crisis Coming as Long as Banks Remain Above the Law: Bill Black

A federal jury convicted Lee Farkas, the former Chairman of Taylor, Bean & Whitaker Mortgage Corp., Tuesday for his role in a $2.9 billion fraud that led to the fall of his company and that of former Top 50 bank Colonial Bank. Farkas was found guilty on all 14 counts of conspiracy and bank, wire and securities fraud. He now faces life in prison.

More than two years after the financial crisis, Farkas is arguably the only major player in the mortgage industry to face criminal charges. William Black, professor of economics and law at the University of Missouri-Kansas City School of Law, calls the lack of prosecutions a disgrace, and he blames policymakers.

It's a matter of "unofficial" policy, he claims. "The de facto policy right now is elite frauds go free if they're in banking because the whole sector is too fragile. That is significantly insane. It will produce the next crisis." Essentially he's saying officials think it's more important for the banking sector to make money than it is for them to follow the law.

In the accompanying interview with Aaron Task, he notes that Treasury or White House officials are fully aware of the fraud, citing FBI testimony as far back as 2004 about rampant fraud in the mortgage market. In fact, Black says the problems banks are now facing with foreclosure paperwork are simply a result of the foreclosure frauds that were never addressed. "Every time you fail to root out the frauds, the fraud simply migrates. It migrates from the lending process to the foreclosure and servicing process."


http://finance.yahoo.com/blogs/daily-ticker/another-crisis-coming-long-banks-remain-above-law-153109732.html
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billy-bob
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« Reply #84 on: May 24, 2011, 10:38:55 AM »

What ever happened to ethics? Even our powers that be are lacking them.
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« Reply #85 on: May 30, 2011, 03:40:48 AM »

Yeah that's what I believe too. I don't buy the liberal versus democrat BS.


huh?
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billy-bob
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« Reply #86 on: June 02, 2011, 10:04:24 AM »

ETHICS: A set of principles prescribing a behavioral code that explains what is good and right or bad  and wrong. Maybe politicians and a lot of CEOs can't read.
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« Reply #87 on: December 06, 2011, 03:43:09 PM »

Understand​ing the debt in lay person terms:

• U.S. Tax revenue:          $2,170,000,000,000

• Fed budget:                  $3,820,000,000,000

• New debt:                    $1,650,000,000,000

• National debt:              $14,271,000,000,000

• Recent budget cut:            $38,500,000,000

 

 So, now let's just remove 8 zeros and pretend it's a household budget.

• Annual family income:                                           $21,700

• Money the family spent:                                        $38,200

• New debt on the credit card:                                 $16,500

• Outstanding balance on the credit card:                 $142,710

• Total budget cuts:                                                   $385

http://www.youtube.com/watch?v=xOAgT8L_BqQ
« Last Edit: December 06, 2011, 03:45:59 PM by Admin » Logged
billy-bob
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« Reply #88 on: December 08, 2011, 10:36:57 PM »

Looks like my budget since I have been in college.
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