Tuesday, February 24, 2009

HT to Drudgereport.com

Below is the text of the statement issued on Monday on the U.S. banking system by the U.S. Treasury, Federal Deposit Insurance Corp, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve:

''A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery. The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses. The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth. Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.

''We announced on February 10, 2009, a Capital Assistance Program to ensure that our banking institutions are appropriately capitalized, with high-quality capital. Under this program, which will be initiated on February 25, the capital needs of the major U.S. banking institutions will be evaluated under a more challenging economic environment.

Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government. This additional capital does not imply a new capital standard and it is not expected to be maintained on an ongoing basis. Instead, it is available to provide a cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers. Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory. Previous capital injections under the Troubled Asset Relief Program will also be eligible to be exchanged for the mandatory convertible preferred shares.

The conversion feature will enable institutions to maintain or enhance the quality of their capital.

''Currently, the major U.S. banking institutions have capital in excess of the amounts required to be considered well capitalized. This program is designed to ensure that these major banking institutions have sufficient capital to perform their critical role in our financial system on an ongoing basis and can support economic recovery, even under an economic environment that is more challenging than is currently anticipated. The customers and the providers of capital and funding can be assured that as a result of this program participating banks will be able to move forward to provide the credit necessary for the stabilization and recovery of the U.S. economy. Because our economy functions better when financial insti tutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands.''

Copyright 2009 Reuters.

An amazing lie.

Everybody knows most major banks have bundled mortgages and derivatives they paid hundreds of billions of dollars to acquire. They can't even identify most of the loans. They weren't audited before they bought them and they haven't since. These banks haven't been forced to. Now, since nobody knows really how bad these loans are, or what kind of losses will be faced, nobody wants to buy them.

The value of an asset nobody will buy, is zero. Regardless of what you paid for it, it's zero.

Unlike tracts of open land, which were at the heart of the Savings and Loan crisis, bad mortgages and insurance against losses from bad mortgages are never going to be worth much again. We now know they're a timebomb; sooner or later, a housing slowdown will arrive, and the holders of such assets will get burnt. Because these assets are losers, they cannot form the basis of a profitable government buyout plan.

Everything that has been done by government since September has been a desperate attempt by the banks to avoid having to report they are basically insolvent. In this fraud, our government has been fully complicit.

We have a golden chance to compartmentalize the failure to the for-profit financials. Instead, by proposing nationalization, Washington is going to export the pain to every household that buy food and fuel with dollars. Because the dollar itself is at stake here.

"The viability of systemically important financial institutions so that they are able to meet their commitments" is not at issue. These institutions are not capable. It would be better for the system if they failed, and we were left to start over with credit unions and foriegn lenders. There's too much opportunity for responsible lenders to have credit vanish from America. And there's no excuse for creating inflation just to protect the top 1% from their own failure.

Make no mistake. These guys are going down. It's just a question of taking the rest of us down with them.

Thursday, February 19, 2009

Remember This Day

WASHINGTON (AP) -- Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products.

The Labor Department said Thursday that wholesale prices increased by 0.8 percent last month, the biggest gain since last July and well above the 0.2 percent increase that economists had expected.

The acceleration was led by a 3.7 percent surge in energy prices with gasoline prices jumping by 15 percent, the biggest gain in 14 months.

Even outside the volatile food and energy sectors, wholesale prices showed a bigger-than-expected increase, rising by 0.4 percent. Economists had expected a slight 0.1 percent rise in so-called core inflation.

Food prices were well-behaved last month, falling for a second straight month. The 0.4 percent decline in January reflected lower costs for beef and dairy products which offset gains in the price of vegetables and chicken products.

In addition to the big jump in gasoline costs, prices for home heating oil were up by 5.4 percent and liquefied petroleum gas, which is often used to heat homes in rural areas, surged by 20.2 percent, the biggest jump in more than six years.

Outside of food and energy, there were increases for pharmaceuticals, light trucks and passenger cars and civilian aircraft.

Despite the big jump in wholesale prices in January, economists do not believe inflation is on the verge of becoming a problem, given the country's deep recession.

That downturn, which began in December 2007, has been keeping a lid on inflation pressures, which has given the Federal Reserve the room to slash a key interest rate to nearly zero without having to worry about kindling inflation.

Federal Reserve Chairman Ben Bernanke told an audience at the National Press Club on Wednesday that he saw little risk that the Fed's efforts to fight the recession and a severe financial crisis would trigger inflation presusres.

He said that once the economy begins to rebound and financial markets stabilize, the Fed will be able to quickly reverse the actions it has taken before inflation becomes a problem.


Bernanke is going to eat this quote.

Yes, the Fed may be able to raise interest rates by 2%. That will not stave off inflation.

Supposedly, according to Nobel Laureate economist and political hack Paul Krugman et al., inflation is not even POSSIBLE at this point. It's just a Republican talking point! We gotta worry about DEFLATION!!!!

This was not supposedly possible. But here it is, already.

These guys do not know what they are doing, their stupid attempt to shore up the fatcats at the expense of the dollar is dooming the dollar.

And I just heard our Legislature passed a fat tax hike in the midst of a recession. Way to go, morons.

Remember this day. This a day the Left went on record. They will push you to forget it. They will argue they had no idea at the time of the consequences. That will be a lie. Remember this day.