Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Fed Financial Crisis Rescue or Coup?

Politics / Credit Crisis Bailouts Dec 04, 2010 - 03:33 AM GMT

By: Andy_Sutton

Politics

Best Financial Markets Analysis ArticleAs 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, Caterpillar, GE, and Verizon. 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 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 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.

By Andy Sutton

http://www.my2centsonline.com

Andy Sutton holds a MBA with Honors in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics. His firm, Sutton & Associates, LLC currently provides financial planning services to a growing book of clients using a conservative approach aimed at accumulating high quality, income producing assets while providing protection against a falling dollar. For more information visit www.suttonfinance.net

Andy Sutton Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules