Best of the Week
Most Popular
1.RED ALERT: Paris Terror Attacks - What to Expect Next - STRATFOR
2.Paris Terror Attacks, Death Pangs of a Dying Religion, and Impact on BrExit EU Referendum - Nadeem_Walayat
3.Paris Terror Attacks, Islamic State Attempting to Spark Civil War in France - Nadeem_Walayat
4.Three Shocking Charts That Prove Gold Price Rally Is Coming - Sean Brodrick
5.Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - Mike_Shedlock
6.Africa Population Explosion - Why Europe's Migrant Crisis is Going to Get A Lot Worse - Video - Nadeem_Walayat
7.Gold Mining Stocks May Be The Buy Of The Century - Jeff_Berwick
8.Grandmaster Putin Beats Uncle Sam at His Own Game - Mike_Whitney
9.BRICS? No, CRISIS - Raymond_Matison
10.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
Last 5 days
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15
Investors Watch Out For The Auto Industry… - 24th Nov 15
BEA Revises 3rd Quarter 2015 US GDP Economic Growth Upward to 2.07% - 24th Nov 15
Stock Market Supports Are Being Broken - 24th Nov 15
Is Gold Price on the Verge of a Breakout? - 24th Nov 15
Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - 24th Nov 15
Silver Price, COT, US Dollar Updates and More - 24th Nov 15
UK Regional House Prices Analysis - Video - 23rd Nov 15
Crude Oil Swinging For The Fences - A 20 to 1 Option Play - 23rd Nov 15
US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - 23rd Nov 15
UK Regional House Prices, Cheapest and Most Expensive Property Markets - 23rd Nov 15
Stock Market Rally Losing Momentum? - 23rd Nov 15
Will Gold Price Drop Below $1000 Soon? - 23rd Nov 15
Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - 23rd Nov 15
Limits to Economic Growth - Challenge and Choices - 22nd Nov 15
Long Dollar Trade and Current Copper Price Below Cost of Production - 22nd Nov 15
UK Housing Market House Prices Affordability Crisis - Video - 21st Nov 15
The Fed Has Set the Stage for a Stock Market Crash - 21st Nov 15
Stock Market Primary V Wave Continues - 21st Nov 15
Gold And Silver - Value Of Knowing The Trend - 21st Nov 15
UK Footsie Bulls Set To Foot The Bill - 21st Nov 15
UK Housing Market Affordability, House Prices Momentum and Trend Forecast - 21st Nov 15
GDX Gold Miners’ Strong Q3 Results - 20th Nov 15
End of Schengen, Stock Market’s Technical Strength Grows - 20th Nov 15
Justice for All and The Curious Case of Zambia - 20th Nov 15
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe - 20th Nov 15
Silver Prices and The Management of Perception - 20th Nov 15
Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - 20th Nov 15
Waiting for Goldot Again - 20th Nov 15
Michael Curran Goes Down-Market Shopping for Gold Stock Winners - 20th Nov 15
Why Isn’t This Incredibly Bearish Bond Market Development Making the News? - 19th Nov 15
SPX Appears to have Stopped its Rally - 19th Nov 15
The Great Fall Of China Started At Least 4 Years Ago - 19th Nov 15
Using Elliott Waves: As Simple As A-B-C - 19th Nov 15
Has Deflation Been Ddefeated? - 19th Nov 15
Dow Jones Stock Market Index is Not Going to Crash - 19th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

The Truth About The Federal Reserve's Socialist Agenda

Politics / Central Banks Dec 11, 2012 - 06:19 AM GMT

By: Money_Morning


Shah Gilani writes: The top line story, according to the FDIC's latest Quarterly Banking Review, is that the majority of U.S. banks are in better shape today than they have been in years.

The untold story is that when the Federal Reserve is done transitioning the United States from capitalism to socialism, the few dozen banks that remain in America will all be profitable until they need bailing out again, but will never die and live on in infamy.

Is that just hyperbole or some wild conspiracy theory? It's neither. Unfortunately, it's the bare, naked truth about the Fed.

It doesn't matter that you didn't know the Federal Reserve System was the brainchild of a handful of the world's most powerful bankers.

Or that all of them took a secret train from New Jersey to Jekyll Island, Georgia (owned by J.P. Morgan) in 1910 aboard Rhode Island Senator Nelson Aldrich's private car to devise and orchestrate the creation of the Federal Reserve.

Or that Aldrich was an investment associate of J.P. Morgan, that his son-in-law was John D. Rockefeller, Jr., or that he was the political spokesman for big business and banking interests in Congress.

It doesn't matter if you don't know who the powerful bankers are today that run the Fed's twelve district banks. Or that the Fed's New York Bank conducts all its open market operations with a bunch of favored big banks it protects (Case in point, MF Global).

Or that one former Chairman of the New York Bank's Board, who was also and still is a Goldman Sachs board member, resigned from the Fed when it was discovered he bought $3 million worth of Goldman's stock right before the Fed made sure Goldman wouldn't have to go out of business at the height of the financial crisis.

What matters, is that without the Federal Reserve the banking system in the United States would be more honest, more competitive and less of a risk to the economy than it is now.

And what really matters, is understanding the Federal Reserve could never exist and do what it does in an open democracy, and that its agenda of socializing risks (making taxpayers eat bankers' losses) and privatizing their profits (letting them keep their bonuses) for the benefit of its club members (the banks) means the Federal Reserve has to transform America to a socialist model in order to maintain its own growth and ultimate power.

Of course, it's not a stretch to see how the Fed's socialist agenda will eventually encompass most of the American economy over time.

But to keep it simple, let's look at how the Fed has already done that to the benefit of its primary constituents: banks and bankers.

It's All Thanks To The Federal Reserve...
With the Fed at the helm, the FDIC's Quarterly Banking Review shows aggregated FDIC insured banks' net operating revenues (net interest income plus total noninterest income) in the third quarter of 2012 came to $169.6 billion. That's up 3% from a year ago, or year-over-year (YOY).

Total quarterly aggregate net income was $37.6 billion, up $2.3 billion YOY to the highest level in 6 years.

In all, some 57.5% of FDIC insured banks had higher earnings than a year ago. A year ago, in 2011's third quarter, 62.6% had higher earnings than in the third quarter of 2010.

One thing to watch, is whether the downward move in the percent of banks earning more than in year-earlier periods is an aberration or the beginning of a downtrend.

This quarter, just 10.5% of banks reported losses vs. 14.6% one year ago. Problem banks totaled 694 vs. 732 in Q2 of 2012. That's the sixth consecutive quarter of fewer problem banks and a full three years since the number was less than 700. Still, problem banks are 913% higher since the 2008 crisis. There were only 76 problem banks at the end of 2007.

Total assets of problem banks fell from $282.4 billion to $262.2 billion, an average of $377million in assets per bank. Still, that's a lot of pain if they have to be rescued.

In the meantime, everybody wants to know if banks are making loans. The answer to that is, yes, but not a lot.

FDIC Chairman Martin Gruenberg called the loan picture an "extended period of increasing loan balances. But still relatively modest."

Loans rose 0.9% to $7.8 trillion. Some 55% of banks reported loan growth.

Commercial and industrial loans (C&I) rose 2.2% to $1.45 trillion. But construction and development loans were down 3.2% to $210 billion , that's 18 straight down quarters. One bright spot was the 2.4% increase in auto loans in the quarter.

Loans to individuals rose just 1% to $1.29 trillion and residential mortgage loans rose only 0.8% to $1.89 trillion. Still, total industry assets rose 1.4% from Q2 to $14.2 trillion.

Net gains on assets sold totaled $5.6 billion vs. only $639 million a year ago.
Of that $4.9 billion increase in net gains, $3.9 billion actually came from loan sales.

Banks saw a 7% rise in non-interest income and a 0.7% increase in interest- earning assets (net interest income) to $746 million. That's for all banks, keep that in mind.

Loan loss provisions declined to $14.8 billion , that's down 5.4% sequentially and down 20.6% year- over- year. All in all, loan loss provisions have fallen in 12 straight quarters.

Meanwhile, average net interest margins fell 13 basis points to 3.43%.

So, on the surface the banking picture looks calm. That's thanks to the Fed rescuing banks, most of whom would have been insolvent and gone bankrupt in any other industry.

But here's the real deal....
You only have to look at a few important metrics to see that not everything is as good as the FDIC and the industry will let on.

And as we take quick note of them, understand that it's because banks are still fragile and pretending to be strong and that the Fed is continuing its rescue efforts in the form of quantitative easing and other backstopping programs.

Not a lot of loans are being made and net interest margins (the core of banking profitability) are falling to dangerously low levels. Net earnings growth is coming from a long history of reducing loan loss provisions, selling assets, and still a fair amount of trading at the big banks.

How else can banks in the aggregate have managed a 7% rise in non-interest income while only a 0.7% increase in interest earning assets to $746 million for all banks?

Another problem brewing for banks is that they're upping their exposure to the same high octane instruments (collateralized debt obligations, collateralized loan obligations, commercial mortgage-backed securities, and leverage structured finance products in general) that brought them down in the last crisis.

They just bought an additional $48 billion of structured finance "securities" and packaged loans in the latest quarter according to the FDIC report. Their leverage structured holdings are now the highest they've been since mid-2009.

On top of reaching for interest income by grabbing more leveraged products, banks are extending "duration" on their balance sheets. That means they're holding assets with longer maturities because they yield more. But they are also far more prone to losses in a rising rate environment, if and when we get into a period of inflation or rate adjustments.

Of course the Federal Reserve knows all this. And they have given their blessing.

How else are the banks going to make money but take more risks by purchasing leveraged instruments with the Fed's no-interest loans which they use as capital?

There's no rush to make loans when the Fed let s banks go for the quick bucks to look healthy so they can pay back the federal government and pay out dividends again, all to make their stock prices firm up or rise.

Why? To get more stupid investors to buy more of their equity so their options become "on the money" and they can get bigger and bigger bonuses, until they implode again.

So what if they do? The Fed is there to socialize their losses, as they will from now on until the twelfth of never, or until the curtain is pulled back and we see the Fed for what it really is.

Oh, and there's more. The whole socialization thing, it's not just domestic. The Fed has taken it global with the help of the biggest socialist governments on the planet.

Don't believe me? Wait until you hear what I have to say next Tuesday about the Fed.

Unless you're a closet socialist you're going to be very, very mad. Maybe even mad enough to do something.

Source :

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


11 Dec 12, 21:56
Orwellian duck-speak

I'd call the author's claim that the Fed is "socialist" Orwellian duck-speak. It's so much the opposite of the facts, the guy can't really be thinking, but just quacking propaganda. The Fed is owned completely by its member banks. It does the bidding of (the wealthy people who own) the banks exclusively. It is an accessory in their heists. The government -- Congress -- has absolutely no say over what the Fed does -- Greenspan chutzpahed of that. Socialism is traditionally when the means of production are owned by the workers, not by a parasitic capitalist class. A reasonable extension of that would be the finance system owned by the people and functioning for the whole economy too. That would be socialism. But we have nothing like that. The Fed does the bidding of the likes of Goldman Sachs and Chase and City and the the international finance bosses. The word "fascist" fits the Fed, but not "socialist".

Post Comment

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

Biggest Debt Bomb in History