Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14
Sheffield Roma Crisis School Place Application's Fraud Perfect Storm - 17th Oct 14
Stock Markets, Commodities and Indicators - 17th Oct 14
“Save Our Swiss Gold ” - Game Changer For Gold? - 17th Oct 14
How to Trade the Ebola Stock Market Sell-Off - 17th Oct 14
When... Not if... Crude Oil Price Drops Below $70 - 17th Oct 14
Either You're The Butcher or You're The Cattle - 17th Oct 14
Gold Benefits from Market Uncertainty - 17th Oct 14
Stock Market Pullback Underway, Euro downside, Commodities - 17th Oct 14
Stock Market Seven Year Cycle and A Correction Ahead? - 17th Oct 14
Three Ways to Play Uranium: Top Stock Picks - 17th Oct 14
America Flirts With Deflation - 17th Oct 14
Why the Fed Should Consider Delaying the End of QE - 16th Oct 14
Gold Prices Since 9-11 - 16th Oct 14
The Inflation Imputation, Dear Saver, May You RIP - 16th Oct 14
Flight To Safety - Gold Rises As Stocks, European Bonds Sink - 16th Oct 14
The March Of History And The End Of Nations - 16th Oct 14
Stocks Bear Markets Move Fast and Are Intensely Emotional - 16th Oct 14
Stocks Got Their Piece – Now It’s Our Turn - 16th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

The Truth About The Federal Reserve's Socialist Agenda

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

By: Money_Morning

Politics

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 :http://moneymorning.com/2012/12/11/the-bare-naked-truth-about-the-federal-reserves-socialist-agenda/

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: customerservice@moneymorning.com

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

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

stevehudson
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

Free Report - Financial Markets 2014