Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
Stock Market Lemmings Are Heading Towards The Cliff… Again - 24th Nov 17
The Precious Metals Bears' Fear of Fridays - 23rd Nov 17
UK Economic Austerity, Bloodletting and Incompetence - 23rd Nov 17
Stocks Are At The End Of The Line – Prepare Yourself Now! - 23rd Nov 17
Some Traders Hit. Some Traders Miss. Here's How to be Part of the 1st Group - 22nd Nov 17
Geopolitical Risk Highest “In Four Decades” – Global Gold Demand to Remain Robust - 22nd Nov 17
Relationship between Crude Oil Price and Oil Stocks - 22nd Nov 17
Harry Dent’s Gold Prediction Invalidated - 22nd Nov 17
Gold Sector is On a Long-term Buy Signal - 21st Nov 17
Saudi Arabia and Israeli Alliance Targets Iran - 21st Nov 17
What History Says for Gold Stocks in 2018-2019 - 21st Nov 17
US Bond Market Operation Twist by Another Name and Method? - 21st Nov 17
Learning from Money Supply of the 1980s: The Power and Irony of “MDuh” - 20th Nov 17
Trump’s Asia Strategy, Goals and Realities - 20th Nov 17
Crude Oil – General Market Link - 20th Nov 17
Bitcoin Price Blasts Through $8,000… In Zimbabwe Tops $13,500 As Mugabe Regime Crumbles - 20th Nov 17
Stock Market More Correction Ahead? - 19th Nov 17
Universal Credits Christmas Scrooge Nightmare for Weekly Pay Recipients - 18th Nov 17
Perspective on the Gold/Oil Ratio, Macro Fundamentals and a Gold Sector Bottom - 18th Nov 17
Facebook Traders: Tech Giant + Technical Analysis = Thumbs Up - 18th Nov 17
Games Betting System For NCAA Basketball Sports Betting - Know Your Betting Limits - 18th Nov 17
Universal Credit Doomsday for Tax Credits Cash ISA Savers, Here's What to Do - 18th Nov 17
Gold Mining Stocks Fundamentals Q3 2017 - 17th Nov 17
The Social Security Inflation Lag Calendar - Partial Indexing - 17th Nov 17
Mystery of Inflation and Gold - 17th Nov 17
Stock Market Ready To Pull The Rug Out From Under You! - 17th Nov 17
Crude Oil – Gold Link in November 2017 - 17th Nov 17
Play Free Online Games and Save Money Free Virtual Online Games - 17th Nov 17
Stock Market Crash Omens & Predictions: Another Day Another Lie - 16th Nov 17
Deepening Crisis In Hyper-inflationary Venezuela and Zimbabwe - 16th Nov 17
Announcing Free Trader's Workshop: Battle-Tested Tools to Boost Your Trading Confidence - 16th Nov 17
Instructions to Stop a Dispossession Home Sale and How to Purchase Astutely at Abandonment Home - 16th Nov 17
Trump’s Asia Tour: From Old Conflicts to New Prospects - 16th Nov 17
Bonds And Stocks Will Crash Together In The Next Crisis (Meanwhile, Bond Yields Are Going Up) - 16th Nov 17
A Generational Reset That Will Redistribute Wealth to the Bottom 60% Is Near - 16th Nov 17
Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - 16th Nov 17
Gold’s Long-term Analogies - 16th Nov 17

Market Oracle FREE Newsletter

Traders Workshop

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

© 2005-2017 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

Catching a Falling Financial Knife