Federal Reserve losing control

[sprhoto]

Everybody should be rather nervous. I've never seen the suits so, well, unnerved.

I was just looking for early dateline stuff when our fine RI folk spotted this.

It does sort of feel as though this is the beginning of the tidal wave. I kind feel like Pippin before the attack on Minas Tirith: I don't really want this to happen, but waiting on the edge of it and knowing that you can't escape what is coming is almost worse.

[smiths]

the pitch is so feverish now,

i can almost feel the bank notes being slipped from my pockets

[PeterofLoneTree]

As I write this, the Asian/Pacific markets are off 2 - 5%.
All the world markets on a single page can be seen at
http://www.reuters.com/finance/markets/indices

[Nordic]

Gold just went over 1030 an ounce, before "settling" back down a bit. Right now it's at $1024.90/oz, at 9:09 pm PDT.

It's not even Monday yet.

Here's what I'm thinking. Everything we've been worried about, another "9/11" to create an emergency, install martial law, keep the GOP in power, etc. etc. etc. .......

Maybe this is it. Maybe it's the 9/11 of the financial world.

It would sorta fit in with the whole Dubai-based Gangsters who hired Bush and Cheney and their minions to destroy America.

They destroyed our military. It's now useless, bogged down in Iraq, and hemmoraging money and equipment like crazy.

And now they're destroying the financial part of the country.

This is merely phase II

[barracuda]

Watch the world end in real time, depending on the length of your screen refresh:

http://www.reuters.com/finance/markets/indices

Seriously, this is like staying up to watch the sun explode.

[Nordic]

Seriously, this is like staying up to watch the sun explode.

Well, I laughed my ass off at THAT remark.

Yeah ...

I remember staying up all night watching a hurricane (I believe it was Andrew) make its way cross Florida. I just couldn't tear myself away from the TV, even after all the feeds went out, just watching it from satellite and however else they could show it ...... I just couldn't stop.

This feels kind of the same.

Right now there's a helicopter circling over my house, adding to the feeling of unease.

[ninakat]

Right now there's a helicopter circling over my house, adding to the feeling of unease.

Nothing to worry about there. It's just Helicopter Ben working overtime -- he's at your place now.

[slow_dazzle]

I believe the shares went from $30 to $2 over the weekend. If that isn't a wake up call then nothing is. I saw a reference to BS shares as reaching over $150 at their height. BS isn't one of the biggest investment banks but if it is indicative of the underlying value of the real biggies then we are in more trouble than most people realise.

I don't have the link to hand although I saw an article yesterday in The Times (UK) that mentioned an emergency bank holiday to take pressure off the system. I took some ready cash out just in case it happens.

The last few days I have looked at the world market indices there is way more red than green. This morning there was nothing but a sea of red. Gold hit around $1030 recently and Nymex Crude Oil is trading for $111:70 right this minute.

The hallucinated wealth created by the financial alchemists is melting like ice in the sun.

BTW, in the time it took me to type this oil went up another 2 cents.

[vigilant]

http://stockcharts.com/def/servlet/Favo ... =show,iday[Y]&disp=SXA

If that link doesn't work, go to www.stockcharts.com
then scroll on the left side of the screen to "market summary"

Good place if you like things at a glance, and like to look at charts.

[Trifecta]

The most powerful economic force in the world right now is what bankers call "deleveraging".

It's the process, currently under way with a vengeance, of banks and financial institutions asking for their loans back, especially from borrowers perceived as high risk.

It follows years of the opposite, known - unsurprisingly - as leveraging.


There's pain for all of us - in the form of less credit, cripplingly expensive credit or a drop in the value of the investments held by the pension funds on which we depend

In the leveraging era, the world's banks and other great lenders lent far too much - to businesses, to various financial speculators, such as hedge funds and private-equity investors, to homeowners, to shoppers, and even to each other.

A great bubble of debt was created.

That bubble was punctured last summer, when lenders suddenly realised that some of their loans - the subprime ones to US homeowners with poor credit histories - weren't ever going to be repaid in full.

'Bad risks'

Since then lenders have been asking for their money back from those perceived to be a lousy credit prospect - and pushing up the cost of credit for almost everyone.

This deleveraging process, which has gone in fits and starts, moved up a gear in the past fortnight, as lenders became increasingly fearful about the outlook for the biggest economy in the world, that of the US.

Bear Stearns offices
Bear Stearns employs 2000 people in London

Borrowers dependent on certain parts of the US economy, especially its ailing housing market, are increasingly perceived as bad risks.

That's what caused the crises last week at Carlyle Capital Corporation and Bear Stearns.

In the coming days you can expect more bad news from financial firms whose sources of finance are drying up.

Now, in many ways deleveraging is a good thing. It's time we learned not to borrow more than we can afford.

The problem is that the process of deleveraging causes pain, and not just to Wall Street firms or wealthy investors.

Mortgage pot shrinking

There's pain for all of us - in the form of less credit, cripplingly expensive credit or a drop in the value of the investments held by the pension funds on which we depend.

Or if a company that's borrowed too much runs into difficulties, well then there's a potential financial cost to its employees.

Even Bear Stearns, primarily a Wall Street firm, employs 2000 people in London.

Someone filling in a mortgage application form
The amount of UK mortgage finance available is shrinking

So is there nothing that governments can do to minimise the dislocation caused by deleveraging?

Well in a way our own government has actually been encouraging deleveraging, by supporting the plan of Northern Rock - the nationalised bank - to shrink its balance sheet by around £60bn.

The impact of that is to cut the amount of mortgage finance available in the UK by up to a fifth.

As for central banks, they increasingly look not like supermen but seven-stone weaklings.

They've been reducing official interest rates, but that's done little to cut the cost of credit for most of us or increase its availability, because banks have taken the opportunity to rebuild their profit margins.

'Dodgy assets'

And what about central banks' new willingness to allow banks to swap financial assets of dubious value for hard cash or liquid government bonds?

Well that may have encouraged lenders to seize dodgy assets from borrowers that are in trouble in order to dump them on a central bank like the New York Fed.

In other words, central banks may inadvertently be accelerating that fateful deleveraging process.

Worse still, perhaps, the cost of longer-term loans is being pushed up, because lenders and investors believe the Fed is devaluing the dollar and stoking up inflation.

As the distinguished economist Joseph Stiglitz has observed, much of central banks' evasive action looks as effective as pushing on a piece of string.

http://news.bbc.co.uk/1/hi/business/7300182.stm

[chiggerbit]

Nationalization? Hell, other than the fact that the tax payers are being used as security, I don't see how this is a government bailout.

http://tinyurl.com/37nk2o

Bear Stearns bailout: nationalization in all but name
Market purists gasped when the British government nationalized mortgage lender Northern Rock last month. But how would you describe tonight's Bear Stearns bailout? It wears the costume of a market transaction. JP Morgan is "buying" Bear for $2 a share. But the Federal Reserve is taking the unprecedented step of seizing control of Bear's investment portfolio. And it is giving JP Morgan Chase a $30 billion loan to take Bear over. So the Fed is simultaneously financing the deal and managing the workout. Why not end the charade and hand Ben Bernanke the keys?

The central bank has already agreed to loan Treasury bonds in exchange for mortgage bonds. Now that it is plunging even deeper into the mortgage business, can calls from Congress to forgive Fed-controlled delinquent mortgages be far behind?

[whipstitch]

Sub-prime collapse 'beyond the US Federal Reserve'

FEARS are growing that the US Federal Reserve may soon find itself short of the funds needed to continue propping up the nation's financial system.

The central bank yesterday used its financial muscle to back the bail-out of the stricken Wall Street investment banking giant Bear Stearns, which will be taken over by rival JPMorgan Chase at a fraction of its worth last week.

But analysts believe the threat to the financial system, which continues to flow from the collapse of the sub-prime mortage market last year, is getting too big for the Federal Reserve.

"This is now beyond the Fed," ANZ international economist Amy Auster said.

"It is not going to be able to deal with this situation on its own."

Cash reserves drying up

She said the US central bank had already extended support of about $US400 billion ($426 billion) to the US financial system, compared with its assets of $US800 billion.

She said financial system losses yet to be reported could easily exceed another $US400 billion.

"What is missing at the moment is the US Treasury," she said.

But Treasury Secretary Hank Paulson has already declared his hostility to federal measures to help the sinking financial sector.

"Let me be clear: I oppose any bail-out," he said in a speech 10 days ago.

"Most of the proposals I've seen would do more harm than good - bailing out investors, lenders or speculators who, instead of getting a free pass, should be accountable for the risks they took," he said. "

I believe our efforts are best focused on helping homeowners who want to stay in their homes."

More could follow Bear Stearns

There remains a vast quantity of financial assets of doubtful value that will expose banks and other financial institutions to the kind of panic that brought investment bank Bear Stearns to the brink of disaster on the weekend.

"When the fifth-largest investment bank is in trouble, you have to become concerned about the solvency of the system and the banks in the system," Ms Auster said.

In 2006 alone, there were $US550 billion of "collateralised debt obligations" issued, she said.

These are the bundles of mortgages and other securities that have been at the heart of the sub-prime crisis.

Ms Auster said the market for these securities depended upon the ratings agencies, bond insurance and collateral.

"All three elements of this infrastructure - the three bands of the bridge have collapsed," she said.

When the Federal Reserve announced its extraordinary Sunday afternoon bail-out of Bear Stearns, it also extended a lifeline to all the other major investment banks, offering them access to emergency funding for the first time since the 1930s.

As in Australia, the central bank is assumed to be the lender of last resort for the commercial banks, which take deposits from the public, but not for investment banks and stockbroking firms.

But the tangled web of counter-party arrangements that has developed between financial institutions over the past decade means that allowing Bear Stearns to go broke would have jeopardised major banks.

"If Bear Stearns defaulted on their paper, it would pull at least another bank down," senior economist with finance broker ICAP, Matthew Johnson, said.

Drop in the ocean

Mr Johnson said he estimated the Federal Reserve was halfway through the ammunition it had to deal with the crisis.

"The $US450 billion remaining is a drop in the ocean compared to the asset classes in trouble," he said, noting that in addition to mortgage-related debt, some of the big private equity deals were beginning to unravel.

The biggest risk to the real economy is that credit dries up, as bankers become scared to lend.

Morgan Stanley chief economist Gerard Minack said while the Federal Reserve was cutting interest rates, its efforts were being neutralised by the banks.

"Nobody is enjoying easier financial conditions," he said.

Mr Minack said there were no grounds for equating the coming recession in the US to the Great Depression, but it could still be as nasty as the downturn in 1974.

Ms Auster said Australia would not escape the effect of the recession, with its share market having already fallen further than US markets.

[between two lines]

Antiaristo

Thank you very much. That has cleared up the main questions I asked and I am in favour of your beliefs on the subject. Like you I can see past the mindless dribble that comes out of our “wonderful country”. It’s pathetic to be honest to think that our own government can deceive it supports on which the state should be truly governed. I must be honest with you, my full intentions of why I contacted you have been, to delicately put it, misleading. I actually know your daughters in England. Victoria Cleary is my girlfriend; however don’t confuse me with Liam who I believe contacted you over a year and a half ago. If it’s any consolation we both have a general interest that we both don’t like him. My name is Ian and I have been with your daughter for over a year now and I have heard a lot about you. But do not think that this is a mere insolent gesture of my own will; I am acting on both mine and your daughters interest. At this very moment she is sitting next to me reading as I write, wanting to tell you what she has wanted to say for quite some time. She is still more than ever intrigued to speak to you and would like to do so over message if you are willing to comply.

We hope to hear from you soon.

Yours faithfully
Ian Thurstan
Victoria Cleary

[freemason9]

and now, for something completely different . . .

[antiaristo]

.

Ian, yes of course.

Please check your private mail.



Here's something completely....Pythonesque.

And it's dedicated to all those coincidence theorists out there.

The Onion. January 2001

Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'
JANUARY 17, 2001 | ISSUE 37•01

WASHINGTON, DC–Mere days from assuming the presidency and closing the door on eight years of Bill Clinton, president-elect George W. Bush assured the nation in a televised address Tuesday that "our long national nightmare of peace and prosperity is finally over."

"My fellow Americans," Bush said, "at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us."

Bush swore to do "everything in [his] power" to undo the damage wrought by Clinton's two terms in office, including selling off the national parks to developers, going into massive debt to develop expensive and impractical weapons technologies, and passing sweeping budget cuts that drive the mentally ill out of hospitals and onto the street.

During the 40-minute speech, Bush also promised to bring an end to the severe war drought that plagued the nation under Clinton, assuring citizens that the U.S. will engage in at least one Gulf War-level armed conflict in the next four years.

"You better believe we're going to mix it up with somebody at some point during my administration," said Bush, who plans a 250 percent boost in military spending. "Unlike my predecessor, I am fully committed to putting soldiers in battle situations. Otherwise, what is the point of even having a military?"

On the economic side, Bush vowed to bring back economic stagnation by implementing substantial tax cuts, which would lead to a recession, which would necessitate a tax hike, which would lead to a drop in consumer spending, which would lead to layoffs, which would deepen the recession even further.

Wall Street responded strongly to the Bush speech, with the Dow Jones industrial fluctuating wildly before closing at an 18-month low. The NASDAQ composite index, rattled by a gloomy outlook for tech stocks in 2001, also fell sharply, losing 4.4 percent of its total value between 3 p.m. and the closing bell.

Asked for comment about the cooling technology sector, Bush said: "That's hardly my area of expertise."

Turning to the subject of the environment, Bush said he will do whatever it takes to undo the tremendous damage not done by the Clinton Administration to the Arctic National Wildlife Refuge. He assured citizens that he will follow through on his campaign promise to open the 1.5 million acre refuge's coastal plain to oil drilling. As a sign of his commitment to bringing about a change in the environment, he pointed to his choice of Gale Norton for Secretary of the Interior. Norton, Bush noted, has "extensive experience" fighting environmental causes, working as a lobbyist for lead-paint manufacturers and as an attorney for loggers and miners, in addition to suing the EPA to overturn clean-air standards.

Bush had equally high praise for Attorney General nominee John Ashcroft, whom he praised as "a tireless champion in the battle to protect a woman's right to give birth."

"Soon, with John Ashcroft's help, we will move out of the Dark Ages and into a more enlightened time when a woman will be free to think long and hard before trying to fight her way past throngs of protesters blocking her entrance to an abortion clinic," Bush said. "We as a nation can look forward to lots and lots of babies."

Continued Bush: "John Ashcroft will be invaluable in healing the terrible wedge President Clinton drove between church and state."

The speech was met with overwhelming approval from Republican leaders.

"Finally, the horrific misrule of the Democrats has been brought to a close," House Majority Leader Dennis Hastert (R-IL) told reporters. "Under Bush, we can all look forward to military aggression, deregulation of dangerous, greedy industries, and the defunding of vital domestic social-service programs upon which millions depend. Mercifully, we can now say goodbye to the awful nightmare that was Clinton's America."

"For years, I tirelessly preached the message that Clinton must be stopped," conservative talk-radio host Rush Limbaugh said. "And yet, in 1996, the American public failed to heed my urgent warnings, re-electing Clinton despite the fact that the nation was prosperous and at peace under his regime. But now, thank God, that's all done with. Once again, we will enjoy mounting debt, jingoism, nuclear paranoia, mass deficit, and a massive military build-up."

An overwhelming 49.9 percent of Americans responded enthusiastically to the Bush speech.

"After eight years of relatively sane fiscal policy under the Democrats, we have reached a point where, just a few weeks ago, President Clinton said that the national debt could be paid off by as early as 2012," Rahway, NJ, machinist and father of three Bud Crandall said. "That's not the kind of world I want my children to grow up in."

"You have no idea what it's like to be black and enfranchised," said Marlon Hastings, one of thousands of Miami-Dade County residents whose votes were not counted in the 2000 presidential election. "George W. Bush understands the pain of enfranchisement, and ever since Election Day, he has fought tirelessly to make sure it never happens to my people again."

Bush concluded his speech on a note of healing and redemption.

"We as a people must stand united, banding together to tear this nation in two," Bush said. "Much work lies ahead of us: The gap between the rich and the poor may be wide, be there's much more widening left to do. We must squander our nation's hard-won budget surplus on tax breaks for the wealthiest 15 percent. And, on the foreign front, we must find an enemy and defeat it."

"The insanity is over," Bush said. "After a long, dark night of peace and stability, the sun is finally rising again over America. We look forward to a bright new dawn not seen since the glory days of my dad."

http://www.theonion.com/content/node/28784