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Thread: weekend commentary - who really controls US bank loans

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    Default weekend commentary - who really controls US bank loans

    nobody cuts through the bull$#it like Elaine Supkis ...





    (snip)"Bernanke Talks About Our Dying Banking System

    Elaine Meinel Supkis

    Bernanke backs up his Beige Book bilge with more mysterious mumblings that are designed to soothe investors and put Americans to sleep. He, like all the monsters bringing us this continuing nightmare of red ink, tells us we can't stop this and it is all too mysterious anyway and besides, we need free trade because it is making certain people very rich so shut up! I then found a Presidential Trade Deficit Commission that is now defunct! It has some nifty things including the same threats that no one dare mess with this free trade freight train that is derailing our nation.

    From MSNBC:

    Banks play an important, though perhaps somewhat diminished, role in providing credit as consumers and businesses increasingly turn to other financial players, Federal Reserve Chairman Bernanke said Friday.

    "Banks do continue to play a central role in credit markets; in particular, because of the burgeoning market for loan sales, banks originate considerably more loans than they keep on their books," Bernanke said.

    "Nevertheless, non-bank lenders have become increasingly important in many credit markets, and relatively few borrowers are restricted to banks as sources of credit," the Fed chief told a monetary policy conference in Atlanta.

    I was on the forefront of 'Bernanke haters' from day one and I suspect there are now many more haters around these days. This lastest statement of this New World Order tool is typical. Banks provide credit? How? I can't see how this is possible! When he admits this ability has been 'diminished' he doesn't say how or why! And who are these other 'financial players'?

    Heh. So here are some answers from the non-economist of Culture of Life News: Banks have little credit to extend to anyone anymore. They offer such miserable returns on cast deposited that we are in a negative savings rate now for several nasty years starting from the day Bernanke's demented forerunner, Greenspan, dropped rates to the absolute floor of slightly more than 1%.

    Last night I painfully combed through this year's Federal Reserve reports and out of the huge stream of poorly-published numbers, I found theses babies: the USA's overall savings rate as money deposited in banks! And what an amazing series of numbers it is:

    2001: $132.4 billions
    2002: $184.3 billions
    2003: $174.9 billions
    2004: $174.3 billions
    2005: $-34.8 billions
    2006: $-96.4 billions---(note: in the 3rd quarter, last fall, it plunged to $-133.0 billion!)
    2007: $-82.3 billlions

    So, the banks aren't attracting much money, are they? Hell, they are losing money! Since the money they attract at say, 2% interest is then loaned at say, 5.45% interest on a mortgage and everyone makes money only...the banks are charging below the interest rates so anyone with any brains takes any savings and parks it in euros, gold or the stock market! All of which pay much better returns and none of whom give out mortgages.

    So stage right enters the 'Financial players' who are nearly all dressed in black and have black names and they look suspiciously like creatures guarding the gates to Hades. These nasty folk get their money not from savers but from some other 'Financial players' who live in Tokyo and eat raw fish.

    Since I know all this, why can't Bernanke say, 'Americans are not saving anymore, banks have no more money to loan for mortgages and now a bunch of unregulated hedge funds are funnelling money from Japan which is really our trade deficit funds, back into the USA in the form of loans'? It isn't that hard to spit out. He could hire me to write his speeches. I could write some scorchers.

    Such as having him go to Congress and begin wailing, banging his balding head on the desk and screaming, 'THERE ARE NO RESERVES IN THE FEDERAL RESERVE! AAAAARRRGH!' Then he could draw his samurai sword and disembowel himself. Then all the politicians, bankers and hedgefunders could be arrested and put on trial. After all, the entire point of the secret meeting in 1913 that set up this secret organization that prints our money was, they would build up a huge reserve and then protect the dollar with it!

    Well, they failed! And they shouldn't be allowed near any banks because they are incompetent."(snip)

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    Default Re: weekend commentary - who really controls US bank loans

    and part 2 from the same link ...

    (snip)"Unlike many 'economists' working for people making a ton of money off of the Japanese carry trade, I have no financial benefits from the present economic system so I can point out the obvious, the super-low Japanese interest rates that benefit the very rich in America is destroying our nation. The yen is now 123 to the dollar and dropping. The yuan is up yet again. And I found some interesting Federal Reserve reports that no one in the media said anything about, of course. Time for more number crunching. And the numbers paint a very grim picture.

    From Bloomberg:

    The Bank of Japan kept interest rates unchanged for a fifth meeting as it awaits more evidence on the economy's strength after consumer prices fell for a third month.

    Governor Toshihiko Fukui and his policy board colleagues held the key overnight lending rate at 0.5 percent, the Bank of Japan said today in Tokyo. The decision was unanimous and expected by all 43 economists surveyed by Bloomberg News. The bank doubled the benchmark rate in February.

    What on earth are they waiting for? They are already #1 in trade surplus profits! The government is now in the black unlike the USA which has been in the red for so long we should change our flag to a red one like China's flag. All indicators are showing the crushing of the Japanese workers and consumers is no longer restraining inflation so the Bank of Japan falls back on the idea that they should 'study' this matter even more.

    Of course, this is a lie. They lie all the time. This lie is like the lies our own Federal Reserve officers make whenever they want to manipulate our currency. They are supposed to anticipate what is coming next, not wait until something is painfully obvious. In the cas of Japan, there is zero pressure from the very rich who rule the earth. They are, unlike with China, allowed to tap this endless fund run by the Bank of Japan and carry off a good snippit of the trade surplus with the USA. This is the 'carry trade' which is used to 'leverage' this same money back onto non-Japanese companies in the form of debts via take-overs which have been roaring along, increasing the aggragate debt load of non-Japanese companies even as Japanese companies that export run in the black and are not being taken over.

    Indeed, if this flood of American red ink flowing out of the Bank of Japan were to suddenly appear in Japan as foreigners take over Japanese companies, the Bank of Japan would slam the door shut instantly. So I expect the stock markets to boom as the take-overs loading on debts onto Western companies booms and the rich will be richer and America is so very doomed.

    From Bloomberg:

    The yuan headed for its biggest weekly advance since the end of a fixed exchange rate in July 2005, after U.S. Treasury Secretary Henry Paulson said dialogue is the best way to urge China to allow gains.

    And the yen dropped even more as some wise currency speculators predicted! And I predicted this too! After the stupid G8 meetings that didn't say a peep about Japan but attacked the currency that has been rising, not falling, Japan is now very bold about all this. Thanks to the internet allowing some of us researchers to cover news that is hidden by the rulers, the totally occult business of the 'carry trade' would still be mysterious rather than obvious. Just last December, a hedge fund employee visiting me refused to say a thing about the Japanese game of manipulating interest rates because his own boss warned him about spilling these toxic beans in public.

    I hope everyone in the hedge fund business knows, we know what their game is and I happen to know how it will all end: with America's bankruptcy. Anyone working to bankrupt the USA is...a traitor. Because history shows us that bankrupt countries got through hell and if an empire bankrupts, this can cause World Wars."(snip)

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    Default Re: weekend commentary - who really controls US bank loans

    Personally I find her comments fairly ignorant.

    First, the old system of money on deposit vs. money loaned is not the bench mark it used to be. Each financial institution, bank or credit union, has their own reserves in addition to any money on deposit. If money on deposit was really the driving criteria for loans many banks would not be in business at all.

    Second, banks and credit unions can not always assume the risk of subprime lending. In order for them to assume the risk, because they are backed by the government, they must have a type of insurance coverage against defaults. Smaller banks or smaller credit unions do not even offer subprime lending because they cant afford to provide default coverage. Many financial institutions are now working with third party lenders to provide subprime lending in some form.

    Non bank subprime lenders assume this risk because their investors want the large dividends. Not all the investors in these hedge funds are foreign investors. Many were just greedy wanting to take advantage of the housing market boom.

    I have said it before on this forum, the problem has always been the deregulation of lending. It is what has lead to the abuses and collapse we are now seeing in the housing market. Subprime lenders have not been held to the same criteria as banks or even auditing procedures

    June 7,2007
    Bernanke said in his speech he's open to imposing tougher regulation of lenders to prohibit ``unfair'' practices.
    The Fed, which has authority to write rules for all lenders, is under pressure from Congress to further restrict predatory lending and toughen up standards. The Fed's Board of Governors in Washington will hold a public hearing on mortgage rules next week.
    http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aJUT9fTgD6kc

    Third the reason banks offer such low interest rates on savings has more to do with the federal reserve than with their own policies. The federal reserve is trying to keep interest rates low which in turn effects not only lending interest rates but also savings interest rates.

    From the comments you posted one would think banks are going bankrupt and that isn’t the case. The fees from their services across the board covers all those costs and provides a dividend to their investors.

    The only people going bankrupt are those people who have been saddled with mortgages and credit cards they cant handle.

    As long as subprime lenders, including mortgages and credit cards, can get away with insane terms and people continue to try to live outside their means, this wont end anytime soon.

    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: weekend commentary - who really controls US bank loans

    Each financial institution, bank or credit union, has their own reserves in addition to any money on deposit. If money on deposit was really the driving criteria for loans many banks would not be in business at all.
    This is absolutely true ... banks and the NCUA hold a small percentage of their outstanding loan volumes as a reserve against loan losses. But the author's point is that in the absence of deposits, in order to make new loans the banks and the NCUA must borrow money themselves. This additional money must either be borrowed directly in the form of mortgage bonds or indirectly borrowed from the Fed in the form of treasury bonds. The author's greater point is that, in either case, the true source of the money is probably a foreign investor or hedge fund that is borrowing yen at 1% interest rate in order to buy bank paper or treasury paper. If and when the yen interest rate spread declines or the yen exchange rate rises, there will no longer be sufficient buyers for that bank paper or treasury paper. If and when that happens, the only other source of additional funds to lend would be a direct printing of new money by the US Fed, with such printing sending the US dollar interest rate skyrocketing and the value of bank paper or treasury paper denominated in US dollars plummeting.

    In order for them to assume the risk, because they are backed by the government, they must have a type of insurance coverage against defaults.
    granted that banks and the NCUA have bought CDO's 'assuming' that these will provide insurance against loan and mortgage defaults. However, the same people are counterparties to these CDO's that are buying bank and treasury paper with borrowed foreign currency !!! Since they operate 'off the radar', there is really no way to know if these counterparties will actually make good on defaults if the percentage of defaults starts climbing. If the counterparties default on their CDO's, the banks and NCUA are in DEEP doo-doo, as there is no way that the small spread and fees earned by banks and credit unions will cover loan losses once their fractional reserves are written off entirely !

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    Default Re: weekend commentary - who really controls US bank loans

    To start, I would like to explain some terms to folks who are reading this that are not in the know.

    The FDIC (Federal Deposit Insurance Corporation) and the NCUA (National Credit Union Admistration) are government entities that insure money on deposit in banks and credit unions. They do not back loans. Both of these groups have large amounts of reserves that they invest for this coverage.

    CDO ( Collateral Debt Obligations) and MBS (Mortgage Backed Securities) are different types of investment securities. They are gone over in much greater detail in the link Melonie provided.

    Both the FDIC and the NCUA are addressing these concerns.

    The FDIC went thru reforms in March, this is a layman’s explaination of the reforms http://banking.senate.gov/_files/fisher1.pdf

    Here the NCUA addresses these same issues with corporate credit unions.
    http://www.cutimes.com/article.php?article=32409

    ALEXANDRIA, Va. — An NCUA guidance letter to corporate credit unions on credit and market value risks of mortgage-backed securities has some corporates touting their safety and ensuring their members they are not at risk from the subprime market.

    The NCUA letter states that as of yearend 2006, corporate credit union exposure to securities collateralized by real estate totaled 75.34% of all marketable securities. “Problems recently reported with underwriting and servicing of many subprime and nontraditional loans intensify the need for adequate monitoring of MBS by management, since such loans may have been securitized,” NCUA wrote.

    Corporate One said it wanted to get out in front of any potential concern among credit unions over NCUA’s letter so it sent its own letter to its members outlining its exposure to subprime mortgages.

    “Corporate One’s overall subprime exposure is approximately 5% of our total investment holdings and many of those issues are insured,” the corporate stated. “We are pleased to report that none of our subprime mortgage holdings currently have any interest shortfall—even under severe stress testing.”

    Russell Moore, capital market specialist with NCUA, said the letter was not in response to any problems at corporates. “As we all know, suprime lenders have experienced difficulties. We are just basically reiterating what we’ve talked about before. It’s just a reminder to corporates to continue doing what they’re doing,” said Moore.

    Moore said the 75% figure includes anything that involves mortgages, including asset-backed secured by home equities, etc. He said the 75% figure in the letter was just a statement of fact, NCUA is not saying the number is too high or low.


    I agree with you Melonie on some things. But not on this one. Bankers may fleece America of their money but they wont slit their own throats.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: weekend commentary - who really controls US bank loans

    Bankers may fleece America of their money but they wont slit their own throats.
    that depends entirely on which 'bankers' you're talking about, and whether or not you believe in deja vu ...



    (snip)"For some years the final bill for the S&L crisis remained uncertain. However, we know now that, setting aside ongoing legal action, the thrift crisis cost an extraordinary $153 billion - easily the most expensive financial sector crisis the world has ever seen. Of this, the US taxpayer paid out $124 billion while the thrift industry itself paid $29 billion.12

    The consequences of the S&L crisis for the structure and regulation of the US financial industry were profound. The number of institutions in the S&L industry fell by about half between 1986 and 1995, partly due to the closure of around 1000 institutions by regulators, the most intense series of institution failures since the 1930s.13 The failures prompted an overhaul of the regulatory structure for US banking and thrifts, a shake-up in the system of deposit insurance and implied government guarantees, and a series of legal battles and corruption scandals fought out in the courts.

    Regulators shifted towards a policy of earlier intervention in failing institutions so that the principal costs are more likely to be borne by shareholders than other stakeholders. There was also a shift towards more risk-sensitive regulatory regimes with respect to both net-worth assessments and the payments made by individual institutions to deposit insurance funds, while deposit insurance reform made it less likely that taxpayers would shoulder so great a burden in any future crisis.14

    At a wider level, the S&L crisis taught politicians, regulators and bankers how misleading rules-driven regulatory and accounting numbers can be in relation to risky bank activities. At different stages of the crisis, and at many different levels from bank executives through to regulators and politicians, a formalistic reporting of the financial condition of S&Ls was deliberately selected by interested parties to cover up the true economic extent of the unfolding disaster. It was a risk-reporting failure on a grand scale that greatly worsened the long-term economic consequences for the ultimate stakeholder: the US taxpayer."(snip)


    Arguably, the emergence of hedge funds and derivatives which operate outside the 'radar' of financial regulators, and the dependence of today's US financial institutions on hedge fund capital and derivatives risk 'management' is analogous to the main component of the S&L crisis i.e. understatement of actual risk and a massive shortage of 'real' assets with which to cover losses.

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    Default Re: weekend commentary - who really controls US bank loans

    and speak of the devil ... this blurb was just released re a privately funded hedge fund rescue plan



    What makes this extra interesting is that IMHO the ONLY reason that private funds would come to the rescue of a hedge fund is to prevent an out and out failure - which in turn would expose the 'man behind the curtain'. This would in turn lead to questions and scrutiny re the true condition of CDO counterparties and the true risks involved.

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    Default Re: weekend commentary - who really controls US bank loans

    Dont forget the fear of being taxed as a corporation.

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