The U.S. and European Union (EU) debt crisis are essentially the same event. Banks leveraged toxic assets (mortgages) 40 to1, which made banks insolvent as house prices declined. This Forbes article refutes the notion that government forced lenders to give loans to unqualified borrowers. In the following excerpt, Forbes cites excessive leverage as one cause of the crisis.
“The SEC loosened capital requirements: In 2004, the Securities and Exchange Commission changed the leverage rules for just five Wall Street banks. This exemption replaced the 1977 net capitalization rule’s 12-to-1 leverage limit.
This allowed unlimited leverage for Goldman Sachs [GS], Morgan Stanley, Merrill Lynch (now part of Bank of America [BAC]), Lehman Brothers (now defunct) and Bear Stearns (now part of JPMorganChase–[JPM]). These banks ramped leverage to 20-, 30-, even 40-to-1. Extreme leverage left little room for error. By 2008, only two of the five banks had survived, and those two did so with the help of the bailout.”
Most of the NINJA loans (no income, no job and assets) were made voluntarily, and Wall Street banks were buying worthless loans on the secondary market, not lending to homeowners. No one forced Wall Street banks to buy worthless loans, leverage them 40 to 1, label them as triple A investments, and sell them around the world.
William Black was Deputy Director of the Savings and Loan Insurance Corporation during the 1980’s financial crisis. He helped obtain a 1000 criminal convictions of “elite” bankers. Mr. Black says public losses from the 2008 financial crisis are “70 times greater” than the Savings and Loan meltdown, but despite compelling evidence demonstrating Wall Street fraud, there have been few criminal prosecutions.
During this radio interview, Black said in 2004, the FBI testified before Congress about an epidemic of mortgage fraud and predicted it would cause a financial crisis. In 2006, all major lenders were warned that “liars loans” had a 90% incidence of fraud. But the mortgage industry increased subprime lending to the point that 1 in 3 loans were liars loans when the bubble burst in 2008. Mr. Black said this constitutes one million cases of fraud per year by the industry.
Kyle Bass, portfolio manager for Hayman Capital Management was on CNBC’s Strategy Session. He was asked if European banks have enough capital. He said the EU “doesn’t have the money to recapitalize their banks because they don’t have a mechanism to print money like we do.”
Kyle was referring to the Fed buying nearly 2 Trillion of toxic assets from banks and injecting 16 Trillion of near 0% loans into the global banking system. The EU is a political union, but it lacked a fiscal union that would allow the European Central Bank (ECB) to print money for a bank bailout.
Bob Pisani is a market analyst on CNBC. August 11, 2011, Bob commented on the financial crisis in Europe. He said the funding costs for EU banks had risen and banks were “having issues”. Bob said “we have no idea what these banks have” and cited a bank analyst saying about French bank Societe Generale, “SocGen doesn’t even know exactly what they’ve got”.
Mr. Pisani continued: “This crisis is going to, number one, accelerate a fiscal union in Europe. Politicians need some kind of crisis to put to their electorate so they can make the changes needed to move toward that accelerated fiscal union. That’s the good news that’s going to come out of all this”.
Later that day on CNBC’s Power Lunch, Mr. Pisani said “they [EU banks] need a crisis over there to get these deals through the Parliaments, and they’re certainly getting the crisis they wanted.” So EU banks and their politicians wanted a crisis that would effectively coerce EU citizens to give bailout authority to the ECB.
Huge debts owed by big banks are used to create a crisis that forces legislation like the TARP bailout and Dodd-Frank on taxpayers. Obama’s finance reform, Dodd-Frank, gives the executive branch permanent bailout authority, and future bailouts will not require a Congressional vote. This legislation epitomizes taxation without representation.
Politicians, investors and media blame European “PIIGS” (Portugal, Ireland, Italy, Greece, Spain) for the EU debt crisis, but this is propaganda. Like U.S. taxpayers, EU taxpayers have been misled by an insider cabal of politicians and bankers who’ve run up huge debts without informing citizens of the risk.
Simon Johnson, former IMF chief economist, said CEO’s of the six biggest US banks drew 2.6 BILLION in cash out of their banks “before” the 2008 financial collapse. Hmmm? Mr. Johnson was clearly suggesting foreknowledge of the crisis.
Bond vigilantes helped bring the EU crisis to a head by making a speculative attack on Italy’s sovereign debt. This caused the interest on Italy’s debt to go up 200 basis points (2%) overnight, and a government default would have pushed EU banks to the brink of insolvency.
Mark Grant from Southwest Securities was on Squawk Box saying EU banks “can sink the sovereigns” and it will take “10 to 12 Trillion dollars to recapitalize the banks.” EU banks are putting pressure on German taxpayers to fund most of the bailout with an EU TARP.
Sept. 22, 2011 on Squawk Box, Steven Roach, Chairman of Morgan Stanley Asia said German Chancellor Angela Merkel “is concerned about sovereign independence” if the EU TARP goes forward, and Greece is also concerned about “giving up sovereignty.” Roach said the strategy is not sustainable and “banks have mismanaged risk”. Bank debt is being shifted to taxpayers.
The deals sought by EU banks equate to monetization of their debt by the ECB, i.e., printing money and loaning it to banks for free, which is a taxpayer bailout similar to TARP. With a little help from their friends the bond vigilantes, big banks were able to extort the concessions they wanted from sovereign nations.
During a House debate over the $700 billion bank bailout (TARP), Republican Jeb Hensarling said the budget deficit rose 800% to 1.2 Trillion, and taxpayers are on the hook for 8 Trillion due to the financial crisis. Organized crime is large and in charge.
Wall Street’s method for extorting Trillions from U.S. taxpayers is being used on EU taxpayers, i.e., give us unlimited access to your Treasury or we’ll collapse your economy. Brad Sherman said members of Congress were threatened with “martial law” if they didn’t pass the $700 billion dollar TARP bailout.
The EU bailout is called the European Financial Stabilization Fund (EFSF), and it isn’t sustainable because wealthy EU countries are not willing to put up the Trillions necessary to recapitalize banks and stabilize sovereign debt. EU banks and investors want the ECB to monetize their debt, i.e., print unlimited amounts of money like the Fed. This shifts bank debt onto the backs of sovereigns and individual taxpayers, a.k.a., bank deleveraging.
CNBC’s Federal Reserve boot licker and money printing expert Steve Liesman asked Fed President James Bullard, “should the ECB monetize the debt?” Bullard replied, “the ECB is already buying sovereign debt, this is a complete violation of the [Maastricht] treaty.” Liesman’s response was “treaty shmeaty”, i.e, the ECB should violate the law and print money. Liesman has no regard for the law, the sovereignty of nations, or the rights of individual sovereign citizens. The previously mentioned comments come a little after two minutes into the video.
Europe’s Maastricht Treaty prohibits the printing of money by the ECB because taxpayers of wealthier EU nations would end up bearing most of the cost. Just like U.S. taxpayers will bear the cost of the Fed’s toxic asset purchases and 16 Trillion cash injection, much of it into foreign banks.
Bailing out foreign banks is a violation of the Fed’s dual mandate, which applies strictly to stabilizing the domestic U.S. economy. Why? The Fed’s decision to bailout foreign banks makes U.S. taxpayers liable for foreign debt. So the US financial crisis was used as a pretext to violate U.S. law, likewise, the EU debt crisis is used as a pretext to violate the Maastricht Treaty. Goodbye sovereignty, hello austerity.
Steve Liesman is CNBC’s Fed expert. He and other CNBC hosts, Melissa Lee, Andrew Sorkin, Michelle Cabrerra, Jim Kramer, Larry Krudlow, Bob Pisani, Rick Santelli, Joe Kernen, all squeal like stuck pigs when talking about government spending programs for average citizens. But when markets start to drop, they support the Fed and ECB printing money like drunken sailors, as well as government stimulus.
CNBC’s host of Squawk Box Asia, Bernie Lo, echoed the sentiments of his CNBC comrades. During a discussion about the Chinese government’s plan to restructure industry, Bernie said “There’s nothing wrong with being a command [communist] economy, it can make things more efficient and make things happen faster sometimes.” CNBC hosts say they support market driven economies, but their support for the Fed’s intervention in markets and government stimulus reveals their socialist/communist agenda.
Government stimulus and unlimited money printing are the only things propping up big banks, the stock market, and by extension, the parasitic careers of CNBC hosts. Most of the CEO’s, portfolio managers, and fund managers they interview, spew the same propaganda. They blame average taxpaying citizens for not living within their means, then they advocate dumping Trillions of bank debt on them in violation of the law. It’s the free market, i.e., a market free from the rules of capitalism.
President of the KC Federal Reserve, Thomas Hoenig, said Too Big To Fail companies “have the availability of different rules” …. “The United States has been the most successful economy in history…because for the most part over it’s history, it has been bound by the rules of capitalism, which does in fact reward success, but also compels participants in the market to play by open rules…and [participants] are compelled to fail when they make poor decisions”
Sept. 23, 2011, Sean Egan, president of the Egan Jones ratings firm was on Squawk Box. Mr. Egan said Europe should make up for a “1.5 Trillion euro shortfall” by printing currency, but “Europe has a problem with printing currency because of memories of the Weimar Republic, which led to WWII”.
Money printing by Germany’s Weimar Republic collapsed their currency and facilitated the rise of Adolf Hitler. Egan said the U.S. will be involved in the solution and suggested sending former Treasury Secretary Paulson to Europe.
Paulson engineered the 700 billion TARP bailout and supports the Fed’s printing of 16 Trillion to prop up the global banking system, so Egan clearly isn’t worried about collapsing the U.S. dollar. He ended his commentary saying, the problem with the EU is “they’re behaving like separate nation states.” The U.S. and European countries are separate sovereign nation states but Mr. Egan sees this as a problem, as do most big players in global financial markets.
When St. Louis Fed President James Bullard was on Squawk Box, he talked about the speculative attack on Italian debt and resulting interest rate spike that pushed Italy to the brink of insolvency. He said “one day it will come to the U.S.”, we will have trouble borrowing in international capital markets. Communist China, one of the largest buyers of U.S. treasuries, is dumping US government debt.
Communist China will be the bond vigilante leading the speculative attack on U.S. debt. If the interest rate suddenly rises on America’s $19 Trillion debt, like it did in Italy, the U.S. will be on the brink of insolvency. This manufactured crisis will be used to force radical cuts in defense, Medicare and Social Security, and force the sale of U.S. assets. This will free up money for interest payments on US debt and for Dodd-Frank, Wall Street’s bailout program.
Washington gridlock is pure political theater, it’s a put on. The super committee formed to deal with the debt problem was designed to fail. Why? US and Chinese leaders describe their governments relationship as a “partnership.” Partners do not compete, they work together to achieve common goals, like bringing China’s totalitarian model to America.
Bipartisan leaders and their Wall Street partners want to crush U.S. sovereignty so they can continue building their command and control, centrally planned, global “free” market economy. They want markets free from the rules of capitalism, and free from moral constraints, i.e., global organized crime. The ideology of Wall Street’s bipartisan cronies is virtually identical their totalitarian partner, Communist China.
For more information click on the pdf file Knowledge is Power.