We were assured by the leaders of both political parties (gangs) that the government of the American people -" specifically the Department of Treasury -- had to borrow these trillions from the Central Bank of China and give it to our banksters, so that the banksters could start making loans again to American businesses and would-be home owners. It sounds so stupid when you think about it: we borrow from the Chinese to give to the banks so they could loan it back to us. But that's the only way the banks could or would start loaning to us; it had to be us who were put on the hook, not them. (What do you expect them to do, loan us their own money?! Don't be silly. Why would they do that when they can get our Treasury Department to borrow the money, in our good name, from the Chinese (and from the many others who buy Treasury bonds) and then get the Fed to buy these Treasury bonds from banksters like Goldman Sachs, so that Goldman can take a cut on the sale?
How in the world did we ever go for something so idiotic? Well in some sense "we' didn't, of course. But "our' government did: In a show of bi-partisan disregard for the wishes of the American people, Congress passed the legislation that authorized the deal and Bush signed it -- over the strident objections of the vast majority of people who voted all of them into office.
And then, after all that, the banks did not start making loans to us again, as they had promised. And, for the most part, they still haven't. It seems they do not trust us with the money that we essentially arranged to have provided to them for that purpose! And yet they had to do something with the massive tonnage of cash that the Fed lavished on them. So the Fed helped them out again: It started paying them interest for any excess funds the banksters left on deposit at the Federal Reserve. And that just served as further disincentive for them to loan to businesses and individuals, as they were supposed to do. -- why bother to make such loans when their excess (and interest-earning) funds were completely safe with the Fed? Sure the interest rate was small, but even a small interest rate on 500 billion dollars is a healthy profit -- especially when you got the money basically as a gift! So dig this: the Fed has been paying the banks to deposit back with them the money that they gave to the banks in exchange for their trash-toxic assets! And so it was that the Fed's excess reserves, held for the banks, soared to record levels.
And that brings us to the Fed's current problem: They bought all of those assets that are generating income streams (for them) that are only a tiny fraction of what they are supposed to be generating, yet the Fed itself is paying interest to all those big banks to re-deposit that money with them. In addition, the Fed has operating expenses. Normally they cover those expenses by doing things like selling assets. Too bad for them there are no buyers for their assets except at a significant loss. Even treasuries would sell at a loss since the Fed has been working so hard to keep interest rates artificially low. And the assets they got from the banks? Fuggedaboudit! The Fed itself would become insolvent if it sold those assets for what they were really worth, because they would then have to sell them at huge losses, i.e. at prices that were much less than their book value (i.e. the amount of money the Fed gave their bankster friends for the assets).
The solution they have devised for this problem is elegantly wicked.
Not only does this solution get the Fed out of its trap, it also solves the new problem that their bankster friends have, which is what to do with all this cash they are sitting on. They have so much cash, they can't find profitable places to stick it all. They could buy bonds, but they know the dollar is due to take big losses -- and that's one reason they are in a hurry to find places to profitably spend as much of their cash as possible. They could buy stocks, but they are so swollen with cash that they have already bid up the price of stocks to levels that are completely unjustified by the expected profitability of the companies themselves. Bottom line: The banks simply have too much cash to be easily absorbed. They have scammed the American People out of more money than they can possibly figure out how to spend. So what to do with all this ill-gotten gain?
Well, there actually is a large pile of assets that might be tempting targets -- if they could just get them for the right price. That pile of assets sits on the Feds books. Why, its the very assets that they sold to the Fed at or near book value! The banks are so flush with cash right now that they might be willing to buy back some of those assets -- if the price is right.
Of course they won't pay book value which is what they sold them for. That would be ridiculous! Instead, they will pick them up for maybe half price, or even quarter price. They will buy back all or most of their toxic dogs at such bargain-basement prices that they will in the process turn them into cash cows! They will rob the taxpayers both coming and going, cheating them twice on the same asset. How sweet is that?! They will then wind up with the cash and the assets, leaving us commoners with only the debt used to finance this shell game. To see how all this is going to be worked out, continue reading.
The only barrier to this scheme (a scheme that will enable the banksters to end up with both the cash and the assets) is that the Fed might soon become insolvent itself if it too much aids and abets the banksters who run it, in this siphoning off of the national wealth. Many think that the Fed is close to insolvency now, because they can't unload all of the trash they have overpaid for without taking a terminal hit themselves. But of course that notion is mistaken because the Fed has the ability to simply create all the money it needs out of thin air.
Will fiscal reality ever force the Fed to quit acting as a conduit to help the big banks loot the Treasury? Or will banksters forever look for new accounting tricks to hide their insolvency as they double-down on the looting? It remains to be seen.
When the Fed makes a profit over and above its operating expenses, it must by law remit these profits to the Treasury. That was a condition of the Feds creation; otherwise they could simply create 100 quadrillion dollars and grow fat off of the interest. So they are not supposed to profit from such an obvious misuse of their currency-issuing authority. However, they have found subtle ways of doing exactly that.
Under a new rule change, losses will not count as losses. Instead they will be called "negative liabilities.' That is to say, they will be counted as a credit against future profits that they would have to, in theory, turn over to the Treasury. So now the Fed can "lose' a trillion dollars a year (to their friends the banksters) for the next two decades, but as long as they create enough money out of thin air to pay operating expenses, they are technically still solvent. Brilliant, no? Meanwhile incestuous personnel move back and forth, as employees, between the Fed and the banks that employ the banksters. And how corrupt is that?!
So here we have an absurd accounting fiction that will enable the Fed to sell back the toxic assets to their bankster buddies at bargain basement prices. That's what's coming next. And who is going to compete with the big banks in buying those bargain assets? Not Americans, as we are starved for cash out here in the heartland. No, our securities, mortgages and other debt, will be bought up by the banksters who essentially stole from us the money they are now using to buy us out. Foreigners like the Chinese will be the only ones able to bid against them, and it's people from both these groups who will likely be our future masters. It is written that the Borrower is Servant to the Lender. And barring the miracle of some kind of mass awakening (in time), that is going to be our fate.
Andrew Jackson ended the pillaging by the central bankers of his generation . . by ending the central bank -" just as Ron Paul wants to do today. The American people will find and turn to a new Andrew Jackson, or they will slide into a debt slavery from which they will not emerge for many decades.
"How could we have possibly known what was going to happen?!"
According to a recent report in the N.Y. Times, Citigroup executives conceded that they had paid little attention to mortgage-related risks. Executives at the American International Group were found to have been blind to its $79 billion exposure to credit-default swaps, a kind of insurance that was sold to investors seeking protection against a drop in the value of securities backed by home loans. At Merrill Lynch, managers were "surprised' when seemingly secure mortgage investments suddenly suffered huge losses.