America’s government, Wall Street, banking, the whole financial sector and major corporations are rife with fraud. One of the latest scams is the Foreclosure Prevention Plan, which has been extended to second mortgages. Homeowner mortgage payments will fall as will the interest rate. As we predicted more than five years ago, the government will end up owning half of the homes in America. Under the plan government supplies a home equity line as well all of which you get to pay for. Karl Marx has to be howling in laugher. For good measure the mugs in the beltway are throwing in another $75 billion. As we reported long ago lenders get $500 for a modified second mortgage and an additional $250 a year for 5 years. This program is supposed to help one million homeowners. In all of this creative our Marxism lenders want to be protected as well from lawsuits from CDO holders - those owners of bonds known as collateral debt obligations. It sounds like everyone wins except the taxpayers who get to pay for it all. Most of these are subprime and ALT-A loans and they’ll never work. They will have a 50% failure ratio. This is a payoff as well for major banks to modify the terrible loans they wrote in the first place, plus it protects them against fraud if they commit fraud. This is a real beauty, a piece of unconstitutional legislation. What does Congress care – they are in the bank’s back pocket. So goes America down the slippery slope to oblivion.

          We have seen extensive coverage of the bankruptcy of Chrysler and the possible demise of GM. If both go into receivership Pension Benefit Guaranty Corporation, PBGC, will have serious problems. The PBGC, is a quasi-government agency, that insures defined benefit pension plans for those who contribute. Chrysler and GM have 250,000 and 500,000 participants respectively. There is no question part of benefits will be lost. We see a payout of 30% to 50% of current benefits and if the Dow goes to 4,000 it will be much less.

          The PBGC, which is out of money now, would need at least $150 billion from the government. If government doesn’t come up with the money to bail out the system all the other participants will bail out of PBGC and probably cancel their 401k programs.

Fraud is everywhere and it continues unabated and un-prosecuted. A crime syndicate runs America. JP Morgan Chase, Goldman Sachs and Citigroup run our government. Every time these three firms participate the system is exploited one way or the other. The latest example is the rules change by the FASB allowing mark-to-model, which means our balance sheet is what we say it is. You ask, how does this happen? It happens because they control the system and our government. 

The greatest fraud is the Federal Reserve and our government. They are both throwing money at the problems. The Treasury borrows the funds and the Fed creates them out of thin air. America, under the privately owned Federal Reserve for almost 100 years has done the same thing over and over again, and it looks like this time they are headed over the edge. Between the looting by the Fed and our welfare state our country is on its knees financially and economically. While this transpires, Americans and people in other nations clamor for government intervention. They want government to get even bigger and they want an even larger welfare state. That said, is it any wonder people all over the world have started buying gold over the past year?

As every nation has learned no nation prospers under monetary inflation because it robs the people of the fruits of their labor. Due to the wanton creation of money and credit we have had two stock market collapses in the last 10 years and a monumental collapse in residential and commercial real estate. How can the Fed be still in charge after the past 20 years of financial and economic disaster? If we include commodities, the losses could be as high as $100 trillion. The people who caused this are the Fed, banking, Wall Street and rating agencies, which are still in charge, and they are not even being investigated. There obviously are no rules. They are what the participants want them to be. As a result of these policies we are in worldwide depression. Due to monetization and reckless creation of money and credit little has been accomplished, except keeping banking and Wall Street afloat for the time being. This spending can only be viewed as further taxation for future generations. After the current injections of money and credit and stimulus end in the summer of 2010, the governmental and monetary powers either create $15 trillion more to jack up the US economy and others do the same, or the delayed deflation takes over. They still are treating the disease and not the cause at a terrible future price. Complicating matters China is creating $1.2 trillion in debt, the Japanese $250 billion and Europe $500 billion. You have to ask, where does it all end? London, Washington and New York have no further answers. They know that massive more money, credit and monetization has to be produced or deflation will take over. They are running on a treadmill that never stops. The bond market breakdown through the 200-day moving average is already telling us there are higher interest rates ahead, which means much higher interest costs are in the future in the long end of the market, which will cut into corporate profits as well.

In the US federal debt, on a short-term basis, should be close to an additional $9 trillion with long-term debt at $110 trillion. Tax revenues will continue to decline if not crash over the next few years as the lagging indicator unemployment hits 35%.

After August there will again be a fall off in economic activity until the 2010 stimulus hits. That will affect the economy for six months from April onward. After that comes more stimulus and the monetization of bank assets now held in a sterilized mode.

One of the problems the US is facing is that governments and corporations worldwide are all raising money crowding out each other. The answer to that will be higher interest rates that have already begun with the breakdown of the US T-bond, the 30-year, and the 10’s that have telegraphed that rates are going higher. This creates real problems for all borrowers. Recently the UK had trouble selling their gilts. This is because government deficits are widening. This is and can be a limit to government borrowing that is generally governed by interest rates.

The FDIC is insuring deposits of $4.7 trillion with a $13.6 billion deposit insurance fund.

Every day the Chrysler saga brings about new complexity. Now, a group of 20 lenders that balked at the terms of a government-brokered deal to cut Chrysler’s $6.9 billion debt, are now planning to object to the company’s planned bankruptcy sale. Selling the assets in 30 to 60 days infringes on their legal rights. This group includes Oppenheimer Funds, Stairway Capital and other secured lenders who have their own group of investors, including teachers, credit unions pension funds, retiree plans, college endowments, and retirement funds.

The government’s proposed plan inverts the classic priority scheme written into the bankruptcy code, when senior secured creditors are paid in full first, followed by junior lenders, administrative claims, unsecured lenders and equity holders in that order.

There is no question the sale is an attempt to end-run the procedural protections that are provided by Chapter 11. The senior secured creditors are going to get $0.29 on the dollar and the unsecured creditors $10 billion. The secured lenders are subsidizing junior creditors who have little or no standing. No court has ever approved something like this before. It is without precedent. The senior holders have been deliberately precluded from negotiations with the government. This is the way corporatist fascism works. The pressure by the administration was intense. A president has never thrust himself into a bankruptcy case like this. This means the court is not independent and unbiased, but rather an instrument of the executive.

This is a cram down – not a negotiation. There is no sanctity of the bank’s debt holder’s investment contracts. Control is to be given to the United Auto Workers, who caused the problem and Fiat a “black nobility,” Illuminist entity. Do you see the picture?

...

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-- Posted Thursday, 7 May 2009 | Digg This Article