Can We Say It Now?

Yesterday, Bloomberg.com ran a story titled, "Bailout Hasn't Checked Wall Street Risks, Warren Says."

My first response was, "Duh, and this is news."

Did anyone really think that the geniuses who made millions running their companies into the ground; who nearly brought global financial markets to a crashing halt; and who were bailed out in spite of their misdeeds were really going to change their ways.

Why should they?

Obviously, the message that they received from the TARP bailout was that their system worked. At least it did for them. And after all, since Wall Street drives the economy, they are all that matters, right?

In her article, Lorraine Wollert reported:

" Elizabeth Warren, a chief watchdog of the government’s rescue of Wall Street, said the $700 billion bailout hasn’t stopped the “culture of excessive risk-taking” that led to the financial crisis.

The Troubled Asset Relief Program also has “injected an unprecedented level of pricing distortions and moral hazard into the marketplace,” Warren said at a hearing today of the Congressional Oversight Panel on TARP, which she leads.

“Uncertainty persists about the stability of our financial institutions and whether they can survive without the benefit of government assistance,” Warren said.

The oversight panel heard testimony from economists about the effectiveness of the program. Treasury Secretary Timothy Geithner must decide whether to extend the rescue program beyond its scheduled expiration at the end of the year.

Warren said banks are relying on government aid and consumer lending to make money.

“That’s not a sustainable profit model,” she said.

So can we finally say it?

All together now:

An economy based primarily on debt and credit and very little production of tangible goods simply is not sustainable.

But this is what we have. A service economy that runs on debt and credit. An economy built on: financial schemes; health care for profit; outsourcing production; illegal labor: and most of all, GREED.

We just didn't learn our lesson. So now prepare yourselves for the rollout of TARP 2.0 aka TARP Reloaded.

In the following video from FireDogLake Elizabeth Warren provides an honest assessment of this situation.

I certainly don't have all the answers for fixing this problem. But I do agree with Albert Einstein who is quoted as saying, "Insanity: doing the same thing over and over again and expecting different results."

And if TARP Reloaded fails, don't hold your breath for TARP Revolutions. That would be a contradiction in terms.

Just How Does The Fed Have Trillions of Dollars & the Government Doesn't?

The Wall Street Journal is reporting that in an effort to stabilize the economy The Federal Reserve is saying it will "flood the financial system with an additional $1.2 trillion."

That's TRILLION with a T.

Washington Post Staff Reporter Neil Irwin reports:

"The Federal Reserve yesterday escalated its massive campaign to stabilize the economy, saying it would flood the financial system with an additional $1.2 trillion.

The decision by the Fed to buy government bonds and mortgage-related securities is designed to lower borrowing costs for home mortgages and other types of loans, thereby stimulating economic activity. The central bank, effectively, will print more money to pay for the purchases.

Combined with the billions already deployed by the Fed, the new money dwarfs even the biggest government bailouts of financial companies."

You're not kidding that it dwarfs other bailouts. So, I just have two questions:

• Where is The Federal Reserve getting this money? and,
  

• If The Fed has access to this much money why did Bernanke and Bush state that the world as we know it would come to an end if Congress didn't rush to pass a $700 billion bill to bail out the banks?

I'm the first to admit that I'm no economic guru. I'm just a finance novice who is trying to maintain my household and make sense of the world around me. I really need someone to explain this. But be advised, momma didn't raise no fool.

Here's what I understand so far.

Wikipedia gives this description of the Federal Reserve System:

"The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. Created in 1913 by the enactment of the Federal Reserve Act, it is a quasi-public (government entity with private components) banking system^[1] that comprises (1) the presidentially appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) twelve regional privately-owned Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with its own nine-member board of directors; (4) numerous other private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks; and (5) various advisory councils.

The primary motivation for creating the Federal Reserve System was to address banking panics.^[13] Other purposes are stated in the Federal Reserve Act, such as "to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes."^[14]"

And according to the site FederalReserve.gov this is how the Fed is funded :

"The Federal Reserve's income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate). After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury."

So if the Federal Reserve turns all of its earnings, minus operating expenses, over to the U.S Treasury, how does the Fed now have trillions of dollars to "flood the banking system"?

To recap, The Federal Reserve is a "quasi-public"/private agency that was created to address banking panics and has trillions of dollars at its disposal but couldn't prevent the current economic crisis unless Congress ponied up $700B of TARP money for the banks.

??????

Oh, I do have one last question.

Is it sheer coincidence that the Fed made this announcement while the US public is totally engrossed by the AIG bonus debacle?

Related posts:

The Narcoleptic Public Consciousness of America, 2/09

Get Over the Shock, Stop Them Now, 9/08

Why Americans Want Wall Street and the Banking Industry to Suffer, 9/08

Where Are They Getting The Money?, 03/08

Banks Will Pay Less to Borrow Money While Consumers Pay More, 2/08

Don't Just Get Mad, Ask Questions, 8/07

Other articles:

The Bush Bulldozer Strategy by Danny Schechter, 10/06

Congresswoman Advises Homeowners Facing Foreclosure to Demand the Note

A Congresswoman, who reminds you of a beloved high school teacher, is giving hope to Ohio residents fighting off homelessness.

Rep. Marcy Kaptur (OH-9) urged residents facing foreclosure to demand the loan note and if necessary exercise squatter's rights before leaving their homes.

No, Rep. Kaptur is not encouraging her constituents to break the law. In fact the opposite is true. She is encouraging individuals who are attempting to pay their mortgages and who have made every attempt to renegotiate their loans to exercise their legal right to fight eviction.

During an interview on Lou Dobbs Tonight, which aired on Thursday Jan 29th, CNN Correspondent Drew Griffin reported:

"Elected officials are saying Toledo is not in a recession, it is a depression. It is this bleak backdrop that inspired Toledo Congresswoman Marcy Kaptur to take the floor of the House earlier this month to tell her constituents to stay put.

Kaptur says she has had it with government bailouts for Wall Street banks, but nothing for homeowners. She is advocating for a legal revolution, a demand that not one of her constituents leaves their home without an attorney and a fight."

The following video clip shows Rep. Kaptur explaining how Wall Street and the banks have manipulated the system during a Jan. 7th address on the House floor.

The following is an excerpt from the Lou Dobbs Tonight broadcast transcript:

" GRIFFIN (voice over): Kaptur is behind a strategy called produced the note. Mortgages have been so divvied up on Wall Street that banks are having a hard time finding that original paperwork, adding a delay to foreclosures.

She is also pushing banks to rework loans, especially those banks getting bailouts and holding mortgages of folks getting tossed out.

KAPTUR: They are vultures. They prey on our property assets. And I guess the reason I'm so adamant on this is because I know property law and its power to protect the individual home owner. And I believe that 99.9 percent of our people have not had good legal representation in this.

GRIFFIN: Without a lawyer, Andrea Guice bought a $147,000 home with nearly $40,000 down.

GUICE: I should have had an attorney. I really should have had the attorney. I did not know.

GRIFFIN: She admits she didn't read the paperwork, didn't learn, until it was too late, she had a sub-prime loan. Her payments of $883 a month jumped in a year to more than $1,500. When it did, she stopped paying.

(on camera) So they foreclosed on you?

GUICE: They have foreclosed on me, yes.

GRIFFIN (voice over): The law firm representing the bank in Guice's foreclosure declined comment to CNN. Another one of the banks Guice believes holds her notes, Wells Fargo, said it wouldn't comment on individual cases, but tries to work with homeowners.

Backed by her Congresswoman, Guice simply is not budging.

(END VIDEOTAPE)

GRIFFIN: Lou, no one's saying, "don't pay your mortgage." What the Congresswoman is saying if you're being foreclosed on, don't just leave. Don't assume you have to leave your house. And you're going to have a run, I know."

In the following video Rep. Kaptur explains how, given the "loan pooling" process, in many instances the institution initiating foreclosure proceedings has now idea where to locate the original loan note.



url: http://www.youtube.com/watch?v=cgckNg2L34M


During the same broadcast, Congresswoman Kaptur further clarifies her position with the show's host, Lou Dobbs:

DOBBS: -- ... At what point does telling a person, as you have, to just exercise squatter's rights -- at what point are you bumping up against the issue of breaking the law?

KAPTUR: Well, you know, Lou, the problem is that these families haven't had proper legal representation. Most of these companies on Wall Street can't even find the loan, and they have not properly noticed the homeowner under the Truth and Lending Act and the Real Estate Practices Act.

DOBBS: Right.

KAPTUR: If you really look at the fine print, these Wall Street firms can't find the loan. They've divided it up into so many pieces, so there's a legitimate question in the law as to where that deed, where that loan actually is.

DOBBS: In point of fact, it's not -- to be clear, if there's no note, there is no debt?

KAPTUR: That's right.

And if you don't have proper legal representation -- and I mean good legal representation -- what happens to the homeowner in places like our region is, they're law abiding people. They're afraid and they leave the property.

I say your biggest right is to hold on to your property. The law is on your side.

DOBBS: Marcy Kaptur, I'm sure that millions of Americans and the folks in Ohio appreciate you being on their side

Yes, Rep. Kaptur, I'm sure that millions of Americans are grateful that the people of Ohio elected someone who really cares about them. Thank You

If you are facing foreclosure and need legal advice contact your local Bar Association and investigate your state's "squatter's rights" laws. You can also inquire about law firms that specialize in real estate and/or offer pro-bono services.

If you are a senior citizen check with your local AARP branch or similar group which might offer low cost legal services.

And finally, everyone should contact their elected State and Federal representatives and encourage them to pass legislation that will help consumers and not just Wall Street and the banks.