Fed's Bill Dudley Explains Bank Runs, Discusses Collateral Risks, Suggests Way To Prevent Systemic Collapse

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Fri, 11/13/2009 - 23:51 | 130431 waterdog
waterdog's picture

I've been blaming the wrong people all along. This guy may be the enemy, but he tells it so I can understand it. Jesus good Lord Christ, what the hell are we doing?

Sat, 11/14/2009 - 00:41 | 130447 Anonymous
Anonymous's picture

I read it, understood it, and even took notice of his disclaimer that he's speaking on his own behalf and not the FED.
In compliance with Marla's Rule#5.
This Guy is !@#$%^&&*%^&*!@#(*&^@#$%^*&&(**)@#!!$%!!*@%^^$%@! and he needs to !@#>*!*!!@#%^&^ the sooner the better!
He sounds like Tony Soprano. The disconnect is astounding.
If JS6 were a single entity and showed me this. Then asked "how do we stop this?" My reply would be"Don't go to work!" The sadness comes with the reality that, this is what's already taking place.

Sat, 11/14/2009 - 13:15 | 130627 Cognitive Dissonance
Cognitive Dissonance's picture

Any sophisticated criminal enterprise (including a Fed/government run Ponzi) will always be shrouded in mind numbing details, long convoluted corridors and dead ends. And plenty of supporters who might not be part of the actual crime but are involved for millions of reasons. This is why one must simplify in order to see what's going on. The details and red tape are it's natural defense, with it's supporters a second line of defense.

There's an old saying that the only competition to organized crime is the government. That statement contains so much truth it's painful. So we laugh, nod our heads in agreement and then change the subject.

This is high crimes and misdemeanors done out in the open and in the light of day. The problem is not "them" but our subservient behavior in the face of authority. Add in the deep capturing effect of having the vast majority of our wealth in direct jeopardy to their manipulations and you have a general population that will scream bloody murder in outrage and then proceed to Walgreen's and purchase K-Y by the case.

Because no one wishes to see themselves as impotent or powerless (examine the sales of Viagra for insight into our fear of another form of impotence) we justify and rationalize away our inaction. This creates an internal emotional imbalance that is deeply rooted in our inner ego and eventually explodes onto the surface as violence directed at anyone other than the real source of our frustration, these fucking bastards.

As long as we hide from what we are not talking about (our inaction and why) this will only get worse for we long ago disarmed ourselves. I leave you with a few thoughts. Dare to spend some time thinking about our role in this mess. Our problems begin and end with "We The People". Until we overcome our own impotence and our desire for others to fight our battles for us, we will continue to slowly sink into this black abyss.

Be that fearless toddler you once were as your parents urged you forward. Let go and take the first steps to your freedom by speaking about the unspoken and unspeakable.

"We are only as sick as our deepest darkest secrets. As long as they remain unspoken and hidden, they control us. But bring those dark secrets into the light of day and suddenly they become entirely manageable." - Anonymous

"In order to maintain our way of living, we must tell lies to each other and especially to ourselves." - Derrick Jensen

"Otherwise sane and rational people will go quietly and meekly into a gas chamber if only you will allow them to believe it's a bathroom."- Zygmunt Bauman

Sat, 11/14/2009 - 00:07 | 130437 andrew123
andrew123's picture

Tyler, you wrote in your opening that:

"Which is the main reason the Fed must be very concerned about gold's dramatic price appreciation, as it is the most obvious statement by the market that increasingly more investors are concerned about the credibility relationships between various liability classes."

Have you see any evidence, anywhere, that the current Fed really cares about the price of gold?  Has any of the Fed governors mentioned it in any of their presentations in the last year? I know some may conclude that they don't talk about it because it's rise is an indictment of their actions, but maybe they simply don't care.  Maybe they think it is a relatively small preoccupation or fetish that they don't need to worry about.  Unlike other commodities, it does not affect the price of consumer goods or services (they don't consider gold to be a consumer good), and the people who are really buying it at the margin don't count because they are a bunch of doomsayers and since they are confident that there will not be any inflation in the price of goods and services for the foreseeable future, they just view it as an interesting aberation (if some central banks that don't own a lot want to buy some to diversify, so be it, but it is not that big a deal).  I am not looking to argue this point (I personally don't believe), but I am wondering if there is any actual evidence that the rise in the price of gold concerns anyone at the Fed, and moreover, that they consider it at all in their policy deliberations?  I suspect that they view it as a distraction, but I would like to know if I'm wrong.  Thanks in advance for any response.

 

 

Sat, 11/14/2009 - 01:03 | 130457 tom a taxpayer
tom a taxpayer's picture

Ben Bernanke speech (Nov 21, 2002) exceprt:

"Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."...

"Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation."

"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."

http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.h...

Sun, 11/15/2009 - 13:26 | 131193 Anonymous
Anonymous's picture

If they didn"t care, why would they participate in long term price suppression. they care they just can't control everything, but they are still actively suppressing the price as best they can, at present.

Sat, 11/14/2009 - 00:37 | 130444 LuisvonAhn
LuisvonAhn's picture

His points are very well taken, but what's so wrong for a higher cost of funding. Shouldn't market forces be the dictator of return on risk? Also, when glass-steagall was repealed a little thought into what actions these institutions were under taking would have saved the world about $13T or so. But hindsight is 20/20. The moral of the story is that no economic theory or statistical formula to date can compare with good old fashion greed and fear.

Sat, 11/14/2009 - 00:37 | 130445 Cistercian
Cistercian's picture

 This certainly does nothing for my piece of mind.They are taking a band-aid approach.And the risk taking by the banks is not addressed in a meaningful way.One large entity becoming overextended can still trigger the derivative deathstar.

 

 

 

Sat, 11/14/2009 - 00:37 | 130446 Anonymous
Anonymous's picture

I know we all love to give the Fed a lot of grief, and many ZHers want the whole institution abolished.

But the regional Feds are doing a lot of the heavy lifting to really work through the difficult policy options to make the system more sound. Dudley... Yes, he is ex-GS. But the commentary here is extremely coherent and far more efficient than plowing through Sorkin or Gasparino's tomes on the subject. He has it right, and he is going out on a limb more than most readers may appreciate.

I would also draw ZHers attention to the October 31st conference given by the Atlanta Fed on TBTF. Many very lucid suggestions, from contingent capital to tiered approaches, outlined by Fed staffers who are, again, sticking their professional necks out to address the myriad and daunting challenges of getting the banking system back on track.

The regional Feds are closer to the situations in their districts and have some bright and well intentioned people. We all like to paint the Fed branches with a broad brush and rail against their conflicts, crappy boards and sometimes needlessly cheerleading presidents. But there are some people there that merit our attention and respect for trying their level best to improve the situation.

Sat, 11/14/2009 - 08:53 | 130559 duckweed
duckweed's picture

obsfucation, blah, blah, blah... the real problem is GREED, and the greediest have gained to much POWER. Save your breath.

Sat, 11/14/2009 - 11:46 | 130618 lookma
lookma's picture

And airplanes crash because of gravity.

Talking about greed is a nonstarter that reveals you have no realistic understanding of human nature.

No one argues we must to solve gravity to stop plane crashes.  Why?  Its a given.

The question is not how to stop a given, but how to act in light of this given truth. 

Sat, 11/14/2009 - 13:11 | 130650 Cognitive Dissonance
Cognitive Dissonance's picture

Now we're cooking with gas. Bravo lookma! 

The secret to effective control and propaganda is to deflect and obscure the questions and to slide your basic premise underneath the conversation without being challenged. Do that and you have everyone by the balls.

Don't discuss the really important basic questions, such as why the Fed is even allowed to exist. Instead, get people to talk about how we can improve the Fed. Don't you want a better Fed?

Wake up people.

Sat, 11/14/2009 - 00:44 | 130449 tjfxh
tjfxh's picture

 

andrew 123, the folks running things aren't concerned about "the barbarous relic." They are concerned about the cost of petroleum. That is the real constraint on the US economy, because petroleum is a necessity and demand for it is inelastic. A dollar spent on gas is a dollar not spent elsewhere. Moreover, as gas and heating oil prices rise, even other high-priority maintenance goods suddenly turn into discretionary items, Oil is the alligator on our backs. In fact, Fed and Treasury economists are probably happy to see funds going into driving gold up and not oil.

Not that gold is irrelevant. But it's price is really more of a psychological factor than a financial indicator. A lot of people are reading way too much into gold's rise.

We'll know when the Fed is concerned. They will drain excess reserves in preparation to raise the overnight rate, which they have already made clear is not going to be anytime soon.

 

Sat, 11/14/2009 - 00:52 | 130450 tom a taxpayer
tom a taxpayer's picture

 

How dare Mr. Dudley pontificate about what regulators could do, and not mention the need to investigate and prosecute the regulators for their aiding and abetting the greatest financial crimes in U.S. history. The first step is to prosecute the regulators for flagrant conflict of interest, malfeasance in office, misconduct, etc. No regulatory system reform will work until Goldman Sachs friends, alumni, and lackeys are throw out of regulatory offices.

Prior to joining the Federal Reserve Bank in 2007, Mr. Dudley was a partner and managing director at Goldman, Sachs & Company. Mr. Dudley worked at Goldman Sachs from 1986 to 2007. Dudley was part of Geithner's NY Fed team that killed Goldman Sachs competitors and repeatedly save Goldman Sachs. Another part of the NY Fed team with Dudley and Geithner was Stephen Friedman, then Chairman of the Board of NY Fed, and at same time, Goldman Sachs Director and big stockholder of Goldman Sachs, who claimed he had no conflict of interest in regulating Goldman Sachs.

"When N.Y. Fed Chairman Stephen Friedman bought stock in the company that he once headed, and where he still serves as a director, he was already in violation of Federal Reserve policy and was hoping for a waiver to permit him to hold his existing multi-million-dollar stock stash and to remain on the Goldman board. The waiver was requested last October by Timothy Geithner, then the president of the N.Y. Fed and now Treasury secretary. Yet, without having received that waiver, Friedman went ahead in December and purchased 37,300 additional shares. With shares he added in January, after the waiver was granted, he ended up with 98,600 shares in Goldman Sachs, worth a total of $13,330,720 at the close of trading on Monday. Friedman was in violation of the Fed's policy because, thanks in part to the urging of Geithner and the N.Y. Fed, Goldman Sachs was allowed to become a bank holding company, making it eligible for government bailout funds (an option that Geithner had denied to Goldman rival Lehman Brothers)."

http://www.huffingtonpost.com/robert-scheer/cashing-in-on-government_b_1...

 

Geithner and Friedman worked to insure that William Dudley, former Goldman Sachs executive, got Geithner's job of NY Fed President. Stephen "no conflict of interest" Friedman was chairman of the search committee, and Geithner lobbied the NY Fed to appoint Dudley-do-right-by-Goldman-Sachs as NY Fed President.

 

Can U.S. Treasury Secretary Geithner be expected to investigate and prosecute the NY Federal Reserve Geithner and others for the dirty deals they made with AIG, Lehman, Bear Stearns/J.P.Morgan, Goldman Sachs, etc?

 

Could U.S. Treasury Secretary Paulson be expected to investigate and prosecute Goldman Sachs CEO Paulson?

 

How dare Mr. Dudley and the den of Goldman Sachs bootlickers at the NY Fed Reserve preach about "regulation".

 

 

Sat, 11/14/2009 - 01:17 | 130464 ARJ
ARJ's picture

Enough with the anti-GS diatribe. Can't someone post something interesting that happens to have been written by an ex-GS person without us having to hear all the conspiracy theories yet again?

Sat, 11/14/2009 - 03:00 | 130496 faustian bargain
faustian bargain's picture

probably not.

Sat, 11/14/2009 - 13:17 | 130657 Rainman
Rainman's picture

A daisy chain of startling coincidence does not indicate conspiracy to commit massive fraud. Even when Al Capone's soldiers were gunning down all of his bootlegging competitors, no one dared to accuse him of a murder conspiracy. Local "justice" was all paid off anyway.

It finally took a federal tax evasion rap to put him away. The very least of his crimes got him 11 years.

So the opposite dynamic would be true for the modern day financial thugs. Fed legislators and justice are all in the bag. Justice.....if it ever comes.....will have to come from the States.  

Sat, 11/14/2009 - 08:50 | 130558 duckweed
duckweed's picture

no, too much is never enough. workers unite! sit down, do not got to work, do not pay your usury, do not pay your mortgage and help your neighbor do the same. in ninety days or less this sucker will fall to the ground. GS, the FED, along with Corporate ameriKa, will fall to the ground and then they will be clear as to where their profit and windfalls, their very lifestyle, comes from. we the people!

Sat, 11/14/2009 - 05:09 | 130525 Tic tock
Tic tock's picture

To sum the argument put forth by the Mr. Dudley,

i) The TBTF make 'lending maturitization arbirtrage' possible throught the economy...which is the cornerstone of eficient capitalism

ii) Now that we know this, and even have the Fed looking at this, it probably won't be a big problem again

...and iii) what options are there anyway?

That's kind of funny, y'know, part four..the Fed backstopping credit to the real economy. ..as if that would do any good when the problem is in the asset valuation near the base of the pyramid..to invest in the firms directly, at the level of printing we've been seein..certainly inflationary. Much better to throw money into every form of financial instrument, provide access to .25% money from the world's largest credit union and collect the important bits of the most assuredly non-performing loan instruments that 'the banks that make America great' have can buy/have bought- while they practise their risk assessment under the new 'normal'.

You can't make an omlette without breaking eggs, Fred.

And anyway, it seems a little too risky to monetize these arbritrage instruments by simply balancing 'collateral availability' against 'exposure', in general I mean, because the boat is going down, bow-first, or stern-first, it really doesn't matter.   

Options,

i) ring-fence Regional banking 'exotic' financial instrument ledgers

ii) extend credit to Regional banks straightaway     

iii) Pull money out of the system at New York, more than lots of it. There's far too many dollars and currently absolutely nowhere for them to go. If the Fed pulls money out the 'aunty' Banks need not get hit in revenue destruction depending on the soundness of their speculations. Yes, there will bea correction, but the Fed needs to build ammunition and there are still plenty of new common-sense dollars waiting on the buy-side. 

 

Sat, 11/14/2009 - 05:28 | 130530 windiepink
windiepink's picture

.....phantom of the monetary opera

act one.........(somewhere in Britian)

FIRST UK MORTGAGE-BACKED CP TO BE RATED BY S&P

NEW YORK, June 15 1988/PRNewswire/ -- S&P plans soon to rate the first commercial paper issue collateralized by UK residential mortgages pending the satisfactory completion of final documentation.

United Mortgage Corp PLC (UMC)'s $350 million (about UK200 million) eurocommercial paper program is expected to be rated 'A-1'.

The funding of long-term mortgage assets by issuing commercial paper will increase the flexibility of UK mortgage lenders in the wholesale .............

act two.......................(somewhere in America)

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/9/98 --Standard & Poor's today raised its rating on Apreco Inc.'s asset-backed commercial paper program to 'A-1'-plus from 'A-1'.

Upon the request of the program administrator, Citicorp North America Inc., Standard & Poor's reviewed Apreco for the upgrade. The rating upgrade is based on 100% programwide backstop liquidity support and a partial 10% credit support provided by Citibank N.A. (rated A-1+) and a high quality underwriting standard that merits an A-1+ rating.

act three..........(the globe)

Bank Loan Report | September 17, 2007| Rozens, Aleksandrs) Concerns about credit quality and underwriting standards within the subprime mortgage market filtered through to the commercial paper market this summer where asset-backed commercial paper - 60% of the total commercial paper marketplace - saw a dramatic drop in liquidity. Wall Street dealer firms backed off from making markets and investors such as money market mutual funds, securities lenders, and corporate treasurers stepped to the sidelines to better survey the credit market chaos.

"At its most fundamental level, this crisis was caused by the rapid growth of the so-called shadow banking system over the past few decades and its remarkable collapse over the past two years." William C. Dudley, President and Chief Executive Officer

Reviews......

The Associated Press/New York/By Dan Seymour

Countrywide Financial Corp.'s move to take $11.5 billion in long-term bank loans points to emerging but serious troubles in the commercial paper market, which thousands of companies have relied on to finance their operations.

A key segment of this $2.13 trillion market has suffered an exodus of buyers, as investors decide how much risk they are willing to stomach. Stung by decaying credit quality, investors have soured on many of the mortgage financing markets ...

Thank you Tyler, Marla, and all commentators to Zerohedge, hope my comment on this subject is not to far off base. Its one in the morning and i have read threw mr dudley's ramble and i just could not help myself, this phantom of the monetary opera has been a huge sucess for the production companys. It has bagged billions! and has kept the presses working overtime.


Sat, 11/14/2009 - 06:06 | 130531 Jendrzejczyk
Jendrzejczyk's picture

"To mitigate such effects, the backstop liquidity provider (Insert your name here) could presumably charge financial firms for the value of the backstop. But what fee would be appropriate? It is difficult to assess (so let's give you $0) ...."

 

Sat, 11/14/2009 - 07:57 | 130541 Anonymous
Anonymous's picture

Many of Dudley's comments parallel the observations in the Recent Senior Supervisors Report titled "risk Management Observations from the Global Banking Crisis of 2008". This report has a very thorough description on the post LEH funding events, and adds detail om the bankruptcy of LBIE and the unwind of securities lending. Worth a read.

Sat, 11/14/2009 - 08:16 | 130547 Zippyin Annapolis
Zippyin Annapolis's picture

Hi,

 

I am from the New York Fed and I am here to help! It is not true that three of us here, two at the Fed in DC and two flunkies at Treasury actually control the government's economic policy and direction. Boy that would be a challenge if true!

So it is a total lie.

Yep.

And as to GS, JPM, CS, Wells, UBS, well yeah we talk: they are sort of like our rich in laws and of course we take their calls and suck up whenever we can because after "giving back" we will still need a big job to "catch up"--all I can say is wouldn't you do the same??

 

Kisses--Bill D.

Sat, 11/14/2009 - 09:04 | 130562 duckweed
duckweed's picture

it is simple, this is how a member of the greedhead elite assuage whatever conscience they have left. You pretend that you're thinking about these things as you throw back a few drinks together, then you unmoor your yacht and sail over to cap d'antibes. what can one do for the poor little proles and plebs? we're doing Gods work.

 

Sat, 11/14/2009 - 09:37 | 130573 Anonymous
Anonymous's picture

And the shadow banking system took my money for the for the benefit of the greater good

http://en.wikipedia.org/wiki/Shadow_banking_system

The term "shadow banking system" is attributed to Paul McCulley of PIMCO, who coined it at the 2007 Jackson Hole conference, where he defined it as "the whole alphabet soup of levered up non-bank investment conduits, vehicles, and structures."

Pimco
From Wikipedia, the free encyclopedia
Jump to: navigation, search
The Pacific Investment Management Company, LLC (PIMCO), is an investment company and runs the Total Return fund, the world’s largest bond fund. Founded in 1971 in Newport Beach, California, with just US$12 million in assets under management at the time, it is now owned by Allianz, a global insurance company based in Munich, Germany.

Mohamed A. El-Erian is PIMCO's chief executive officer and co-chief investment officer along with co-founder William “Bill” Gross. Gross manages PIMCO's Total Return Fund, which has over $150 billion under management. As of March 31, 2009, PIMCO in total had over US$756 billion in assets under management and more than 1,200 employees.[1]

On May 16, 2007, former Federal Reserve Chairman Alan Greenspan was hired as a special consultant by PIMCO and he will participate in PIMCO’s quarterly economic forums and speak privately with the bond manager about Fed interest rate policy.[2]

Sat, 11/14/2009 - 09:38 | 130575 boooyaaaah
boooyaaaah's picture
Pimco From Wikipedia, the free encyclopedia Jump to: navigation, search

The Pacific Investment Management Company, LLC (PIMCO), is an investment company and runs the Total Return fund, the world’s largest bond fund. Founded in 1971 in Newport Beach, California, with just US$12 million in assets under management at the time, it is now owned by Allianz, a global insurance company based in Munich, Germany.

Mohamed A. El-Erian is PIMCO's chief executive officer and co-chief investment officer along with co-founder William “Bill” Gross. Gross manages PIMCO's Total Return Fund, which has over $150 billion under management. As of March 31, 2009, PIMCO in total had over US$756 billion in assets under management and more than 1,200 employees.[1]

On May 16, 2007, former Federal Reserve Chairman Alan Greenspan was hired as a special consultant by PIMCO and he will participate in PIMCO’s quarterly economic forums and speak privately with the bond manager about Fed interest rate policy.[2]

Sat, 11/14/2009 - 14:07 | 130692 boooyaaaah
boooyaaaah's picture

excuse me

Did we bail out the shadow banking system?

We are good enough to bail out the shadow banking system through the depreciation of our dollar, but we are not good enough to be invited to Jackson Hole

History

The term "shadow banking system" is attributed to Paul McCulley of PIMCO, who coined it at the 2007 Jackson Hole conference, where he defined it as "the whole alphabet soup of levered up non-bank investment conduits, vehicles, and structures."[7][8][9]

The concept of credit growth by unregulated institutions, though not the term "shadow banking system", date at least to Prices and Production, by Friedrich Hayek, 1935, which includes:[10]

There can be no doubt that besides the regular types of the circulating medium, such as coin, notes and bank deposits, which are generally recognised to be money or currency, and the quantity of which is regulated by some central authority or can at least be imagined to be so regulated, there exist still other forms of media of exchange which occasionally or permanently do the service of money.
...
The characteristic peculiarity of these forms of credit is that they spring up without being subject to any central control, but once they have come into existence their convertibility into other forms of money must be possible if a collapse of credit is to be avoided.
Sat, 11/14/2009 - 14:10 | 130696 boooyaaaah
boooyaaaah's picture

Excuse me,

Where is it written that we bail out the shadow banking system?

The shadow banking system also conducts an enormous amount of trading activity in the OTC derivatives market, which grew exponentially in the decade prior to the 2008 financial crisis, reaching upwards of $650 trillion dollars in notional contracts traded (see the Bank for International Standards (BIS.org) bi-annual report). Credit derivatives in particular, collateralised debt obligations (CDOs), tranches of interest rate obligations derived from bundles of mortgage securities, a variety of customized or synthetic innovations on the CDO model, and credit default swaps (CDS's), a form of quasi-insurance against the default risk inherant in the assets underlying the CDO's, saw the most rapid and explosive growth in this shadow market. The market in CDS's, for example, rose from insignificantly small in 2004 to over $60 trillion dollars in a few short years[13]. Because credit default swaps were not regulated as actual insurance contracts, companies selling them were not required to maintain sufficient capital reserves to pay off on potential claims. Demands of settlement on hundreds of billions of dollars of credit default swaps contracts offered by a division of AIG, the largest insurance company in the world, led to their financial collapse. Despite the prevalence of this activity and the volume of contracts involved, it attracted little outside attention before 2007, and much of the activity was off-balance sheet for the entities affiliated banks. The uncertainty this created among counterparties was a contributing factor when credit conditions worsened.

Since then the shadow banking system has been blamed[1] for aggravating the subprime mortgage crisis and helping to transform it into a global credit crunch.[14

 

Sun, 11/15/2009 - 10:48 | 131156 Cognitive Dissonance
Cognitive Dissonance's picture

Yup, if you wait around long enough, you'll see just about everything.

Including someone commenting on their comment on their comment. Call it the Comcast triple play. And they start with "Excuse me" as if they're refuting the prior comment. Talk about talking to yourself. Best not to do so in public, don't you think?

It's one thing for people to think you're an idiot, another to open your mouth and remove all doubt.

LOL funny.

Sat, 11/14/2009 - 10:23 | 130594 Anonymous
Anonymous's picture

With the comments about ex-Goldman people, let's not forget that Nomi Prins is ex-Goldman and she's been doing great stuff to shine a light on all that's been going on.

We might tar them all with the sane brush but there must be other ex-GS people who have integrity and wonder what's going on with GS (notwithstanding the others as well).

DavidC

Sat, 11/14/2009 - 14:42 | 130712 deadhead
deadhead's picture

Let's hope that the ex GS (or current ones for that matter) employees with integrity that you reference will contact   tips at zerohedge dot com

Thank you in advance if you have information to share with ZH and are willing to do so.

Sat, 11/14/2009 - 12:31 | 130598 Pat Shuff
Pat Shuff's picture

 

  With 20-20 hindsight he says 'I can see clearly now, the rain is gone.'

  In foresight seating bumps on a log around the Open Market Committee

  conference table would have been a vast improvement over carrying in

  fissionable materials in their briefcases in acts of domestic terrorism

  threatening national security at a level Pakistani cavemen could only dream of.

 

  The lunatic fringe was saying all this years ago, Doug Noland for example.

  Who's lunatic now. Listening to this guy just might the lunatic you're looking for,
  turn out the light, don't try to save...

 

  He doesn't seem to comprehend that having consolidated all that junk from failed and failing institutions to save the system  is now held at the last banks standing, like his, and are vulnerable to exactly the panic process he describes but on an unfathomable scale, the mistrusting counterparties the size of sovereign nations, the rollovers in T's.

 

Yes, he can see clearly now the rain is gone. Less clear is what's coming down from the headwaters,

no pushing and shoving now, there's room for everyone on the Ark, leave Dudley Do-Right

babbling to his rubber just ducky bucky.  That's all he _gets_  in hot pursuit, trivializing the basic unit of trust.

 

Maybe just a failure of imagination, like standing in the Yellowstone caldera and seeing no dormant volcanoes anywhere.  

 

Sat, 11/14/2009 - 11:19 | 130610 heatbarrier
heatbarrier's picture

"At its most fundamental level, this crisis was caused by the rapid growth of the so-called shadow banking system over the past few decades and its remarkable collapse over the past two years."

You can't expect nothing less from the NY Fed. ABS is the future and it has been discredited from lack of regulation. Are we suppose to go back to banking? Read the history of banking crises since the invention of the banking model in the 12th century, endless crises, it is a flawed model, it survives only because it has coerced the State to support it.

Sat, 11/14/2009 - 12:58 | 130643 Cognitive Dissonance
Cognitive Dissonance's picture

I personally believe we'll soon begin to see the first signs of honesty from high(er) political and professional entities as they begin to see this mess is going to end badly and they wish to get their truth telling out and into the public before the riots and civil unrest begins.

Even the most ruthless fascists and other evil doers always have an emergency escape backpack prepacked and hidden under the bed or in the closet, to be grabbed on the way out of the door and used while still two steps in front of the ugly angry masses.

Sat, 11/14/2009 - 13:31 | 130666 Anonymous
Anonymous's picture

Bingo!!

It will be fun watching the rats scurring to get into a life boat as this mess unwinds.

The "leaders" may be in for a difficult lesson when they see the net result of using greed as the means to command a folowing. Always a danger that fear might rise to overcome the greed.

Popcorn anyone?

Sat, 11/14/2009 - 18:34 | 130832 boooyaaaah
boooyaaaah's picture

Maybe this is the beginning of the fed turning on the shadow bankers

No honor among thieves. If there needs to be blame and punishment, then the Fed has the goods one the shadow bankers

Can they prove fraud, I think so

Sat, 11/14/2009 - 13:17 | 130656 SDRII
SDRII's picture

Yet another diatribe about how irrational markets make for irrational prices. Send this to the academy so they can finally discard the emh. Bd leaves out the part about how the securities like the GDP where never what they advertised hence the printing program to make up the difference. When is the claptrap about irrational markets and liquduty going to end. Merely an excuse to print snd backfill naked bank balance sheets. Very simple.

Sat, 11/14/2009 - 13:39 | 130674 buzzsaw99
buzzsaw99's picture

F$ck teh fed and Bill Dudley. Lube up Dudley, Dimon wants another hand job.

Sat, 11/14/2009 - 16:08 | 130754 Cognitive Dissonance
Cognitive Dissonance's picture

buzzsaw99

As always, your command of the English language goes beyond brilliant. Always direct and to the point as opposed to my verbose pontifications. :>))

Hand jobs all around. More than enough for everyone, regardless of whether he (or she?) wants one. Plenty of bankers waiting. The line stretches around the block. Lube up that poor fellow standing over there, he looks like he hasn't had any loving in a long time.

buzzsaw99, why don't you run down to Walgreen's and pick up another case of K-Y for me? Looks like another long night in front of us. Ya know, doing God's work is never a chore but a real pleasure.

Hey, wait a minute, someone tackle that bastard before he makes it to the door.

Sat, 11/14/2009 - 14:47 | 130716 JR
JR's picture

Okay, let’s go back to the formation of the Federal Reserve System and the reasons given for its invention--to keep markets orderly, to prevent catastrophic economic occurrences and to support the moves toward robust economics. It was a lie when it was given. It was a lie through the decades that it was in operation.  And it is a lie now.  The system was designed by the financial oligarchs for their personal benefit and nothing else.  

Willam C. Dudley speaking to Princeton’s Center for Economic Policy Studies (CEPS) is like Willie Sutton explaining a failed bank robbery to his operatives and how he’ll do better in the future.

Dudley, chief economist at Goldman Sachs from 1987 to 2007, is president of the New York Federal Reserve Bank. Goldman Sachs controls the New York Federal Reserve Bank. The New York Federal Reserve Bank, i.e., Goldman, controls the Federal Reserve System and what the Fed intends to do with interest rates, the money supply and corporate “assistance.” As Matt Taibbi says, Bernanke and Geithner are its stooges.

Princeton University's Center for Economic Policy Studies is part of the financial smoke screen; a habitat for more of the paid stooges rotating in and out of the Fed, Treasury and Oval Office.  It was founded in 1989 “to support economic policy-related research... and to foster communication among experts in the academic, business, and government communities.” It ”sponsors a number of programs each academic to year to bring such leaders together” to disseminate obfuscatory manifestos to confuse and lull the public sheeple back to sleep.

This financial “crisis” was brought on by such self-appointed “stabilizers” and “regulators”  who have dragged us into the abyss of depression on one hand and inflation on the other—all getting out their tinker tools again to adjust what’s  left of any remaining equilibrium in America’s, and the world’s,  free-market mechanism of supply and demand.

1929 was made inevitable by vast bank credit expansion and fraud. This time around, America’s Wall Street Crime Family has gone global, having garnered the dollar as the world’s reserve currency at Bretton Woods in 1944, now tryng to defuse an underground derivatives time bomb 20 times the size of the physical economy of the U.S. that is shaking the economic timbers of the world.

The whole concept of a ”Council of Economic Advisors” serving special interests and sitting in the Oval Office should be swept away, along with the bankers' privately owned Federal Reserve System.  It is time for a rediscovery, a renaissance, of the classical theory of the business cycle and a massive retreat of investment-banker-controlled governance over the economic sphere.

 _______________________________________

 Co-Directors of the Center for Economic Policy Studies (CEPS ) are Alan S. Blinder and Harvey S. Rosen:

Alan S. Blinder:(Wiki:pedia: Blinder served on President Bill Clinton’s Council of Economic Advisors (Jan 1993 - June 1994), and as the Vice Chairman of the Board of Governors of the Federal Reserve System from June 1994 to January 1996. Blinder's recent academic work has focused particularly on monetary policy and central banking, as well as the "offshoring" of jobs… He has been a member of the board of the Council on Foreign Relations (since 1997). He was an adviser to Al Gore and John Kerryduring their respective presidential campaigns in 2000 and 2004. Blinder was an early advocate of a "Cash for Clunkers" program. Of the Keynesians, founded by John Maynard Keynes, he is listed as member of the “New Keynesians: Edmund Phelps · George Akerlof · Stanley Fischer · Olivier Blanchard · Alan Blinder · John B. Taylor · Robert J. Gordon · Joseph Stiglitz · Robert Shiller · Mark Gertler · Maurice Obstfeld · Paul Krugman · Kenneth Rogoff · Ben Bernanke · Lawrence Summers · Julio Rotemberg · Michael Woodford · Nobuhiro Kiyotaki· David Romer (husband of Christina Romer—25th chair of the Council of Economic Advisors) · N. Gregory Mankiw · Nouriel Roubini · Andrei Shleifer · Jordi Galí

Harvey S. Rosen:  (Wikipedia: Harvey S. Rosen is the John L. Weinberg Professor of Economics and Business Policy at Princeton Uniiversity.  His research focuses on public finance. Harvard professor and former chairman of the Council of Economic Advisers Greg Mankiw credits Rosen as one of four mentors who taught him how to practice economics, along with Alan Blinder,  Larry Summers, and Stanley Fischer, formerly of Citigroup, Bernanke’s Depression thesis advisor and now head of Israel’s central bank. He was a member of the Council of Economic Advisers from 2003-2005, and served as Chairman in 2005.)

Jon Corzine, former CEO of Goldman Sachs, is on the CEPS Advisory Board.

The current 38 members include Goldman Sachs & Co, Credit Suisse, Barclays Capital, Bloomberg, PNC Wealth Management…

Sun, 11/15/2009 - 14:02 | 131217 tom a taxpayer
tom a taxpayer's picture

Well said, JR!

Sat, 11/14/2009 - 16:08 | 130755 Anonymous
Anonymous's picture

I want to run a poll. I have perfect credit and have about $22k I can get a hold of right now.

I'm thinking, if this collapse is going to come and everyone is going to be in debt with bad credit, why not exchange that credit for gold & silver and say F it!

Let property prices come down, gold go up, sell gold, buy land/house all cash...although I will have lousy credit, I won't have a mortgage payment so I won't care. Well, I'll just make the minimum payment and negotiate the debt down a few years out. I know, that's not the attitude we need to have, but I've paid in to the system, always worked hard and have low life neighbors that do nothing and collect food stamps. I'm tired of paying for their laziness and feel that if the ship is going down why not take what you can before credit contracts even more and I don't have the opportunity.

Dumb idea or worth pursuing?

Mon, 11/16/2009 - 03:21 | 131552 MsCreant
MsCreant's picture

I am in a real similar boat. I proposed on another thread to run up just a couple of months of expenses on my card, and use cash to buy more gold. The thing is, it is going up at such a high rate that one could get caught in a price correction. If you are long that is okay. I have silver I bought all over the place pricewise, made most of it up.

The deflation thesis, where everything loses value, may mean your gold does not equal as many dollars. But if people lose faith in the system, deflation/inflation become irrelevant and we are talking currency crisis/govt. belief crisis. Gold and silver are a vote against the system.

Where I have come to is that I don't give a rats ass about a poor investment and a pull back, blah, blah, blah.

GOLD and silver IS A VOTE AGAINST THE SYSTEM AND WE NEED TO START VOTING WITH OUR DOLLARS.

I have read so damn much trying to get up to speed and make the right call on all this, for me and my family (maybe some ego involved too, my grandmother pulled her money out of the banks three weeks before the stock market crashed, point of family pride for me to figure this out). Lots of great theories about what is to come. None of them lead to recovery, never mind speedy recovery. We have been doing crashes throughout history, dishonest businessmen trying to work the system to get one over, EVERYTIME. This is how they steer the damn plane we are all on. The history of the economy and what money really is should be taught in school.

The bottom line? No one knows what is going on and has all the right answers. We each stand alone with our decisions. It goes how it goes. When I pull out of "pride" and "getting as much money as I can out of this" logics,  I am left with my one vote, my vote with my dollars.

I am waiting to buy pms in the morning. I may be wrong. I will find a way to have peace with it if I am. Not everything is about maximizing individual gain.

Good luck

Sat, 11/14/2009 - 18:03 | 130815 Anonymous
Anonymous's picture

And if all currencies competitively devalue the purchasing power of those currencies will go down regardless. That will drive commodity prices up regardless of demand. Hyperinflation has absolutely nothing to do with demand-pull inflation.

The bottom line is that the US economy has been built on trillions of worthless derivatives. If it were not for those derivatives the so-called wealth that the economy has been based on for the last ten years would not exist.

By the very fact that tier 1 ratios virtually no longer exist, exposes all of the hidden inflation in the system. If any government prints money that is unproductive what has happened, the purchasing power of that currency declines, even in Japan which was still the largest creditor nation in the world, at the time of its program and had a growing export market. There are differences of course, the US dollar is fiat and has the largest amount of debt in the world.

Eventually if our creditors peg to the US till their deaths, they will be dragged down to hell with us, literally they will go bankrupt first and be forced to liquidate their foreign exchange holdings at that point. This is the end game for countries like japan, if they continue to rely on the US.

During the depression there was no alternative to the British pound, and when the British defaulted on the gold standard the only known monetary system at that time the CONFIDENCE in the currency degraded which resulted with a collapse in orderly world trade. Mind you the dollar and the pound still had somewhat light pegs to gold at that time and did not excessively print unproductive money. That is all it takes, the eventual decline in confidence of the dollar, it has happened in history before, though not on this scale of a fiat currency based upon a ponzi economy.

This is why deflation cannot be the end game, if all of our creditors go bankrupt, who will be left to buy our treasury bonds? No one will be left to buy any US debt or dollars once they go bankrupt, that is a fact.

Sat, 11/14/2009 - 18:09 | 130818 AnonymousMonetarist
AnonymousMonetarist's picture

On October 25, 2009 ZH stated

By doing so, the Federal Reserve effectively gave a Carte Blanche to primary dealers to purchase any and all equities they so desired, with such purchases immediately being funded by the US taxpayer, via the PDCF. In essence, this was equivalent to the Fed purchasing equities by itself through a Primary Dealer agent.

On December 12, 2008 , this silly blogger stated
'Yes Virignia ... there is no collateral.

Bloomberg : The Fed lent cash and government bonds to banks that handed over collateral including stocks and subprime and structured securities such as collateralized debt obligations, according to the Fed Web site.'

Here we are a year later and we have no idea who got what for what and we have translated insolvent companies reimbursing a small part of our total largesse as proof they are vibrant concerns that can make tons of money in FICC when the money is easy and free.

Now here is a thought experiment for you, the expert opinion of many folks is the reason why the Fed did not want to be transparent at the time is that it would show what the potential losses might be on assets taken as collateral with the PDCF.

Gosh, given the Potemkin recovery, what is the harm of showing us the information now?

When Goldie took Trader Hank aside during one long weekend to inform him that AIG was systemic, it was clear that a tough hard decision had to be made to liquidate in order to forgive past debts ... unfortunately it turned out to be a bankster jubilee.

Yes Virignia, in order to stick their finger in, for certain transactions, there was no collateral.

Audit that!

Sat, 11/14/2009 - 18:09 | 130819 AnonymousMonetarist
AnonymousMonetarist's picture

On October 25, 2009 ZH stated

By doing so, the Federal Reserve effectively gave a Carte Blanche to primary dealers to purchase any and all equities they so desired, with such purchases immediately being funded by the US taxpayer, via the PDCF. In essence, this was equivalent to the Fed purchasing equities by itself through a Primary Dealer agent.

On December 12, 2008 , this silly blogger stated
'Yes Virignia ... there is no collateral.

Bloomberg : The Fed lent cash and government bonds to banks that handed over collateral including stocks and subprime and structured securities such as collateralized debt obligations, according to the Fed Web site.'

Here we are a year later and we have no idea who got what for what and we have translated insolvent companies reimbursing a small part of our total largesse as proof they are vibrant concerns that can make tons of money in FICC when the money is easy and free.

Now here is a thought experiment for you, the expert opinion of many folks is the reason why the Fed did not want to be transparent at the time is that it would show what the potential losses might be on assets taken as collateral with the PDCF.

Gosh, given the Potemkin recovery, what is the harm of showing us the information now?

When Goldie took Trader Hank aside during one long weekend to inform him that AIG was systemic, it was clear that a tough hard decision had to be made to liquidate in order to forgive past debts ... unfortunately it turned out to be a bankster jubilee.

Yes Virignia, in order to stick their finger in, for certain transactions, there was no collateral.

Audit that!

Sat, 11/14/2009 - 18:09 | 130820 AnonymousMonetarist
AnonymousMonetarist's picture

On October 25, 2009 ZH stated

By doing so, the Federal Reserve effectively gave a Carte Blanche to primary dealers to purchase any and all equities they so desired, with such purchases immediately being funded by the US taxpayer, via the PDCF. In essence, this was equivalent to the Fed purchasing equities by itself through a Primary Dealer agent.

On December 12, 2008 , this silly blogger stated
'Yes Virignia ... there is no collateral.

Bloomberg : The Fed lent cash and government bonds to banks that handed over collateral including stocks and subprime and structured securities such as collateralized debt obligations, according to the Fed Web site.'

Here we are a year later and we have no idea who got what for what and we have translated insolvent companies reimbursing a small part of our total largesse as proof they are vibrant concerns that can make tons of money in FICC when the money is easy and free.

Now here is a thought experiment for you, the expert opinion of many folks is the reason why the Fed did not want to be transparent at the time is that it would show what the potential losses might be on assets taken as collateral with the PDCF.

Gosh, given the Potemkin recovery, what is the harm of showing us the information now?

When Goldie took Trader Hank aside during one long weekend to inform him that AIG was systemic, it was clear that a tough hard decision had to be made to liquidate in order to forgive past debts ... unfortunately it turned out to be a bankster jubilee.

Yes Virignia, in order to stick their finger in, for certain transactions, there was no collateral.

Audit that!

Sat, 11/14/2009 - 19:25 | 130859 boooyaaaah
boooyaaaah's picture

If you bet a hand in poker, take a risk, and loose you become illiquid

The fact that our shadow bankers became illiquid is no reason for the house (citizens) to keep supplying them chips.

For the Federal reserve to claim that it is in America's interest to supply the shadow banking system with chips --- so they can become liquid again --- Is fraudulent --Just because they show a bell curve and a shift to the right only means they are practicing finacial quackery and fraud

Wiki; In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and is also a civil law violation. Many hoaxes are fraudulent, although those not made for personal gain are not technically frauds. Defrauding people of money is presumably the most common type of fraud, but there have also been many fraudulent "discoveries" in art, archaeology, and

Science.

Quackery is a derogatory term used to describe unproven or fraudulent medical practices. Random House Dictionary describes a "quack" as a "fraudulent or ignorant pretender to medical skill" or "a person who pretends, professionally or publicly, to have skill, knowledge, or qualifications he or she does not possess; a charlatan."[1]

The word "quack" derives from the archaic word "quacksalver," of Dutch origin (spelled kwakzalver in contemporary Dutch), meaning "boaster who applies a salve."[2] In the Middle Ages the word quack meant "shouting". The quacksalvers sold their wares on the market shouting in a loud voice.[3]

"Health fraud" is often used as a synonym for quackery, but this use can be problematic, since quackery can exist without fraud, a word which implies deliberate deception.[4]

 

Sat, 11/14/2009 - 21:09 | 130933 Anonymous
Anonymous's picture

In the system of whores that is the federal reserve system, Mr. dudley is the queen of them all. I have been following his remarks since the start of the crisis, and I can safely say I know his position on the issue before it is public. In summary if it increases the earnings of his goldman buddies he is for it. It is ending benefits to wall street and gutting the middle class. I know we aren't allowed to be mean anymore, but I wouldn't put a man who assulated him in jail if I was on the Jury. I would give him a medal

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