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Finally, It’s the Fed That Has Become Too Big to Fail
We’re still not sure whether CNBC was making a joke or simply advertising its ignorance with a recent headline, “Accounting Tweak Could Save Fed from Losses,” This was a tweak about as subtle and ingenuous as Bernie Madoff’s balance sheet. What the central bank did was revise and advantage its own rules so that if some financial catastrophe were to inflict huge losses on the Federal Reserve System, the U.S. Treasury would take the hit, not the Fed itself. Oh, and taxpayers needn’t be concerned about the presumptuousness of this coy arrangement, since the changes provide for the Fed to pay back the losses with future profits. Do we really need to point out to CNBC et al. that any such profits would have to come almost entirely from…interest income on Treasury bills, bonds and notes held by the Fed?
Who would have believed that the nation’s banking system would one day be powered by the feather merchants’ version of a perpetual motion machine, or that the bulk of America’s liquid “wealth” could be stored on a few computer chips no bigger than a piggy-bank’s snout? As we now know, all it takes to pull off this scam is a credulous press, an ignorant Congress, and central bankers so cynical that they actually believe the public is too stupid to understand what’s going on. Thus is Helicopter Ben able to say with a straight face: “Under a scenario in which short-term interest rates rise very significantly, it’s possible that there might come a period where we don’t remit anything to the Treasury for a couple of years. That would be I think a worst-case scenario.” Hello!!!! Are we actually supposed to believe that the day this Zimbabwean twist on quantitative easing is announced, that it won’t send the dollar into a death dive, making Americans poorer by a third, or even half, overnight?
Media Fell for Ol’ Switcheroo
News reports noted that the Fed rule-change was announced on January 6 but that it took a couple of weeks for its significance to sink in. Significant in what way? In Reuters’ words, it is significant because “It makes [the Fed’s] insolvency much less likely.” This explanation is darkly funny for two reasons. In the first place, by accepting the Fed’s spin at face value, the news media have trained their eagle eye not on the crafty magician’s hands, but on the breasts of his assistant, just as the Fed might have hoped. And second, the notion of insolvency’s being “much less likely” is a blatant cop-out that as much as admits the news media don’t know what the hell the rule change is going to accomplish. They are telling us the Fed’s three-card-Monte switcheroo is significant because it supposedly will protect the Fed against going belly-up. But is that what is significant here? In fact, when the day comes that the Fed is forced to acknowledges the worthlessness of its vast mortgage holdings – a day that is surely coming — even the village idiot will understand that Treasury is powerless to set things right (other than by ginning up hyperinflationary quantities of cash). In the meantime, don’t expect the working press to delve into the actual significance of the “accounting tweak;” for if they were to expose it for the brazen fraud it is, the resulting epiphany of a failing economy with no political route to recovery would be too painful and bewildering to bear.
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1. re the rule change - the FED has long had the power to shift losses (eg. selling MBS on its books at a loss) to the Treasury. But the loss shifting adjustment came at the end of the year. The new rule allows them to make adjustments daily.
This suggests the FED is getting ready to use the power. It wouldn't do to have the FED dump dog assets at a loss only to see their capital erode right in the face of all the attention now being paid to the FED's balance sheet (see looming Paul subcommittee). Bernanke couldn't respond 'oh, we'll make it up at the end of the year.' By adjusting daily, they can begin the balance sheet clearing business.
2. re the comment above that the FED can't expect the Treasury to bail out the FED since it (Treasury) is so far in the hole - The Treasury has already bailed out the FED. The entire expansion to the FED's assets for all of 2010 was $194.4 billion. This came about by adding US Treasury paper.
For the same period, the FED financed this expansion by borrowing the money ($194.9 billion) from the US Treasury, who sold Treasury paper to finance the loan.
Ironically, this Treasury bailout (and circular money flow) is shown in the FED balance sheet attached to the Jan. 6, 2011 FED announcement of their new accounting policy.
http://www.federalreserve.gov/releases/h41/20110106/
The loan from the Treasury to the FED shows up as 'US Treasury, Supplementary Financing Account.'
on a bright note ....... one of my family members is coming around to believing me !!!!!! Last week I had lunch with my adult son & gave him 5 silver eagles !! today I dialed him @ work & told him that silver was down a bit & would he like to buy a whole tube just for himself & HE SAID, "YES" !!! .......... SUCCESS ! One family member starting to believe me ......... only 4 more to go !
signs of panic, should the Tea Party get a hold of the Feds mandate, written on the back of the Constitution where Congress would never think to look, they would prevent the Treasury from adding the Feds balance sheet to its already bloated deficit. Of course it would be great if the Fed had to declare bankruptcy, as there are no real shareholders, or depositors. Throw the Fed under the bus?
Zimbabwean twist- sounds like an interesting sex move.
I was hunting in Zimbabwe in 2003, in the midst of triple digit inflation. The most heartbreaking thing was being stopped by police in every town and being shaken down for meat. They didn't want money, guns, ammo, candy, gadgets, fruit; they just wanted meat.
The government couldn't afford the paper onto which to print more money, seriously. This was explained as the reason why banks were offering 8 one-hundred zimbabwe dollar bills in exchange for 1 five-hundred zimbabwe dollar bill. How's that for an accounting gimmick?
I rue the day that kind of inflation set in here.
So the Fed has painted itself into a corner with it's monetizations, and gets out of it by an "accounting tweak" that socializes the losses to the American Taxpayer? Just like that? I heard about their "tweak" but didn't realize this is what it was. Wow.
It is well known the Fed bought so many low interest UST notes that if rates rise, they'd go bankrupt. So now when rates rise the US is bankrupt instead? Bull$h-it -- this is treason and fraud.
This is reason enough to end the Fed. It took 2 years and a lawsuit to find out they took Eurotrash derivatives in exchange for 9 trillion in FRNs to CBs around the world. We have no idea what they are doing, yet taxpayers are on the hook for everything they do.
Amazingly evil.
.
Nice piggy bank. How many Maple Leafs can it hold ?
And so fed junk goes to the treasury.... but will proper accounting mean this Fed junk to treasury adds to the US National Debt??
Or is this another 'hide the salami' thing like Fred/Fann.
There IS a poltical solution.
It has been done.
But someone who must be regarded as a madman did it, and he mongrelized it with other tangential agendas, and in the end Russia and the Anglo/USA alliance crushed it.
Supposing we do it, and we don't make similar mistakes, who will be willing to come crush us?
Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.
***** Hmmm let's see...the US Treasury is $14 Trillion in the hole already, yet the Federal Reserve thinks it can just order the Treasury to borrow more money to bail out the cartel? If this isn't the most glaring example of heads I win, tails you lose I'll eat my silver.
All my assets are tied up in bad debts at the moment, but my accountant says a simple bookkeeping tweak can save me from any losses, forever.
I've often wondered why the Fed was taking so much trash, even valuing it at delusional values. This connection with the Treasury is interesting in that maybe the fed is trying to get entitled to the gold tht is supposedly in Fort Knox. First, shout and scream about the uselessness of the "barbaric relic", then get the treasury to be responsible for vast paper sums owed to the Fed, then demand payment, but not in FRN, but in gold. Fort Knox. . .poof! And they take their illegally gotten gains anywhere and do anything.
How did we think this was going to end? A bunch of fat people eating at McDonalds going up their bosses ass with pretty status reports, everyone making 100K, financing 5 bedroom Styrofoam houses...? Hello? Did this every seem like a good idea to anyone?
Well, OK, when you put it that way it doesn't sound so good. But the brochures sure looked nice.
good advertisement helps to make sure there's a sucker born every minute...
Obviously, this new "accounting methodology" should be applied to all companies, not just the Fed, so that insolvencies are a thing of the past, in much the same way that airplanes should all be built from "black-box" materials so that no one ever need die in a crash again.
Re "Accounting Tweak Could Save Fed from Losses"
HOW FORTUNATE!!!
Being insolvent myself, I'm naturally interested in ways to handle that and its good to know the expert economist whiz-bangs are all on the job!
Did they happen to leave a number?
P.S. What if there were financial innovation that wasn't about magic tricks?
Finding Roots in a Shifting Landscape: Facebook and the Future of Social Networks
we all new it all along didnt we? I for one salute our fed overlords and masters and any comments to the contrary were due to my username being hijaked. Where do you want me to turn in all my guns sir?
Bend over, bitches.
Heads fascism and moral hazard win, tails you lose AND get to pay for the incorporated systemic fraud of epic proportions.
"No one saw it coming" Alan Greenspan
"Mission Accomplished" George W Bush
"END THE FED!" Pee Wee
Basically we guarantee the continuation of the banksters' ponzi well past the point of its natural fatal decay so that we can pay for their corporate losses . . . and the private wealth extraction that produces them.
Bernie Madoff must be burning at the unfairness of it all.
There is no difference is what the Fed is doing compared to what Bernie did.
Except for the accounting methods being "legal" in one case.
Imagine the damage Bernie could have done had he had the power to change accounting law at any time he chose.
Now we can imagine the damage the Fed is currently doing.
Whaddid we all expect?
Sunshine, butterflies, cute puffy white clouds, flowers, bunny rabbits, clean fresh breezes, bucolic crystal clear streams, happy trout jumping in pristine ponds, light, knowledge, civility, intellectual discourse, a veritable heaven on earth?
And we get a bunch of raving fucking lunatics raiding the treasure of the people with impunity, nay with the encouragement of the keepers of the faith to be in trurn showered with rainbow colored skittles from their paymasters, the looting Hoard.
The Fed is a private bank, a for profit private bank, a very fucking large for profit private bank, a very fucking large private bank with the power to coin money, which is unaudited and might be deemed as somewhat systemically important, and probably is the epicenter of the money transfers and precious metals hocus pocus (lootings?) taking place amongst the rich and powerful, globally, and we'd not expect the backing of the American taxpayer?
Pick a card, any card.
Two jokers in each deck...except at the Fed table.
I hear Ben Bernanke is directing the sequel to Kevin Costner's Waterworld.
The planet is covered in dollars. Dollars, dollars everywhere. Not a drop to drink!
And Jessica Alba, Matthew Mchogoconohey, and Ben Affleckt,
must survive!
THAT FUCKING MOVIE IS GOING TO FUCKING SAVE THE FUCKING WORLD AND
BRING DOW JONES 500 000 good economy + life
+ life style + better Religion + government
PLUS BRUCE LEE BACK TO LIFE
as Hot Kung Fu Lady
BEN BERNANKE IS PERFECT
BOW OR DIE you humans
wealth isnt money. material wealth is a state of objects held in psychological control but as we know that we all die we only think we are wealthy.
True wealth is immortality of the souls magic-
Heavy shit from an evil asshole.
feather merchants, bitchez.
The black hole that is the Fed, where nothng can escape, not even light...and the MSM eyes who peer into it and announce they see galactic wonders...LOL.
About all we can hope for at this point is that it will turn out like the ending sequence of Raiders of the Lost Ark...
This issue was discussed on Zero Hedge well before Reuters wrote an article on it: "Creative Accounting" Makes Fed Insolvency Impossible
Mr. Durden you are a great man! And you look like Brad Pitt?! What a bonus.
I didn't find out about this until this morning. I was wondering how they were going to screw over Treasury (and how Treasury was going to allow it to happen of course) for all the toxic crap they're holding. All I can say has already been spoken by Colonel Walter E. Kurtz -
I remember when I was with Special Forces. Seems a thousand centuries ago. We went into a camp to inoculate the children. We left the camp after we had inoculated the children for Polio, and this old man came running after us and he was crying. He couldn't see. We went back there and they had come and hacked off every inoculated arm. There they were in a pile. A pile of little arms. And I remember... I... I... I cried. I wept like some grandmother. I wanted to tear my teeth out. I didn't know what I wanted to do. And I want to remember it. I never want to forget it. I never want to forget. And then I realized... like I was shot... like I was shot with a diamond... a diamond bullet right through my forehead. And I thought: My God... the genius of that. The genius. The will to do that. Perfect, genuine, complete, crystalline, pure. And then I realized they were stronger than we. Because they could stand that these were not monsters. These were men... trained cadres. These men who fought with their hearts, who had families, who had children, who were filled with love... but they had the strength... the strength... to do that.
Now, of course, I don't know if The Bernank has love, but you figure he might... his wife, his favorite hooker, his rabbi, money... he has to love something or somebody... So all you can really say is that it is true! The Bernank and TPTB are stronger than we!
I called my US Senators office and asked about this, they were incredulously ignorant. "we'll have to get back to you on this. nobody has talked to the senator about this..." Of course that was their reply, why should I suspect anything else?
Will they ever let the situation destabilize to a point that undermines TPTB's rule? It certainly does not look like anything internal will be able to challenge them. So that leaves some external force - The Chinese, The UN, Some Allicance of Nations? The US/EuroZone v. everyone else? Or perhaps Alex Jones and The Bilderberger/CSR/TLC Conspiracy was the right explanation all along.
The Fed and its accomplices are stronger than we are. They will hack away the middle class for "the greater good", and they will believe that what they are doing is sane and moral. I'd say, "God, help them", but I don't feel that way. So I won't.
Typer, good as always but I think that chip is actually even smaller then the tip of the pigs tail.