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IMF Issues Biggest Criticism Of US Policy To Date: Says Treasury Should Put GSE Obligations On Balance Sheet

Tyler Durden's picture


In another confounding episode of biting the biggest hand that feeds it, the IMF has just issued another criticism of US fiscal policy, and in its just released Global Financial Stability report says that the US should include in its budget the "cost of mortgage loan guarantees and other housing supports." Not only that but the fund also urges that the Treasury should immediately make its support for the GSEs explicit and carry Fannie and Freddie's roughly $7 trillion in debt (discussed extensively by Zero Hedge over a year ago: "Obama's Budget Has One Small, Missing Piece.... For $6.3 Trillion Dollars") on the books: a move that would send US debt to well over $20 trillion and make the ratio of marketable debt (the lowest common debt denominator) to GDP well over 100%. To wit: "Government guarantees should be explicit and fully accounted for on the government's balance sheet... There is a need for better-defined and more transparent government
participation in the housing market, with all such policies, including
strict affordable housing goals, transparently shown in the government's
budget." Of course this won't happen for many years as otherwise the US would effectively confirm that it is insolvent per various Reinhart-Rogoff ratios, and instead the administration will continue pushing with its misguided plan of offloading GSE obligations on the balance sheets of private institutions. As if that will change anything: it only means that the next taxpayer funded bailout will save the TBTFs once again, instead of leading to a run on the Treasury. End result: same thing.

Reuters summarizes the report:

The Obama administration has kept Fannie and Freddie off the budget, as did the Bush administration before it. Including them would make an already ugly fiscal picture look even worse.

The United States put those companies, which buy loans from banks and repackage them as securities for investors, into conservatorship in 2008 as the housing market bust led to massive losses on loans they guaranteed. The government has propped them up with more than $134 billion in taxpayer funds.

The U.S. Congressional Budget Office said in 2010 that Fannie and Freddie should be treated as government entities and counted in the budget, and many Republicans in Congress have pushed for that as well.

The IMF has generally tiptoed around direct confrontation on policy issues with the United States, which is its largest member and has effective veto power over any IMF decisions.

Overall, the Obama administration's housing reform proposals were "headed in the right direction, although some concerns and challenges remain," the IMF said.

The Fund said the reform efforts rightly focused on winding down Fannie and Freddie, adding the firms should be closed over the medium term to allow private-market securitization to return.

 The IMF also faulted the Obama administration for failing to address the tax deduction for mortgage interest, which it called "both expensive and regressive."

The tax break is hugely popular, and eliminating it would no doubt cause political pain at a time when the Obama administration is already preparing for the 2012 presidential election campaign.

Poor IMF: considering its recent Kotlikoff-assisted criticism of US budgeting proposals (see "IMF Says US Must Raise All Taxes, Cut All Entitlements By 35% To Contain Future Budget"), and now this, we anticipate some rather serious threats of funding withdrawal by the US, as nobody is allowed to even remind that Obama's head is planted firmly in the sand of denial (which according to recent reports is also radioactive, but well below soon to be hiked limits).

Quoting from the relevant section in the report:

The role of government in the housing market should be carefully reviewed as it may unintentionally contribute to financial instability. In particular, there is a need for well-calibrated government participation with less focus on direct provision of mortgage credit and more concern about systemic effects and externalities. Better calibrated government participation would also rely on more targeted measures to achieve social objectives, such as affordable housing for low-income households. Dedicated government agencies need to be transparent and carefully constructed. In addition, government guarantees should be explicit and priced upfront to mitigate the moral hazard problem—that is, lenders taking excessive risk based on the implicit assumption that the government will eventually rescue them in the event of a crisis.

A disproportionate focus on homeownership might exacerbate house price swings through government-led subsidization of mortgage loans and a relaxation of lending standards in response to growing competition between the government and financial firms. Some countries might want to reconsider their policies in this regard: for example, good-quality rental housing could be a better option for low-income households. A more level tax treatment across owner-occupied and rental housing would help reduce the current bias toward homeownership. In particular, in the absence of taxation of imputed rents and capital gains on housing, countries should reassess policy tools such as mortgage interest deductibility, which should be capped and apply only to first mortgages on primary residences.

In the foreseeable future, there seems to be a continued need for government guarantees for securitized mortgages, given the significant remaining uncertainty and vulnerability in the U.S. mortgage market, particularly in the private-label residential MBS market. Substantial swings in the cost of mortgage financing could be particularly damaging at a time when weaknesses in real estate markets continue to weigh on the economic recovery. However, government guarantees should be explicit and fully accounted for on the government’s balance sheet. Over the medium term, and with appropriate reforms to encourage “safe” securitization as discussed in the chapter, the GSEs should be wound down to make way for private-label securitization to reemerge as a viable option. Ultimately, the details of implementation will be key. The challenge will be to strike the right balance between delivering an appropriate level of explicit government participation and discouraging another cycle of overinvestment.

Bottom line: another one joins the ranks of the truth tellers... which can only mean the retaliation will be vicious.

IMF Chapter 3


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Wed, 04/06/2011 - 11:54 | 1141240 66Sexy
66Sexy's picture

Doesn't the IMF set US policy?

Its all the same people, and they are trying to make us think it's not?

Wed, 04/06/2011 - 11:57 | 1141261 Long-John-Silver
Long-John-Silver's picture

Obama is attempting to crash the US Dollar so the IMF can set US policy. The Sheeple will demand it.

Wed, 04/06/2011 - 13:17 | 1141660 Harlequin001
Harlequin001's picture

More games. Why would the US want to put any of this on it's balance sheet?

Think about it, how is money created? It is created from nothing.

Where do you think the losses from all these defaulted guarantees will ultimately go?

The answer is back to the same nothing from whence they came. Nobody loses a single cent.

Only the Fed can do this. Whilst I am fully aware that it isn't quite this simple and the parties do change somewhat, when you think about it Congress asks the Treasury for money to build an aircraft carrier or something. The Treasury prints up a $billion TBill and trots down to the Fed, which writes a check on itself for $1 billion which it gives to the Treasury in receipt. Treasury gives the cash to Congress to spend on an aircraft carrier. Let's assume the Treasury keeps it for a moment.

Now supposing the Fed wishes to remove liquidity, it simply returns the TBill to the Treasury which returns the currency to the Fed. The Treasury shreds the T Bill and the Fed shreds the currency et viola, balance sheet is balanced once again. Instead of returning a TBill the Fed now returns a worthless defaulted CMBS at full face value. The Treasury pays $1 billion to the Fed in receipt and shreds the CMBS, the Fed shreds the currency and the balance sheet is once again balanced.

Treasury, which is now short of currency  now asks the Fed to buy another $1 billion TBill, so the Fed writes a check on itself once again and the currency is the same as before, balance sheet is once again balanced and the whole load of defaulted crud is now exchanged as TBills. Nobody loses any money and the taxpayer certainly doesn't pay.

We all know it doesn't work and inflation goes skyward but I wouldn't mind betting that the Fed thinks if it has $10 trillion of newly issued TBills in exchange for its defaulted CMBS it can simply start shredding dollar bills as it returns the CMBS to Treasury and the whole thing will resolve itself. Madness when you think about it but who needs lose any money through anything other than inflation?


Wed, 04/06/2011 - 15:03 | 1142178 MrBoompi
MrBoompi's picture

The answer is back to the same nothing from whence they came. Nobody loses a single cent.

I'm sure China doesn't quite feel this way, but I know where you're coming from.

Wed, 04/06/2011 - 12:03 | 1141291 SheepDog-One
SheepDog-One's picture

Exactly right, its ALL the same central banksters, they just put on different hats depending on which side of their mouths they need to speak out of.

Wed, 04/06/2011 - 12:08 | 1141317 aheady
aheady's picture


Wed, 04/06/2011 - 12:18 | 1141369 In Fed We Trust
In Fed We Trust's picture

the US debt to well over $20 billion and make the ratio

I think you mean 20 trillion.

Wed, 04/06/2011 - 12:21 | 1141373 66Sexy
66Sexy's picture

Time to rewatch 'Fall of the Republic':

Wed, 04/06/2011 - 12:34 | 1141446 MarketTruth
MarketTruth's picture

Agreed, you need to think of it like this:

The IMF is the parent company of the Federal Reserve.

Wed, 04/06/2011 - 12:09 | 1141322 I am Jobe
I am Jobe's picture

Yeap one and the same. Its over. Another YAK YAK session.

Wed, 04/06/2011 - 12:35 | 1141447 chunga
chunga's picture

Don't give up so easy friend.

I posted this earlier (buried way down deep in another thread) but will do it again. Tyler, this needs a spot up top.

Read the brief...

Moll vs. MERS, et al

On a micro Alpha Delta level individual battles will be won or lost in the courts. Failing that...who knows where the battles will be fought.

If you are a Fight Club Lawyer join us.

Foreclosure Fraud – Economic Injustice Examined

Wed, 04/06/2011 - 14:47 | 1142094 MachoMan
MachoMan's picture

JFC, where do you find these people...  do they get paid by the pound?  We're not treading any new ground here...  either you're the holder or not...  and, if not, then the holder's valid agent...  and, if not, then you'd better not foreclose...  and, if you've already foreclosed, you'd better hope to high hell you didn't do so against anyone who's managed to hear about fraudclosuregate.

Decent brief but shit...  we would need to get the court's permission to file this boat on an APPELLATE BRIEF...  let alone a response to a motion to dismiss...

Wed, 04/06/2011 - 16:12 | 1142411 chunga
chunga's picture

The judges look for the tiniest way to escape. RI actually tried to push it to NH...they took a pass. I think this brief was aimed at radioactive "Bucci" and all the cases sitting behind it as well. Dismiss this one and it sets the stage for dismissing them all. This is incorporated with a "Reclamation Deed" and "Repudiation of Title". As much as it pained you to read it, it was a lot harder for the defense. (I've seen their response and they have brought in some pretty high-powered measuring by the pound it must be pretty heavy)

I think Glenn Russell's printing costs alone were like 7K in Ibanez. It didn't come off legalzoom. How much did defense spend on Ibanez/LaRace over 2 homes valued at 100k each?? This is like a finger in the dyke thing. If you want a landmark case you must be thorough.

Wed, 04/06/2011 - 12:19 | 1141361 gabeh73
gabeh73's picture

"Bottom line: another one joins the ranks of the truth tellers... which can only mean the retaliation will be vicious."

good article TD except this last line.

These people are MIXING truth with propaganda. This is typical, yes the US government is hiding debt in several ways to understate our problems and to come out and admit it is a break from the MSM line...they counter the truth telling with the lie that this must be resolved by RAISING taxes! 


So this creates the impression on the weak minded that honest "truth-tellers" are for massively increasing taxes and bringing on austerity for the middle class.


A real truth teller would explain that the military industrial complex has almost sucked the corpse dry and tax increases to feed the vampires more is not a good solution for the masses.

Wed, 04/06/2011 - 14:58 | 1142138 MrBoompi
MrBoompi's picture

Yes, the Fed is a part of the cartel, if not the leader of the pack. The Wall Street Journal can't even get it right, they call the Fed a government agency.

To these folks, collecting the monthly interest payments as scheduled is the most important thing in the whole world. They will tell us exactly what they believe will allow them to continue collecting interest payments, which, in the case of the US entails raising all taxes and cutting all entitlement spending by 35%. THIS would guarantee their interest payments would be collected for the foreseeable future.

And the overall debt? Well, that would have to keep growing of course. You really don't think any plan coming from these folks would actually REDUCE the amount of debt out there do you? And you really don't believe any plan coming from these folks would be designed to help anyone but THEM right?

Thu, 04/07/2011 - 15:32 | 1146542 gabeh73
gabeh73's picture

thank you for explaining what I was trying to say.

Wed, 04/06/2011 - 15:00 | 1142155 covert
covert's picture

there are a lot of fake and therotical conspiracies however, there are a few true ones also.what's george up to?


Wed, 04/06/2011 - 16:08 | 1142502 SqueekyFromm
SqueekyFromm's picture

OK, the IMF is trying to screw us out of $7 Trillion!!! I am also posting this link up high on the thread because it is VERY IMPORTANT and people might not see it way down there where I am now. BUT, the Fannie Certificate says right on its front page:


I don't know how to do pictures here, sooo here is the link and Thank You Mr. Karl Denninger!!!


Squeeky Fromm, Girl Reporter




Thu, 04/07/2011 - 15:36 | 1146554 gabeh73
gabeh73's picture

agreed again...officially dumping 7 trilion more on the backs of taxpayers(current and for generations to come) is not a an act of rebellion. This is just the cartel leaders speaking up about the reality we can expect. 

Wed, 04/06/2011 - 11:55 | 1141244 EscapeKey
EscapeKey's picture

Oh, you mean like the UK did a few months back?

The unadjusted measure of public sector net debt expressed as a percentage of gross domestic product (GDP), was 149.1 per cent at the end of February 2011 compared with 152.1 per cent at end of February 2010. Net debt was £2,252.1 billion at the end of February compared with £2,183.4 billion a year earlier.

Wed, 04/06/2011 - 11:56 | 1141251 I am Jobe
I am Jobe's picture

Yeah, we ahve so many deicison makers that no one knows what to do anymore. Incompetance witten all over . Must be the Harvard Education Freshman Class. Screw off 101 and Posting on Facefart is all needed to graduate and suck on a bankers dildo.

Wed, 04/06/2011 - 11:59 | 1141263 franzpick
franzpick's picture

...a move that would send US debt to well over $20 billion...

20 Trillion? 200 Trillion?  I can't keep track anymore.

Wed, 04/06/2011 - 12:02 | 1141276 Long-John-Silver
Long-John-Silver's picture

It's all just Jew-confetti

Wed, 04/06/2011 - 13:05 | 1141574 Dburn
Dburn's picture

Go Fuck yourself

Wed, 04/06/2011 - 14:37 | 1142039 Alienated Serf
Alienated Serf's picture

thanks for your meaningful contribution to the discussion, long john.  now please go kill yourself.

Wed, 04/06/2011 - 12:06 | 1141305 Cdad
Cdad's picture

Pretty sure that should be $20 Trillion.

Wed, 04/06/2011 - 12:02 | 1141267 Stuart
Stuart's picture

Obama to IMF: STFU and never pull that skeleton out of our closet again.   We need it to stay in there and you're not helping our obfuscation campaign and other efforts to keep the public uninformed.    

Wed, 04/06/2011 - 12:02 | 1141282 bob_dabolina
bob_dabolina's picture

Balance sheet transparency?

Fuck you

-Tim Jeethner Turbo Tax Account Rep.

Wed, 04/06/2011 - 12:07 | 1141315 Dick Darlington
Dick Darlington's picture

+1 lol

Wed, 04/06/2011 - 12:02 | 1141283 youngman
youngman's picture sounds like the IMF is starting to make plans to jetison the USD as the reserve this kind of talk they will set the stage to leave it...

Wed, 04/06/2011 - 12:37 | 1141458 franzpick
franzpick's picture

Exactly, and pave the way for the introduction of the next level of financial holocaust, the 'special-destruction-right' SDR ?

Wed, 04/06/2011 - 12:04 | 1141284 The Axe
The Axe's picture

Wed, 04/06/2011 - 12:35 | 1141451 SheepDog-One
SheepDog-One's picture

Right! The continuing trillions in debt will just keep getting swept under the rug, while 400 lb americans will just keep enjoying cheap bulk food purchases on food stamps at Walmart forever, never experiencing any cuts. Rock on!

Wed, 04/06/2011 - 12:35 | 1141453 Hansel
Hansel's picture

It shouldn't happen.  The government shouldn't be guaranteeing MBSs.  Every prospectus for every bond sold by Fannie and Freddie said they weren't backed by the government, so let's live up to that promise.

Wed, 04/06/2011 - 12:04 | 1141294 Rider
Rider's picture


Timma: "Yes we ought that pension, and the tiny GSE too, and medicare thingies. We will pay, Timma swears it by the tooth fairy. I will pay for everything with this new freshly printed piece of paper."


Wed, 04/06/2011 - 12:05 | 1141298 SheepDog-One
SheepDog-One's picture

Paper exchanges such as DOW having problems defying gravity this morning. 

Wed, 04/06/2011 - 12:05 | 1141299 RobotTrader
RobotTrader's picture

Dollar is getting smoked.

So is OIH, XLE, and MOO.

GDX looks like it might have topped out.

Robots must be short-circuiting or something.....

Wed, 04/06/2011 - 12:06 | 1141303 SheepDog-One
SheepDog-One's picture

My physical protection against the paper bonfires such as the US LOLlar are doing great.

Wed, 04/06/2011 - 12:25 | 1141396 Careless Whisper
Careless Whisper's picture

did u catch some of that downdraft in TZOO and VHC that i turned u on to this morning?


Wed, 04/06/2011 - 12:08 | 1141304 Dick Darlington
Dick Darlington's picture

"Government guarantees should be explicit and fully accounted for on the government's balance sheet...

Hold that thought and transfer it to Europe. Shitloads of govt guaranteed bank debt has been issued since the start of the crisis and in some countries they still do that (read: Spain et al). Ireland's NAMA ie the bad bank which has sucked tens of billions of rotten waste from the balance sheets of the Irish "time bombs" etc. Where do these show up? Def not on the balance sheets of the respective governments.

Wed, 04/06/2011 - 12:27 | 1141414 Rodent Freikorps
Rodent Freikorps's picture

What if they are not as "guaranteed" as many believe?

Wed, 04/06/2011 - 14:57 | 1142144 SqueekyFromm
SqueekyFromm's picture

Yes!!! I remember reading something on Market Ticker about where right of the front page of something, it says this is NOT guaranteed by the government. I will try to find it.

Squeeky Fromm, Girl Reporter 

Wed, 04/06/2011 - 12:07 | 1141311 Tense INDIAN
Tense INDIAN's picture

nifty down on huge volumes::

Wed, 04/06/2011 - 12:11 | 1141324 SheepDog-One
SheepDog-One's picture

Drowning in an ocean of radioactive paper.

Wed, 04/06/2011 - 12:10 | 1141327 I Am The Unknow...
I Am The Unknown Comic's picture

GASP!  Such blashphemy!  Egad!  How dare they speak such things that should not be spoken!  Just wait until Emperor Bernankster hears of this!

Wed, 04/06/2011 - 12:10 | 1141329 notadouche
notadouche's picture

Where does the IMF get it's funding?

Wed, 04/06/2011 - 12:12 | 1141332 f16hoser
f16hoser's picture

After all the money Bernanke gave them this is the gratitude we Taxpayers get?

Fuck the IMF!!!!!!!!!!! I want my money back!

Wed, 04/06/2011 - 12:13 | 1141338 f16hoser
f16hoser's picture

Correction, I want my children's money back!

Wed, 04/06/2011 - 12:14 | 1141341 MiguelitoRaton
MiguelitoRaton's picture

The restriction on assasinating foreign leaders only extends to sovereign countries, right? The IMFers might want to be more careful. If Clinton was still in Office, it would be a done deal by now.

Wed, 04/06/2011 - 13:15 | 1141658 samsara
samsara's picture

Clinton is a Collectivist/Globalist too.   Do you think it was a coincidence him being a 'Rhodes" scholar(as in Cecil).

He had Carroll Quigley as a teacher(literally). 

Wed, 04/06/2011 - 12:12 | 1141342 Yen Cross
Yen Cross's picture

I like how the Chinese run under the carpet, and toss cockroach thoughts out when the going gets tough.

Wed, 04/06/2011 - 12:18 | 1141364 InconvenientCou...
InconvenientCounterParty's picture

Can we invade or impose some kind of military remediation on the IMF? If we make our payments on time will they STFU?

Wed, 04/06/2011 - 12:21 | 1141374 nah
nah's picture

think of the GSE's as a billion billion stars, suns far away that practically have little to do with our everyday lives

Wed, 04/06/2011 - 12:19 | 1141375 Sofa King
Sofa King's picture

I see the IMF is after the mortgage interest deduction.  How about Ge and the ther conglometates actually pay taxes first and then we'll move on to finishing off the middle class.  You can take that deduction away, but you'll crash the banking system faster than a runnaway algo.

Wed, 04/06/2011 - 12:22 | 1141377 falak pema
falak pema's picture

7 T USD Hole in US books? No accountability for extra provision of debt servicing in budget. No big deal for uber-US oligarchs... IMF's problem : how do we sell a basket currency SDR formula to China, to solve the upcoming USD reserve currency melt down scenario, as its the main USD creditor after FED, if there is such a gaping hole in US ledger? Embarrassment... and the US tells China : "bring your dumb Yuan down or else we will make hell for you inflation wise..."

This is getting to be an unstable scenario even for the cool-hand Luke's of the oligarchy game!

Benocide to tell us how to solve this one!...Where are you Benocide? One more apple on your plate! Benocide is ratcheting up to rocket to the moon with Lady Blythe...

That guy Dominique Strauss Kahn...he will soon be playing Waltzing Matilda into France this summer...and leave the shit throwing around with uber-US his successor!

Wed, 04/06/2011 - 12:22 | 1141379 props2009
props2009's picture

Superb interview with John Taylor

German EURO is 1.7 but Greece EURO is 0.7

Wed, 04/06/2011 - 12:25 | 1141392 falak pema
falak pema's picture

Here comes the two tier euroland scenario...

Wed, 04/06/2011 - 12:24 | 1141389 Careless Whisper
Careless Whisper's picture

Fannie and Freddie are SECURED debt. there's a difference. the IMF is looking to crash the dollar and replace it with a world currency so they can be the central bankers of everyone. IMF scum.  It's not a secret . The IMF has proposed their "bancor" as a new world currency.

Wed, 04/06/2011 - 12:24 | 1141390 eurusdog
eurusdog's picture

What I think is happening. The ECB will not raise rates tomorrow. This was all hot air to bolster the value of the EURO before a wave of insolvancies hit and drive the EZ into the dirt.The IMF and Fed will have to talk the USD down by coming out with QE3 a few months into the summer.



Wed, 04/06/2011 - 12:23 | 1141391 the grateful un...
the grateful unemployed's picture

the head of the IMF is a French Socialist Party member, who plans to run for President. hmmm? 

Wed, 04/06/2011 - 12:27 | 1141405 RobotTrader
RobotTrader's picture

Yeah, right as if that is really going to happen.

If anything, more "off-balance sheet" crap will be swept under the rug, hidden from view.

After that happens, the banks will be free to rally yet again.

Just like there is a maniacal rotation today out of oil stocks and into bank stocks.

Biggest percentage gainers today are the PIIGS banks, like BBVA up 4%.

Wed, 04/06/2011 - 12:28 | 1141406 simon says
simon says's picture

US to IMF:

Go f#%k yourselves.  And btw, we are increasing your Washington rent to $1trillion/year.

PS:  Your SDR is collateralized by debt of all bankrupt nations so WTF are you talking about???    


Wed, 04/06/2011 - 12:31 | 1141427 SheepDog-One
SheepDog-One's picture

Right! Because with our insolvent ass we're really in the position to call the shots and all.

Wed, 04/06/2011 - 12:26 | 1141407 SheepDog-One
Wed, 04/06/2011 - 12:30 | 1141429 monopoly
monopoly's picture

HUI needs to get back above 600 for a further move up. Since when did the IMF get religion?

Wed, 04/06/2011 - 12:33 | 1141436 SheepDog-One
SheepDog-One's picture

2nd IMF warning to US just this week, and its only Wednesday.

Wed, 04/06/2011 - 12:33 | 1141439 BlueDonkey
BlueDonkey's picture

welcome to Greece Bitchez

they will suck you dry like they did us.  We were the test case, they are tightening the screws to see when we snap.  We are voiceless suckers however and they are milking us dry.   When they find our breaking point they will attack you and suck your remaining blood.  When they are done there will be a revaluation of gold in the fofoa sense and we will all be stuck with just our dicks in our hands.


Wed, 04/06/2011 - 12:40 | 1141464 SheepDog-One
SheepDog-One's picture

Except in the US millions of us have M16's in our hands, thats what all the cold feet are about. 

Wed, 04/06/2011 - 12:41 | 1141479 ZakuKommander
ZakuKommander's picture

Or AK variants.  More dependable.

Wed, 04/06/2011 - 12:48 | 1141493 SheepDog-One
SheepDog-One's picture

Or FN and HK variants, or any of the over 100 million guns presently in americans hands. Their only sticking point. Cold feet, putanas.

Wed, 04/06/2011 - 14:46 | 1142086 Alienated Serf
Alienated Serf's picture

in a TEOTWAWKI situation, I really think eastern block commie arms are the way to go.  fancy teflon grease for your AR-15 is gonna be hard to find.  I'll take my mak-90 that can eat mud and my 70 y/o Mosin for longer shots.

Not that there is anything wrong with having a nice modern piece or two for very long range work.

Wed, 04/06/2011 - 15:33 | 1142335 ZakuKommander
ZakuKommander's picture

Speaking of old Mosins, and long range, highly recommended:

Wed, 04/06/2011 - 12:45 | 1141488 falak pema
falak pema's picture

why aren't you fighting q-daffy with your M16? That's the place to be! Good training to then come home certified war veteran, or war veteran squared, if you've already done Uncle Sam duty somewhere, anywhere!

Wed, 04/06/2011 - 12:51 | 1141511 SheepDog-One
SheepDog-One's picture

Ive got no beef with Kadafi at all. 20 year retired military myself, I hardly need any training. Just keep in close with local militia group, stocking food and ammo, building on site homes and farming, as millions of other americans are doing to protect whats theirs.

Wed, 04/06/2011 - 13:10 | 1141615 ZakuKommander
ZakuKommander's picture

I really don't think SD is interested in fighting for the oil interests and the House of Saud.  Nor should we be.

Wed, 04/06/2011 - 13:33 | 1141751 SheepDog-One
SheepDog-One's picture

Yep these foreign entanglements where we've got no business are infuriating.

Wed, 04/06/2011 - 12:40 | 1141475 cxl9
cxl9's picture

The IMF also faulted the Obama administration for failing to address the tax deduction for mortgage interest

Go ahead and eliminate that deduction. Please. Watch how fast I default on my mortgage. But I'll continue to collect the rent for two years, buy gold/silver with the money, and then pay cash for my next house.

Wed, 04/06/2011 - 12:55 | 1141519 samsara
samsara's picture

So,  what is the suggestions today from the Globalist/Collectives about what a sovereign nation should do to go bankrupt?

Nations are in the way of a globalist agenda.  They are troublesome little anachronism left over from the last century.

We need Weak Nations and a Strong UN(ie WTO, IMF, World Bank, BIS, etc etc).



Wed, 04/06/2011 - 12:58 | 1141550 buchesky
buchesky's picture

Like that will ever happen...account for Goldman and the rest of the too-big-to-fail banks on the Fed's balance sheet?  Right.

Wed, 04/06/2011 - 13:05 | 1141573 Rikki-Tikki-Tavi
Rikki-Tikki-Tavi's picture

Gentlemen, before getting so upset with the IMF please consider (as pointed out by 66Sexy in first post) that:

USA is represented by the dynamic duo Geithner & Bernanke in the IMF and is the only country able to block a supermajority on its own. Have you considered that G&B perhaps simply are using IMF to get a tough message across?


Wed, 04/06/2011 - 13:33 | 1141760 SheepDog-One
SheepDog-One's picture

Yep precisely.

Wed, 04/06/2011 - 13:09 | 1141603 JLee2027
JLee2027's picture

Does somebody want to call those muther fuckers at the IMF and remind them that the biggest donor to those slackers is the United States taxpayer and once we get our fiscal house in order, the IMF will no longer be funded?

Wed, 04/06/2011 - 13:14 | 1141646 dogismyth
dogismyth's picture

its all part of the circus act.  The IMF is the ringleader.  The federal reserve is the pony.  And the US taxpayers are the dogs jumping through the hoops onto the ponies.  The sensational headlines and news are all part of the propaganda to help you think more clearly...or not.  Kinda interesting this is all happening before the budget vote.  Which by the way....will likely be delayed to the weekend.  And we know how those situations work out.

Can you say bullish Monday?  Go on...say it.  Cause it'll be here next week so we can kick the can down the road for a while longer.

Wed, 04/06/2011 - 13:19 | 1141687 digalert
digalert's picture

In Washington District of Criminals:

we don't talk about fannie or freddie around these parts

Wed, 04/06/2011 - 14:21 | 1141984 max2205
max2205's picture

Don't forget little Timmy worked for the IMF and there are his tool for floating ballons...prick it...

Wed, 04/06/2011 - 14:26 | 1142010 omi
omi's picture

These are not legal obligations, hence they can be discarded as they can be discarded. 

I know it's hard to imagine, riots in the streets and all, but if you want to get technical, USA is classifying it correctly.

Wed, 04/06/2011 - 15:06 | 1142181 boiltherich
boiltherich's picture

People are missing the point in this IMF demand,  just as they miss the point about the shadow inventory in the US residential RE market.  All I have ever seen related to this is how large a liability it is, and they are quite mistaken, if the liabilities of the GSE's are posted to the federal treasury ledgers then so are the assets, is there anybody here reading this that does not get that or disagrees with that? 

The reason why the shadow inventory exists at all is because of how RE is booked in accounting procedures, the banks do not want to live in our houses or be our landlords, but because of how accounting handles the booking they have no choice but to sit on millions of empty homes.  When you take out a mortgage your promise to pay 360 monthly installments (in most cases 30 year fixed rate) is booked as an asset as if you had already paid that amount, because of compounding a typical mortgage, I will use mine as an example though it was only a little over half the average mortgage, was 130,000 and the payments were 998 per month for 360 months.  Call it 360,000 over the life of the loan, the bank lists that as an ASSET not a liability.  The liability side is the original principal amount and since they have to match differences get accreted to other accounts that accrue over time and it is different for different banks, but periodicity makes these accounts not important for the matter at hand, they simply are not realized and small write-down's in expected income streams will be written off month by month. 

The important thing is that a bank has ASSETS equal to the total of the mortgages over the expected life of a loan, and a liability of the principal balance to date, those are the major bookkeeping entries.  In a way it violates the accounting rules that demand periodicity be respected when they book unrealized assets in order to leverage those to relend or invest money they may never get.  And this is at the heart of the matter, my bank listed my mortgage as an asset of $360,000 and leveraged that to chase yield in debt and equity markets, speculate in commodities, relend to other mortgages, and we know they did a lot of this, in the many trillions of dollars, bidding up stocks, bonds, and oil/food along the way, to bubble regions.  Now when I mailed my keys back to the bank last year that $360,000 asset becomes a $130,000 liability and the difference between the two is $490,000 which is a loss they have to show in the period in which it was booked.  Now remember that the average mortgage was double what mine was, and when you have millions and millions of suddenly non performing loans to multiply this by you understand why they simply will not do it, can't do it.  The houses in question might represent a loss of home equity to the average American household estimated to be 9 trillion most recently, but the hit to bank balance sheets is almost quadruple that.  If the banks had to foreclose on all seriously past due mortgages and list for sale all foreclosures in a reasonable time frame the devastation to their books would be well past 35 trillion dollars even allowing for recapture of some amount at the sale.  This is why a full year after I mailed my keys back to Chase the county assessor still lists the house in my name, why the HOA is dunning me for unpaid association fees and dues, and why Chase is buying a homeowner policy in my name at four times the price I used to pay AllState and which only covers their own financial interest in case of loss.  The vastness of the insolvency is so huge that I expect banks to sit on these properties for the life of the mortgage no matter what havoc it wreaks on neighborhoods and credit scores nationwide.  I expect the houses to be gutted by tweekers, vandalized, and generally rot into the dirt unmaintained, but they will not allow the bankers to suffer a moment of anxiety over the frauds perpetrated upon America.

The only difference between commercial banks and GSE's in all this is that GSE's were required by law to either return proceeds to the treasury or reinvest in more RE loans, they could not speculate with the money (on paper) but the point is still this, the ASSETS are the cumulative income of the mortgage and on paper that is many trillions more than what was actually obligated in the original principal, about triple.  If we do as the IMF is demanding the result would not be a US debt of 20 trillion, it could actually wipe out the current 14 trillion in debt we now have.  You and I both know this is nothing but accounting smoke and mirrors, but so is the banking system that is reaping hundreds of billions/trillions in taxpayer subsidies which is enslaving all of us for all generations to come. 

Wed, 04/06/2011 - 19:07 | 1143228 Buck Johnson
Buck Johnson's picture

But as you just said that there is a big gap from what the original loan is and what the life of the loan is and if you aren't paying your mortgage, the liability is the 130,000 and the difference between the 360 month pay time.  So if these are allowed to go onto the GSE books as both assets and liabilities, the assets would be credited but the liabilities would still be trillions more than what we have now in debt.  And thats if the assets are even worth that 130,000 anymore.  And then add to the fact that as you said it was leveraged but it also was bundled into debt traunches to be sold to investors.  And the reason why much of the printing of money was going overseas was because of the bonds that where bought by financial institutions and central banks. 

You see if I'm Gunther Bank in Germany and I decided back in 2006 to buy 1 billion dollars in mortgage debt, I will get a rate of return.  Whatever the contract was (every month at a certain percentage or every quarter etc.), I get a return on my investment by getting paid from the money that the servicers pay me from the mortgage payer (you and me).  And in that contract it has provisions that if there is any change in the time of payment or the amount of payment of my return, then the bond issuer is in default.  And if they are in default they must pay back the original 1 billion dollars plus any penalties.  The banks that sold the debt truanches didn't have hundreds of billions of dollars to make good with any traunches that could have gone bad, so they ran to the Fed and the Fed bailed them out by printing money.  The problem is continuing because more and more debt traunches are going bad and the fed is continuing to print money which is inflating the price of commodities via inflation. Not to mention that Gunther bank used that billion dollar in debt as an asset to leverage other deals.  So even if you talked to them to not demand a default it wouldn't matter because they where counting on that return on that money.


Thu, 04/07/2011 - 01:40 | 1144347 boiltherich
boiltherich's picture

I intentionally did not go into collateralization because it makes little difference to me the average American house owner (though the real average is about double what I borrowed) for a great reason, when the mortgages were bundled into CDO's the bankers then leveraged that to the hilt, they not only sold them as the total sum of the 360 payments at interest well above what we now have, they also used that as the basis for net present value of the income stream.  They leveraged the leverage, and all of it was done at totally unsustainable rates. Hell, I knew that in the 1990's as a college student getting a degree in finance, if I knew that then how could everyone else have missed it?  You can quant this and normalize that and put gigabytes of computers to work on all of it but what it boils down to in the end is what a guy and his loved ones can do on the job and in his house to pay for it all. 

Please remember that a bank is a company that first and primarily serves the public, like you and me, as a place we can go to when we want to cash our paycheck, or deposit it into a checking account so we can pay our debts.  They provide a nice lobby with a lot of marble and a big clock, to assure us that we are dealing with real professionals where our funds are concerned. Maybe we are industrious and lucky to have a job that pays well and which gives us some overtime, or to be an actual business owner that has done well because we were personally involved in the development of the company or hit a business cycle just right, that is how America got great, but there is nothing in that which allows for a Forbes 400 list, or the fact that close to half of working people in a lot of places now get by because they qualify for for food stamps and HUD. 

I am a radical left guy that does not take shit from anyone, yet I understand where the right is coming from, we both remember what it was like in the past when billion was a new word that had to be explained to people on the evening news.  And I am not yet 53.  I am also a disabled veteran on a fixed income, and I am a gay man, the only way I could could be more stereotypically left is if I decided to have a sex change on Medicaid.  The difference is that the right uses religion, homophobia, and racism to advance their agenda which is not about fixing our lives and nation and world, but about abusing the situation to get idiots to vote against their own welfare to promote an oligarchy that will make the average American envy the average Mexican.  Wedge issues are all about protecting the better off from paying for public goods which we all need. 

And by the way I am done with it, I did not pick boiltherich as an ID for no reason, it is what I would like to do to the 1000 wealthiest families in the nation.  If it turns out that the rest do not want to pay a fair share then we just boil another 10,000 and see how well the system works.  Over concentration of wealth is the single most disastrous thing that has ever happened to man, every instance of it has been glorified as a golden age, but those have always been short lived because what they bought and created with that wealth was done on the backs of the majority that always rose to destroy them. A lot of baby with the bath water where man takes three steps forward and two.9 back and all the pain that goes with it.  What do you think every revolution man has ever fought was about? 

And what really pisses me off is that it would be so easy to correct.  So easy to avoid.  Most of you are kids that remember nothing, in the 1960's the maximum tax rate on the wealthy was over 90%.  Yet the average American was better off then and businesses at all levels were more profitable, unemployment, REAL unemployment was under 4%, made in Japan was code for junk.  China was a sad remote communist backwater like Mongolia is today.  What you cannot and will not get through your stupid thick heads is that redistribution of wealth is happening at this moment, it has always happened and it always will, that dear friends is economics.  But when it is done wrong misery is the result.  Not for the winners of course, but for the multitudes life gets worse every day until they say enough and kill those that concentrate wealth.  This is the main flaw in capitalism, it is great at allocation of goods and services, and even production so that supply meets demand usually, but the real problem is that it requires ROI at a rate that means that some have to lose out.  Over time more have to lose out and it compounds just as the interest in the ROI demands.  Eventually you get a situation of unequal wealth like France in 1790, or Haiti today.  The world belongs to the people on it, our nation belongs to Americans, when one percent claim to own more than ninety percent of the nation guess what is going to happen.  Deny it, go ahead, Russia was once a beautiful and promising place too, but the rich were under taxed and the rest burned down the palaces rather than die in the street of malnutrition and cold. 

Since the average American like me is told that I have a negative net worth when I include a fair share of corporate and government debt, and I am lucky to have any McJob, with no healthcare or god forbid a retirement plan, how long do you think it will be before I just come and take your Mcmansion and Mercedes, and impose a 90% income tax?  Do get ready to be equal or be jailed. 

Thu, 04/07/2011 - 15:55 | 1146631 gabeh73
gabeh73's picture

hey boiltherich...the old left-right thing is a mental prison...break out of it.


If you want to advocate killing the rich please make sure and explain that a family of 5 that makes about 200k per year ain't what your talking about...cause when the average democrat politician talks about taxing the rich he always seems to be targeting me and never David Rockefeller/Bill Gates/Warren Buffett.

The democrats work for those top 100 families just as much as the republicans...the parties are controlled and owned. Their is no left vs right...that is is individualism vs the corporate/big government/banker oligarachy.


You seem big on public goods and redistribution of wealth and I guess your saying those of us who aren't are "from the right".  The wealth distribution is more unequal in countries with bigger government. It is the use of the legalized vilence of big governemnt by the oligarchy that helps widen the wealth distribution...government is just the monopoly on violence...nothing do you see why the top 100 families want big government and the left and right work together to achieve it?

Wed, 04/06/2011 - 15:39 | 1142362 jmc8888
jmc8888's picture

Why should fraud be put on the balance sheet? Wipe it out and prosecute.

Of course it also means, why should fraud be guaranteed by the gov't? Take it away.

Using what??? Oh yeah, Glass-Steagall

Wed, 04/06/2011 - 15:50 | 1142433 SqueekyFromm
SqueekyFromm's picture

OK, here it is!!! The Fannie thingy where it says right on the front that:

The certificates ARE NOT GUARANTEED by the United States, etc:

(I don't know how to post pictures here)

Squeeky Fromm, Girl Reporter

Wed, 04/06/2011 - 19:48 | 1143335 Don Levit
Don Levit's picture

Fannie and Freddie are level 4 obligations, the weakest federal commitment to fulfill.

On the same level is Social Security and Medicare future benefits.

Only the debt held by the public and federal employees' pension obligations are liabilities on the balance sheet, level 1 liabilities, the fed's strongest commitment to fulfill.

Oh, hold on a second, those pension liabilities are unfunded, for thn trust fund is operated like Social Security's.

Oh no, an unfunded real liabiliity!

Don Levit


Fri, 04/08/2011 - 23:54 | 1152723 tomster0126
tomster0126's picture

The IMF can suck it!  Since when have they done anything right?  We just fixed our shit tonight, so there.

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