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Tim G’s Bank – “I’ve got a secret”
UPDATE: Shortly after I posted this piece I did hear from the FFB. They sent me a link to the letter I make reference to below. The letter is not a smoking gun.
It deals with minor security issues. Rather than "fix" the following
I'll leave it the way it is. The matter of the side letter is resolved.
The other points I make are still valid. The FFB borrows money from the
Civil Service retirement fund. This is unusual in comparison to other
federal Trust Funds. Some of this money is on lent with the benefit of a
"guaranty" from the federal Agency making the loan. A "spread" is paid
to the Agency. The original piece, warts included:
I’ve had a number of articles on the topic of the Federal Financing Bank
(“FFB”). This is the doghouse lender run by our good friend Tim
Geithner. I check the reports on a monthly basis, there is always
something that makes me laugh/cry.
-FFB is the lender of last resort for the good old Post Office. They
have $12 billion outstanding to the PO. Interest rates? Don’t ask. The
FFB is lending at 0.25%
-FFB has $600mm outstanding to various Universities. Once again the rates are dirt-cheap. The maturities? Some go out to 2028
-FFB is also the lender to Ford, Tesla, Fisker, Solyndra, Arizona Solar
and Kukuku Wind. The amounts outstanding to private sector names now
totals $4 billion.
-Even the military is involved. The FFB has $370mm outstanding under the
dubious heading of “Military Sales”. I wonder just whose military are
we financing with that loot.
The FFB came out with its annual report
recently. An outside auditor, KPMG, performed the audit. I poured
through all 24 pages. The second to last paragraph caught my eye:
We noted certain matters that we have reported to Bank management in a separate letter dated November 10, 2010.
A separate letter? What’s that about? My read of this is
that the nice folks at the KPMG had something they wanted to say to the
management of FFB, and they did not want the contents of that letter to
be public. By the way, Tim Geithner is the Chairman of the FFB. So he is
the “management” that got the letter that we can’t see.
I love side letters. You have to assume that a dozen or so lawyers and
accountants looked at the final draft of the report and argued about the
necessity to put in the language that is confusing me. After all, if
the side letter is a secret why make it known that there is a side
letter to begin with? Possibly a bit of CYA on the part of good old KPMG.
So I contacted the FFB and asked them what this was about and haven’t
heard a word. The fact is that I don’t know what might be in that
letter. But because I don’t have the answer from Treasury I think I am
allowed to speculate on just what this might be about. If I’m wrong,
then Treasury can let me know and I’ll publish a correction.
There are some things going on at FFB that don’t quite pass my smell test. Consider this from the Annual Report:
FEDERAL FINANCING BANKNotes to Financial Statements September 30, 2010 and 2009 (Dollars in thousands)
Additionally, at September 30, 2010 and 2009, the Bank had borrowings of $10,238,990 and $11,921,240 and an associated unamortized premium of $180,007 and $228,927, respectively, from the Civil Service Retirement and Disability Fund (CSR&DF), which is administered by the Office of Personnel Management (OPM).
Why would the Civil Service Retirement fund lend money to FFB? $22
billion is not chump change. It’s a third of FFB’s total liabilities.
CSR&DF has a surplus and invests that money in Special Issue
Treasury securities in its normal operations. This is exactly the same
for the other federal trust funds. Social Security is a perfect example.
SS holds $2.6 trillion in Special Issue Treasuries. But it does not
hold a penny of paper issued by the FFB. Why is the CSR&DF lending
FFB 22b? The answer is not that the FFB is having any difficulty in
raising money directly from its parent (Treasury). The rules are pretty
clear; FFB has a blank check:
The
Bank is authorized to issue obligations in unlimited amounts to the
Secretary and, at the discretion of the Secretary, may agree to purchase
any such obligations. (BK note: Secretary = Geithner)
I wonder if the unusual funding arrangement between FFB and CSR&DF
is in anyway connected to this sentence from the KPMG report:
While the Bank is permitted to charge a spread on new lending arrangements with government-guaranteed borrowers, the margin is not retained by the Bank, but rather is retained by the loan guarantor.
Ah!! Spread income is diverted out of FFB back to some Agency. How much? What Agency? Why is any Agency in the credit business?
I can’t answer any of these questions. I wish I could. I think the answer on “How much” is in the line item marked: Legislatively mandated interest credit. It only comes to $270 million. Chump change, right?
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I wonder if this is a continuation of the actions taken in 2006, where the Treasury started borrowing from the fund to avoid the debt limit?
http://www.washingtonpost.com/wp-dyn/content/article/2006/03/07/AR200603...
Krasting, I've thrown a lot of stones at you, but this is gold.
Nice job.
Amazing what people will do at the end of the rope to survive the ponzi just one more day, one more election, one more credit line with other peoples money. All a sign of financial decline and imminent collapse. Keep it up Bruce. Only bright spot--- my social security has already been raided by whores, now they are raiding themselves---end is near
Who knew? According to "Ponzi-nomics" there isn't suppose to any money "in this government Agency pooh." Of course if you understand how a revolutionary technology can suddenly make 400,000 government employees irrelevant and the other 400,000 "suddenly twice as productive" welll PRESTO POPPO! BILLIONS! Now "onto the firing of said employees"! We got book deals to sign you know!
Nice bit of education for today. And now, at last, we start to see how it REALLY works.
Bruce EXCELLENT !!!,
This is the kind of side deals thay make with Treasury, that is how steal tax payers money and give it to their friends.
Another Red Letter Day For Bruce
Nice post... You just love that red type...
BTW: Jeethner is not a "friend of ours"...
But he is a friend of Jamie & Lloyd, Amerika's Shoe Shine Boys...
Yeah, real journalism.
I was listening to a Radio interview in which a female student demonstrator from Yemen was asked if she believed Yemen was a democratic country. She answered: Oh yes, in this country you can say anything you want about leadership or political issues.And she added: But it makes no difference.
I guess that is what the word Democracy means nowadays everywhere
Unless you're aligned with the mob that rules, democracy has always been this way.
It's the reason the framers of the US Constitution created a republic instead.
Not that it matters now...
Bruce,
I have been listening to my wife bitch about audits, from both sides of the fence, for the last twenty five years. She's made her career for the last fifteen years on going into problem situations and turning them around.
If KPMG felt the neeed for a side letter - things are SOOOO BAD with regard to GAAP standards they felt the need to publicly state a private letter to manangement existed. It creates the opportunity for KPMG to prove they did not "wink" at improprieties being committed by their client (remember their USED TO BE an accounting firm named Arthur Andersen).
This isn't just CYA - this is building a bomb shelter for when the situation goes nuclear and providing the justification for Legal needing extra budget to start addressing KPMG's potential liability before it sees the light of day. But you probably already knew all of that ....
barliman
Bruce, Bruce, Bruce, you fell for the oldest trick in the book. You saw the side letter specifically produced to take the heat off. What about the OTHER side letter?
Fantastic work, thank you Bruce!
Bruce, see page 17 of KPMG's report for the explanation of the "Legislatively Mandated Interest Credit"
http://www.treasury.gov/about/organizational-structure/ig/Documents/oig1...
At least 5% interest - that's some pushin' in the Cushion!
From the same people who brought you Fannie, Freddie, Farmer, NRSROs, SEC, FINRA . . .
Think about it - these are crooks ! It's way past $20 Trillion already . . .
The national debt is only exceeded by the amount the US oligarchs hold in offshore accounts.
Just like the bullion banks move around or lease the EXACT SAME quantity of physical gold and silver which may be only 1/100th the paper liability, so too the Treasury is constantly moving around funds to obscure the fact that the total of obligations is many times greater than that published.
No wonder Timmah wants the debt ceiling raised. We may be at $20Trillion already and not know it.
Why the hell is anyone even surprised at this? You think telling congress about this will fix it? Talk about naivety!! Wow. This is the great ponzi republic or the biggest banana republic there ever was. There is know value to money other than to keep the game going. Nice work but don't know why anyone would be slightly surprised at all. Never going to change until the music stops.
CSR&DF holds congressmens' pension money. They have an incentive to care.
Retirement Benefits for Members of Congress
Better yet, that's the retirement kitty for thousands of "civil servants." You let them know, and all of those congress critters will hear no end of it.
Think Wisconsin x 50.
FOIA Request?
FOIA is only for government agencies. All I'm seeing here are banks.
OK, then how about a MTRSA?
(Matt Taibbi Rolling Stone Article)
My thoughts exactly.
Nice work, Bruce. More evidence that Treasury operations are a morass of confusion, corruption and incompetence. There is zero reason to tender a single penny of tax revenue to this mafiosa govt until ALL the 'bezzle is wrung out.
Great insights as usual, Bruce.
Please keep on this. This is the kind of shit that needs to be vetted to congress and the public.
Why vett this to Congress? They dont understand it and therefore do not want to see it.
Rep. Hans Schultz (D) House Budget Committee
http://www.youtube.com/watch?v=34ag4nkSh7Q
With american idol and budget balancing shenanighans who cares a hoot about this stuff ? bruce great job digging this up. dont expect to hear anything back from KPMG though.
Fuck I need to get a loan from these fuckers for my newly about to be established oil exploration/wind/solar energy company - 1 billion would be a good start
I need a billion or so for my new gold and silver acquisition business.
That sounds like a great business venture... going outside to look for oil in the sun.
Oh well, didn't find any. Cha-ching!
I'm on the verge of getting government funding to investigate room temperature fusion and its possible application in the future if it is ever invented by someone.
Without getting into too much detail, my research so far indicates that the US could power everything with room temperature fusion should such a power source ever be developed. Plus, since it would operate at room temperature, there would be no meltdown worries at all. Perfectly safe.
Once this grant is secured, I will be applying for a grant to study the realistic application of teleportation.