Treasury Quid To Banker Pro Quo: "You Can Raise Dividends If You Buy My Toxic Mortgages"

Tyler Durden's picture

To all those wondering why the Treserve scrambled on Friday to allow banks to resume paying dividends (even something as downright hilarious as Citi's $0.01...Is that the lowest recorded dividend yield in history?) here is your answer. The Treasury just announced it would sell its $142 billion MBS portfolio, supposedly to the same banks who are now using their cash on the books to satisfy shareholders too. The Treserve will sell $10 billion per month depending on market conditions, meaning a downtick in the market will now crash not only that given day's POMO (a UST market operation), but also have a reflexive impact on the entire MBS trading complex. As usual we can't wait for Directive #1 which will make selling any share an act of treason.

From MarketWatch:

The Treasury Department said Monday that it will begin to sell its
portfolio of $142 billion in agency-guaranteed mortgage-backed
securities. A senior Treasury official said the department plans to sell
up to $10 billion in MBS per month subject to market conditions. The
sales could generate a profit for taxpayers of about $15-$20 billion as
market conditions have improved, the official said. Congress gave
Treasury the power to purchase the securities guaranteed by Fannie Mae
and Freddie Mac to provide stability to financial markets during the
financial crisis of 2008. The official said the sales were not related
to the looming debt ceiling.

As usual the only loser here is the taxpayer, as banks will very soon have dangerously low cash and capitalization levels, meaning the next downturn, which nobody will have seen coming, will result in another cool 10-20 trillion in pieces of linen thrown at it, and another 10-20% drop in the value of the former reserve currency.

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lizzy36's picture

Not that this move by treasury has ANYTHING to do with the debt ceiling. ;)

Bananamerican's picture


are repups more likely to continue caving on the debt ceiling, making token "fiscal responsibility" noises/gestures in the process or...?

"the next downturn, which nobody will have seen coming, will result in another cool 10-20 trillion in pieces of linen thrown at it"

Really? Isn't THAT the point the amerikan peeps go mubarak?

Larry Darrell's picture


The banks must have forgot to make their payments to the Supreme Court members.

Because the SC just ruled that the FED has to release the list of banks that received emergency loans.

Catullus's picture

This is the biggest circle jerk ever.

chunga's picture

Smash the title insurance companies. Check the docket below.

disabledvet's picture

or a war Libya.

sudzee's picture

Looks like the Treasury is now bailing out the FED.

John McCloy's picture

   I am all for that. Load them back up boys and get em while they are hot. Looks like the great unwind is about to commence and judging by the reverse repo experiments noted on ZH last year I am sure it is going to go Swimmingly.

mtomato2's picture

Directive #1.  I love it.  Atlas Shrugged, anyone?

Calling John Galt.

Go Galt. Please.'s picture

Directive #2: You can't sue anyone over these MBS. Even if there's no mortgages backing the security

TradingJoe's picture

Low Volume Dead Cat Bounce! IMHO the LAST ONE!

Cdad's picture

Agreed.  Shaka, when the walls fell!

silvertrain's picture

"as banks will have dangerously low cash and capitalization levels" 

 Isnt our treasury{as reported by zerohedge a few days ago} already out of cash? Are we waiting on auctions this week? Anybody have a followup on that deal?

Cognitive Dissonance's picture

The sales could generate a profit for taxpayers of about $15-$20 billion as market conditions have improved, the official said.

I thought the US Government was a non-profit organization? Oh wait a minute, now I get it. This is our share of the vig? I'm a little slow at first but I eventually catch up.

But wait a minute. Didn't it cost us like a Zillion Billion dollars to make that "profit"? Now I'm really confused.

Cdad's picture

Brother CD,

It would seem that your dissonance is coging you.  Suggest you chuck back a handful of Pfizer should straighten things out for you so that you can see the beauty of the Ponzi Fed more clearly.

The new American Marxist/Banker party asks that you quit sweating the details. 

Cognitive Dissonance's picture

Federal Reserve marching orders. "Don't worry, be happy."

Roger that. Where's my morning dose of Valium?

Cdad's picture

Mmmmmmmmmmmmmm.  Valium.  Personal favorite. 

Now that you are feeling better, get out there and buy some casual dining stocks!  They look historically cheap, I'm tellin' ya...ripe for criminal syndicate Wall Street banker/Marxist  upgrades.

FOC 1183's picture

forget valium and go straight for the 714s

Cognitive Dissonance's picture

I suspect it speaks volumes about me that I instantly knew that 714s meant Quaaludes. :>)



FOC 1183's picture

yes it does.  and probably means we had the same foggy adolescence.

bookwurm's picture

"Better living through chemistry"

Cognitive Dissonance's picture

Not foggy. Thick as pea soup. :>)

disabledvet's picture

i hear "some of these boondoggles are so big you can drive an Abrams through them."

Joe Davola's picture

Didn't it cost us like a Zillion Billion dollars to make that "profit"?


Don't worry, they'll make it up in volume.

Cognitive Dissonance's picture

Maybe it's my simple mind, but every time I see that phrase about how someone will turn a loss on each sale into a profit by way of volume, the absolute and shear absurdity of the entire proposition makes me laugh out loud. Yet the brilliance of the con is remarkable because people swallow the bullshit.

DaveyJones's picture

I prefer to call it our share of the viag

Hero Protagonist's picture

I wonder if the sales will be subject to the same taxpayer guarantees as the FDIC "loss share" program?


Cognitive Dissonance's picture

He who owns the Fed makes the rules. Everyone else lives by them. Time for a peaceful revolution.

Overpowered By Funk's picture

Remember this...

The Fed giveth and the Fed maketh banks do whatever they want. Bought and paid for - by us sorry taxpayers of course.

Boilermaker's picture

I love a good old fashioned debt daisy chain.

This is fucking ridiculous.

Oh shit, the DOW is climbing like a tomahawk!!!  Everyone in the deep end of the pool!!

Long-John-Silver's picture

Tomahawks eventually plow into something on the ground and explode creating a crater.

Boilermaker's picture

Not these.  They simply go into orbit and continue on unabated into the unknown universe on inertia.  They are the new and improved version.

Mr Lennon Hendrix's picture

The game will go on as long as it has to.


Boilermaker's picture

Exactly.  What's more is that they'll simply ramrod it harder as it gets worse, literally.  Once it's not real then it's not real.  There isn't anything to try to feign now, especially credibility.  Everyone knows it's bullshit so why not just go for it.

lsbumblebee's picture

Change "portfolio" to "heap".

Yen Cross's picture

Calling Tokyo. Come in Tokyo!

Boilermaker's picture

That's only interesting if you twisting on some chicks nipples while she puts her arms behind her head and swings back-and-forth like a radar dish....then, it gets interesting.

Bananamerican's picture

"domo arigato mr. bu-kka-ke...but we are busy with our own meltdowns"

Boilermaker's picture

In more standard daily news, the REITs are back to their moon shot trajectory.  Good news, bad news, no news...fuck it, SPG deserves a triple digit multiple or more.

I thought the 'reinstitution' of the dividends in the financials would peel away a layer or two of the REITs.  How fucking stupid of me.

Yen Cross's picture

The commercial REITS are suffocating at best. So that is your backgrownd?

Boilermaker's picture

Suffocating???  On what, their astronomical valuations and declining assets?  IYR is right back to it's high.

Nothing can suppress the awesomeness that is CRE.  NOTHING!

truont's picture

This shell game of toxic feces will not fool anyone, Geithner...

Boilermaker's picture

No, it won't.  But it will cornhole the shorts, right?

Remember, it's not a lie if you believe it.  Obviously, the equities markets are the one and only game in town.  It doesn't have to represent anything, actually.  Most people don't even know what equity is.  They only know their 401(k) statement was larger.

Give credit where credit is due, they are subduing the masses quite well.

Yen Cross's picture

I like you but lose the 401k theory.

Boilermaker's picture

LOL, it's all about the 401(k)'s.  I would say that 95% of people in 401(k)'s don't even know what they 'own'.  It's just the system was provided to them and they were told to participate.

It's a way for the banks to recapitalize without congressional approval and to silence the masses while they do it.  Yes, they'll be the eventual bag holders.

Try to have a logical discussion with Betty the admin assistant about why pushing up the equity markets is wrong.  She'll immediately point to her 401(k) statement and have a deeply confused look on her face.  Then, when the discussion gets complicated, dismiss you and say "well, it's up, that's all I know".

DaveyJones's picture

"it doesn't have to represent anything, actually"

at least it lives up to its expectations