This page has been archived and commenting is disabled.

Why Is The Fed Actively Managing A $25 Billion Maiden Lane MBS Portfolio When Its $2.4 Trillion SOMA Holdings Have A $1 Billion DV01? (And Are Unhedged)

Tyler Durden's picture


An interesting thing happened when we were combing through the Fed's Maiden Lane 1 portfolio. After going through holding after holding of crap, that would make junk indignant if one were to call the Fed's adopted holdings of muni CDS, Subprime mezz bonds, and Agency CMO such, we ended up looking at the rate hedges section. As is disclosed by the Fed, the FRBNY holds 5000 TYM0 puts, 3825 TYH0 puts, short 4000 FVH0, short 7828 TYH0, short 2240 USH0, and is short a bunch of eurodollar positions. Also, the interest rate exposure is in thousands so the Fed has about 3 trillion in notional swap exposure. Now Maiden Lane is supposed to be an adopted, run off (or, as Geithner likes to boast, run on) portfolio, presumably without active management. Which is why we were surprised by the presence of the TYH0 and TYM0 positions: these did not exist at the time the Fed created Maiden Lane I! In fact TYM0 did not exist until March of 2009!

See below:


Fair enough - we now know that the Fed is paying Blackrock with our money to manage the interest rate exposure on its Maiden Lane I positions, just so JPM could get a steal on Bear Stearns (oh yeah, and Jamie Dimon is furious today that the Fed not only bailed him but gave him Bear on a silver platter). This means that the Fed paying Larry Fink several million a year to put on some interest rate hedges and some various futures. And for what - to avoid a blow up in a $25 billion portfolio?

What about the bigger picture?

As Jefferies points out today:

One has to ask why the SOMA is spending all this effort with Blackrock to hedge interest rate risks in a $25 billion MBS portfolio when it’s holding $1.25 trillion of MBS assets, plus a trillion of long dated Agency debentures and Treasuries. There is a billion dollars a basis point of interest rate risk in the SOMA.

You read that right, while the Fed is pretending to care about interest rate concerns in an increasing rate environment and is hedging ML1, it has one billion DV01 risk for its house bailout package. This is a stunning number: the second rates commence creeping higher, you can kiss all that profit on TARP and what not not only goodbye, but the losses on the SOMA books will likely destroy America. And yes Virginia, it is negatively convex: once rates start creeping wider, they will accelerate faster and faster until everything escapes the control of Ben Bernanke.

Ron Paul, Alan Grayson, and every other activist in the Congress and the Senate should immediately ask the Fed why is Ben Bernanke hedging its ML1 IR exposure, while leaving its SOMA exposure completely unprotected even when the DV01 is about 100 times greater!!! A 1% move in rates would lead to a $100 billion loss for taxpayers. Should we have a failed auction, or go back to Paul Volcker times and have the 10 year hit over 10%... well, you do the math.

Going back to Jefferies:

I think this whole move on transparency opens up way too many avenues for attack on our venerable Federal Reserve. It’s the most complicated time in monetary policy history and Congress is now on a warpath. This is not good for independence and it’s not good for credibility. Based on what I see the Fed will have tough questions to answer on its management of the SOMA account after this release. And if they are pushed into a corner on interest rate hedging because of this, it gets very interesting…..hedging 1bio/bp basically amounts to one thing - asset sales! Good luck trading.

One can now see why Tom Hoenig has been the voice of reason: unless the IR risk is promptly offloaded to private hands before rates begin creeping higher, and impact a portfolio of rate sensitive products, never before as concentrated as it is now in the clutches of the Federal Reserve, the mindblowing DV01 on America's assets will lead the country to a prompt, and very negatively convex bankruptcy, long before China realizes it should stop bidding on our auctions.

And to simply for those who may be a little confused by the jargon: the Fed's lapdog BlackRock is hedging that which is irrelevant: the smallest portion of the Fed's rate exposure. But because Tim Geithner has a penchant of appearing on TV and saying how well Maiden Lane is performing, the Fed has decided to protect against a major hike in rates. Yet that which is truly relevant, the Fed's nearly $2.4 trillion in holdings of MBS, Agency and Treasuries is completely unhedged. Good luck finding the counterparty that would be willing to put on a $200 trillion gross notional interest rate swap with the Fed. (or maybe one already exists, and since it is off balance sheet for the Fed nobody would ever have a clue. That counterparty would have America by the proverbial testicles). If rates do go up, and if the System Open Market Account holdings are unhedged, hyperinflation Catch 22 - here we come (oh yes, and the Federal Reserve is now a ticking time bomb, which can only be defused by forced asset sales which would be a prelude to wholsesale tightening and an S&P back to 666). Good luck trading indeed.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 04/01/2010 - 19:10 | 283709 boiow
boiow's picture

money= the most marketable commodity.


Thu, 04/01/2010 - 14:34 | 283321 vote_libertaria...
vote_libertarian_party's picture

uhhhmmmm...It's all above my pay grade...but this sounds pretty scary.


My wife keeps asking me when the stock shorts will pay off.  I keep telling her be patient.  The next wave of the tsunami will be here soon.

Thu, 04/01/2010 - 14:59 | 283362 tmosley
tmosley's picture

Stock shorts are unlikely to pay off at any point ever, as they are priced in dollars.  If you were to short in terms of gold, then you would have a winner.

Thu, 04/01/2010 - 15:03 | 283368 Mako
Mako's picture


It's end game, the final solution to the equation.  

I am actually surprised that nobody understood what the Fed was doing and why the Fed was setup.  

They are the lender or now the buyer of last resort, if there were someone that could and/or would hedge against then why would you need the Fed in there?  It's a nice article but I am confused as to why this is news, what did everyone think the Fed was doing?


It's game over guys, it was game over when everyone started playing this game way before you were born.


Thu, 04/01/2010 - 15:39 | 283428 crosey
crosey's picture

Mako...yours is a unique perspective, one that I have not yet considered.  But the outcome is of Biblical proportion.  The next deluge will not be with water.

Thu, 04/01/2010 - 15:44 | 283434 Mako
Mako's picture

It always ends the same way.   Humans continue to use the same equation over and over expecting a different result.   Yes, most religions figured it out thousands of years ago but modern Man is so advanced they can't even do simple Math.

I wrote on my blog what a good article this was but that I was confused as to why people are surprised there is no hedge.   Not only will there be no hedge, the System will have to continue to leverage up to survive.  Of course, the amount of power needed now is getting way past what humans can output.


Thu, 04/01/2010 - 17:47 | 283590 lookma
lookma's picture

Mako, are you kd in disguise? You are so in tune to the problem, but so unabashedly unaware of the solution that has been repeated over and over for time immemorial. They need to depreciate the debt load wrt to real stuff or deflate. Barter economy will not return. Maybe not even a sound medium of exchange will emerge. But it's the most basic principle of econ that there must be a store of wealth. You seem to think no, but why? Because you keep repeating so without any supporting basis? I wonder what that store of value might be? Probably something real and unique people value. Hmm, I have a guess... Cheers, love your posts but hate your willfully ignorant rants. Don't bury your head in the sand and hate, take yourself and educate. best wishes

Thu, 04/01/2010 - 19:14 | 283717 boiow
boiow's picture

a store of wealth is only something (commodity or service) that people want now or in the future.

Fri, 04/02/2010 - 00:27 | 283986 Dicite justitiam
Dicite justitiam's picture

hey b, you ever read Eric Lonergan's "Money"?

Thu, 04/01/2010 - 14:34 | 283322 sodbuster
sodbuster's picture

Maybe they figure- why bother with the 2.4 trln in SOMA holdings- the shit is totally worthless anyway! Just a thought.

Thu, 04/01/2010 - 14:39 | 283330 SDRII
SDRII's picture

Smoking pile of rubble; mission accomplished by making the PDs whole; to the moon

Thu, 04/01/2010 - 14:39 | 283331 JW n FL
JW n FL's picture

Distressed Debt is worthless?


Positive Carry?


Just for the fun of it.

Thu, 04/01/2010 - 14:38 | 283327 Nearing Coleman
Nearing Coleman's picture

What is more important: NYFRB SOMA hedging or low-cost US Treasury funding?

Thu, 04/01/2010 - 14:50 | 283344 hedgeless_horseman
hedgeless_horseman's picture

Larry Fink votes that hedging the portfolio is more important.  And unlike most people, his vote counts.

Thu, 04/01/2010 - 14:40 | 283335 Dicite justitiam
Dicite justitiam's picture

The 'economy'.  What an amazing beast, this uncontrollable force of nature she be.  Just to behold the uncompromising force is breathtaking.  The more we attempt we control it, the more unruly it becomes.  Although the rational fact-checker and competent ship-captain in me fights the inclination to imbue a moral component into this drama, witnessing this action makes it hard to believe there is no 'moral' force, unmeasurable, immutable, that cannot be denied.  Moral carries connations that are not quite appropriate, but that's the closest word I can find.  Stay humble, my vigilant friends.  This is not a surrender to ignorance and gnashing of teeth--hell no.  Action is appropriate, but it should be not of the character of obfuscation, vacillation, and denial.  Confront, struggle, and take measure of the man.

It is breathtaking, and the weather-channel addict in me is keen.

Thu, 04/01/2010 - 14:42 | 283337 bugs_
bugs_'s picture

Anyone the Fed offloads risk to will explode
and the Fed gets it back.

I'm surprised the Fed would hedge at all
given this truism.  It looks more like some
kind of "experiment" or "practice" in a
"25 Billion dollar sandbox".

Thu, 04/01/2010 - 14:43 | 283338 Ripped Chunk
Ripped Chunk's picture

Because they didn't think anyone was watching too closely.

That is how this whole fucking robbery has been allowed to go down. 

And when they actually did try to look they were told: "shut up and vote or we will collapse the system and there will be marshall law"

Thu, 04/01/2010 - 14:47 | 283346 non-anon
non-anon's picture

I wonder what kind of meds Ben, Geithner, et al are on.

Thu, 04/01/2010 - 16:28 | 283491 tip e. canoe
tip e. canoe's picture

whatever they are, betya a silver $ they have a blue coating.

Thu, 04/01/2010 - 18:33 | 283655 non-anon
non-anon's picture

I just marvel at the way they can sit there and BS us the way they do, I would be cracking up and losing my mind!

Thu, 04/01/2010 - 19:16 | 283719 boiow
boiow's picture

the promise of more frn's or power.

Thu, 04/01/2010 - 14:51 | 283349 SDRII
SDRII's picture

One wonders when stories like this start to appear in the papers:



Thu, 04/01/2010 - 15:07 | 283382 JW n FL
JW n FL's picture

Great read and Thank You!


But the house cleaning in Syria and surrounding nations will continue... Iran is fast tracked to get kicked in the nuttz... and nobody wants to be Iraq part Duex... Syria has made marked improvements with relations to the U.S. and wants to be Jordan part deux..


The Euro trash that did not step up to help in Iraq are shit out of luck... and will be traded off to the Russians a bit at a time.. for thier dis-loyalty...


I can source and site this stuff for you but Google works just as well for you as it does for me...



But privately one can hear that France is resentful of a United States that waited three years to enter World War I while France bled, and waited two years to enter World War II, doing nothing while France fell. There are many causes of the current Francophobia in the United States, and it was evident before the clash of the two countries over Iraq. The French see a new aggressive strain of messianic universalism in U.S. policy, a willingness to impose democracy by use of the U.S. military.

The French-American War Over Iraq.


Eurpoe will be made to pay for thier un-involment in Iraq... and Syria sees the writting on the wall...


This is a repost.. but has some interesting articles... maybe you will enjoy reading..

The Russian's got most of those missiles already...

U.S. replaces Bush plan for Europe missile shield

wait? I mean…


OOOOOOOOOOOOOO! Wait you mean the nukes?

Germany's Call for Removal of US Missiles in Europe Reopens Debate

Plus! 14.06.2004

The facts: Germany's unemployment rate is at 4,5 million, when adding the quiet reserve it is more like 5 to 6 million. Trend: consistent. Black market labor has reached, with approximately 17 % of the GDP, its highest level since the Federal Republic's coming into existence. Trend: increasing. The employer's costs on a high level. Trend: persistent. Fewer German company's go public. Trend: reaching zero. In 2002, the number of insolvencies rose 10%, not only because of new insolvency policies. Trend: restrained.

Something not so, so dated then? 06-06-05

In Germany, for instance, a recent poll showed that 56% of the population hates the euro. They want to dump it and restore their beloved German mark.

No wonder! The German economy — like France’s — is mired in one of its worst recessions since World War II. Unemployment is running at 12%. Tax receipts are plunging. GDP growth is a paltry 1%, despite massive efforts to get it going.

How about this one?

The Germans posturing for their Gold back out of our repositories in New York video is or has been removed? I watched the Video last year… in which the cameras had to be turned off inside oval office for the emergency of the Germans wanting their gold back… this was a full access day when the problem accidently was presented… this summation of the event is wonderful.


The German’s… being the German’s… and going protectionist have been pre-cursory events to… The German’s being the German’s… Russia?

Russia seems to get along with whoever does not like us… have you noticed that? I would like you to review this picture and tell me if you see any animosity or worry?

So… maybe you would like to see George with Putin directly after Russia practiced naval war games with Venezuela? They look like those you have already seen… Russia is one of the U.S.’s best friends the chess game that goes on is for public consumption.


War games with Venezuela…

Fishing Games with George in Maine…


So the Mid-East… has an Nuke problem as provided by Russia the World’s second largest oil producer… and America as the second largest importer I doubt they want any trade problems with us (us being the U.S. proper)… and it would seem that Russia’s friendliness with another Oil rich country at odds with the U.S. would be consistent with their (their being Russia) past behavior… to what end? World domination? Or so they can jack up the price of oil or be the number one supplier because they allowed the idiots to be what they truly are? Idiots.

I am not trying to say that the German’s are really to be watched… and that Iran is screwed… the leadership in the Bunkers is screwed… for the record the Iranian people that I saw running around with Ted Coppel look fine by me… downright friendly even… educated and not wearing Burka’s.

Maybe we should have stepped up and helped Iran during the elections? I think so.

To answer your last question… no Obama is a Lobby puppet… don’t get me wrong Obama is a politician thusly owes and must pay his Pipers…  But Obama has forwarded Bush Policies in how many different instances? Almost All!? And taken Bush’s “Right Wing Policies” and pushed them even further than Bush. That’s a fact.


Thu, 04/01/2010 - 15:49 | 283443 merehuman
merehuman's picture

Thanks for the links  JW

Thu, 04/01/2010 - 16:23 | 283489 JW n FL
JW n FL's picture

I don't know everything... but I freely try to share what I do know.... so that it can be improved upon... so that the reality we all suffer can in fact be known by many as opposed to just the few...

I think most have a limtied amount of time and thusly rely on the Networks to bring them thier information...

The left wants to hear what they want to hear... the right wants to hear what they want to hear... but in the end its just the Lobby dollars moving the pawns / politicians around the board. You are the only person here who thinks I am helpful.. becareful... you would not want to be put on the anti Gold list? Oops!

Thu, 04/01/2010 - 17:56 | 283596 SDRII
SDRII's picture

Landis is as bad as the neocons only he comes at it from the left and MI6/Us intel were activily tweeting or assisting so it is rumored. Furthermore, the IRanian arrest of the western backed leader of a Baluchi terrorist cell via plane intercept seems to confirm as much - that is westernm involvement in the elections. So your wish is likely true.

Fri, 04/02/2010 - 04:42 | 284034 theprofromdover
theprofromdover's picture

France's problem?

Not WW1 or WW2, they did fine out of these minor inconveniences.

They just never got over the fact that the western world chose to speak English.

Like UK, they still think they have an empire and influence.

Unlike UK, they still have a chip on their shoulder, and lifts on their slip-ons.


Germany's problem?

The people want to cecede from the Euro joke (and are probably right to).

Unfortunately Germany is still (as always) energy-poor.

For the right reasons, in early 2000 they voted to remove nuclear power generation from German soil.

In the new short-sighted world, soot is bad, radioactive is good. (Go figure)

I hope they have the nerve to jump.


Might lead to some honesty around Europe.


Thu, 04/01/2010 - 17:56 | 283599 trav7777
trav7777's picture

His children are among the richest minors on earth, billionaires.

Remind me what he invented or the businesses he owned or the great capitalist he was.  Like, say, Arafat or Bhutto.

Thu, 04/01/2010 - 14:52 | 283350 assumptionblindness
assumptionblindness's picture

The Fed has nothing to worry about and they know it.  Interest rates will NEVER go up.  Well, not until/unless we have a Republican President or Congress anyway.  George Soros and his friends are playing nice nice for the moment...

Thu, 04/01/2010 - 14:53 | 283352 JW n FL
JW n FL's picture


Becuase there is very little new building... the inventory held... will gain in value.. due to inflation (or the squeeze on debt helf offshore) and any kind of growth rate in the future... the here and now crowd... who pray for the end of the world every day... 10 times a day... want failure... but the Fed will print its way out of trouble and the distressed debt assets held will have value in the mid term... at which point the same "AAA" rated banks that dumped them (as not to carry) will buy them back at a discount to then flip them for a profit!

All courtesy of the American Tax Payer...

The Lobby will insure control of the "AAA" rated banks market share as well as profitability...

Dont BUY GOLD! Buy B of A

or pray for the end and lie to yourself that the end is near! the Fed can print faster than the truth can be explained to idiots.

Thu, 04/01/2010 - 19:54 | 283771 boiow
boiow's picture

you don't live in reality. how the system and the taxpayer can keep that lot in the air is impossible.

even the best jugglers got to eat.

the system will default, no bigee.

Thu, 04/01/2010 - 14:57 | 283355 passive_lurker
passive_lurker's picture

Better the central bank take the losses than our commercial banks, right?

Thu, 04/01/2010 - 15:09 | 283384 JW n FL
JW n FL's picture

The Central Bank is not going to see losses.... the Commercial Banks will not relize losses... the American Tax payer will pick up the tab, AGAIN! Courtesy of the Lobby making sure...

Banking Dollars to the Lobby…

714 client(s) lobbied for specific issues containing the word 'bank' (See all)

Here's the Top 50 (by number of bank mentions)

· American Bankers Assn

· Federal Home Loan Bank

· National Assn of Realtors

· Credit Union National Assn

· Process Handler Et Al for Hire

· Brassell, Robert J Jr

· Estate of Robert James Brassell

· Bank of America

· Goldman Sachs

· JPMorgan Chase & Co

· National Assn of Federal Credit Unions

· Securities Industry & Financial Mkt Assn

· Self Help Credit Union

· Independent Community Bankers of America

· Loews Corp

· Morgan Stanley

· Mortgage Bankers Assn

· Estate of Delois Albert Brassell

· HSBC Holdings

· Citigroup Inc

· US Chamber of Commerce

· Delta Airlines


· United Services Automobile Assn Group

· ACA International

· Consumers Union of the US

· Council of Federal Home Loan Banks

· Credit Suisse Group

· National Assn of Bankruptcy Trustees

· Delphi Corp

· National Assn of Home Builders

· Financial Services Roundtable

· International Council of Shopping Cntrs

· Advanta Corp

· Deere & Co

· National Cooperative Bank

· US Public Interest Research Group

· American Council of Life Insurers

· American Veterinary Medical Assn

· Clearing House Payments Co


· Principal Financial Group

· American Insurance Assn

· Cerberus Capital Management

· Coalition for Employment Through Exports

· Zions Bancorp

· Ameriprise Financial

· General Motors

· Air Line Pilots Assn

· Arab Bank



Really? The Banks are using profits to pay for their Lobby? not the 0% Fed Window?

**** "In the first three months of 2009, the financial sector spent $104.7 million to lobby Congress and the administration, down 8% from the same period last year" ****

So that I am clear... 2008 was a vintage year for Banks? they made soooooooooooooooooooooo much money on 2008 that in the first 3 months of 2009... they could drop $104.7 MILLION DOLLARS?


Thu, 04/01/2010 - 16:32 | 283498 tip e. canoe
tip e. canoe's picture

"brevity is the soul of wit"

Thu, 04/01/2010 - 16:38 | 283510 Dicite justitiam
Dicite justitiam's picture


Thu, 04/01/2010 - 20:13 | 283793 Rick64
Rick64's picture


Almost everybody knows these facts you have been printing. It seems you think we are not aware, but it is common knowledge. The one thing they disagree with is your view on gold, and everybody is entitled to their opinion. To call people idiots, morons ect.. is unneccessary.   Arrogance breeds Ignorance.

Fri, 04/02/2010 - 14:30 | 284516 JW n FL
JW n FL's picture

The Gold Bugs can Junk me till the cows come home... they are idiots. Buy high to sell higher and all fear based?


Great business model to follow... but, its a free country... they can waste thier monies however it suits them.


Buy bank stocks and buy bullets... either way you will be right. and I own some gold... at $600 an oz I was in though... and most people can not afford the amounts needed for Gold to be of any real use to them. Better they buy canned soup.


Junk the truth Gold Bugs! Junk away!

Thu, 04/01/2010 - 14:58 | 283357 Sancho Ponzi
Sancho Ponzi's picture

I personally don't think Bernanke has any intention of selling his MBS crap, thus why hedge what you cannot sell? (or perhaps could sell at a steep discount)

It's like he's playing the ultimate extend-and-pretend game of chicken. Can asset valuations and wages increase enough to allow selling of his toxic MBS crap at little or no discount? I think he already knows the answer to that question, and will be long gone before the Fed is able to offload any meaningful amount of asset backed securities.

Thu, 04/01/2010 - 15:12 | 283386 JW n FL
JW n FL's picture


Becuase there is very little new building... the inventory held... will gain in value.. due to inflation (or the squeeze on debt helf offshore) and any kind of growth rate in the future... the here and now crowd... who pray for the end of the world every day... 10 times a day... want failure... but the Fed will print its way out of trouble and the distressed debt assets held will have value in the mid term... at which point the same "AAA" rated banks that dumped them (as not to carry) will buy them back at a discount to then flip them for a profit!

All courtesy of the American Tax Payer...

The Lobby will insure control of the "AAA" rated banks market share as well as profitability...

Thu, 04/01/2010 - 15:59 | 283442 bingaling
bingaling's picture

JW I am trying to figure out your angle here . Do you think the Fed and the dollar are invincible ?

History has proven again and again that is not the case . If you think taxpayers are gonna bail something this big you are nuts . There will come a time when a person will just not show up for his job if it doesn't pay, including soldiers .

Thu, 04/01/2010 - 16:04 | 283460 JW n FL
JW n FL's picture

I think that most are not ignorant but stupid... which works against us... there is no angle there.


As for the spin machine and the Fed's ability to out print the truth.., I think honestly it is an up-hill battle at best.


To audit the Fed... would be an exercise in futility.. even if we could crunch the numbers the off book transactions that they would bury or hide.. Plainly, the truth would never make it out the door even if the laws where reversed.


And let’s say for conversational purposes that the truth did make it out the front door… how many studies that take how long to complete would be fully comprehended by the public by and large?


We are in the same boat you and I, paddling the same direction even… but that does not mean the gene pool of America is capable of comprehending the truth.


I am sorry Brother… that’s just how jaded I am… please and I mean PLEASE! Prove me wrong…


I provided 3rd party accurate information whenever possible to open people’s eyes… but I just don’t think some are capable of understanding why and how much they are really fucked. Forgive the vernacular Good Sir.



Thu, 04/01/2010 - 17:04 | 283536 faustian bargain
faustian bargain's picture

To audit the Fed... would be an exercise in futility.. even if we could crunch the numbers the off book transactions that they would bury or hide.. Plainly, the truth would never make it out the door even if the laws where reversed.

And let’s say for conversational purposes that the truth did make it out the front door… how many studies that take how long to complete would be fully comprehended by the public by and large?

I think that's too much fatalism for my taste, but maybe you're right, i dunno. I do think, counter to your first question, that if the Fed really didn't have anything to worry about they would go ahead and submit to an audit. And as to the second question, I guess that's  something that could only be answered definitively by trying it. I don't see the harm in going for it, but I do see some harm in discouraging it.

Fri, 04/02/2010 - 14:35 | 284522 JW n FL
JW n FL's picture

I am all for the Audit! I am with you! but how honest will the Fed be? thats the thought that keeps me awake at night.

I think it is in the Feds best interests to Lie to the Public, or be tried for treason? People lie to protect themselves, thier way of life and thier asses...

I am sooooooooooooooo happy to be wrong... I am sooooooooo happy if the Fed would be honest and forthright... but I just dont see that happening. I am all for the push, I will openly support the Audit, I will stand with you and March and I will fund the commercial drive. I am with you!


Thu, 04/01/2010 - 16:45 | 283516 Sancho Ponzi
Sancho Ponzi's picture

The big banks are doing everything (including a concerted effort to cut off all lending to residential builders) to prove you right, but there are problems with your logic: 

1) Median home prices are still north of 3x of household incomes with no relief in site

2) Wages are barely holding steady

3) There is a huge oversupply of large houses 

4) The demand for smaller houses will lead to new construction funded by local and regional banks

If you are talking in the next 10 years, yea, I see that. If you're thinking that's going to happen before 2012, I can't see it happening.




Thu, 04/01/2010 - 16:57 | 283527 JW n FL
JW n FL's picture


I was only talking about Commercial... not the residential... sorry I was not more clear..

Considering Cionstruction is the second largest economic driver in the Country... and that $1.4 trillion in Commerical is maturing (Commercial side)... with new equity requirements of $300 Billion(ish) which is all just a pass thru to the bottom for the Banks, who already have more cash on hand than they can spend (AAA rated, not main street)...

We are screwed again.. on the commercial side... Besides... B of A is offering debt forgivness, again! it worked so well last time... I am joking... to be clear.

Thu, 04/01/2010 - 17:35 | 283573 LeBalance
LeBalance's picture

this is a dupe post from above.

Thu, 04/01/2010 - 15:14 | 283392 SayTabserb
SayTabserb's picture

I agree with this take on the situation. The Bernankster has always indicated that he would shrink the Fed's balance sheet "at the appropriate time" or some such meaningless qualifier. He knows the time will never be "appropriate" until the underlying mortgages expire, one way or another, or until there is a significant, huge swing to the upside in residential values, making most of his collateral good and marketable.  If the collateral keeps going bad, well, so what.  That's why the Fed, and not some real organization, holds it. Money isn't real to the Fed.  It's all just digital entries.

Thu, 04/01/2010 - 18:00 | 283605 Sancho Ponzi
Sancho Ponzi's picture

It's like holding onto a junker stock that's dropped from $100/share to .10/share. Technically you haven't lost anything until you liquidate. If you can prolong liquidating forever, no problem.

Thu, 04/01/2010 - 20:01 | 283780 boiow
boiow's picture

you have lost any payable dividends. plus the ability to release your capital for new investment that can pay dividends. if something is not making you money then its losing you money.

Thu, 04/01/2010 - 15:00 | 283365 Hondo
Hondo's picture

The interest rate risk on the SOMA has always been there even during the inflationary years.  I'm not particularly worried about it as it most likely will never be sold but rolled at maturity (besides who in any economy could take the other side of an IR trade for a central one and not any group of banks as someone will always end up taking the hit).  I'm more concerned about the hedging positions in ML1 and its rational given Fed comments to the contrary and why in the world would it make a difference versus SOMA to hedge it..........and more importantly who took the other side of those trades.

Thu, 04/01/2010 - 15:40 | 283429 jm
jm's picture

any idea why would they release this information?

Whether the game is chess or poker, it makes them look stupid or deliberately malignant. 

Signaling “we are all-in... there's no reversal in policy” here provides information that can be used to crush their ass.

I need to re-evaluate.

Thu, 04/01/2010 - 16:37 | 283500 Rick64
Rick64's picture

Edited: court ruling reported by Bloomberg News.

Reporters David Glovin and Bob Van Voris write, “The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.

Thu, 04/01/2010 - 17:07 | 283539 faustian bargain
faustian bargain's picture this is in response to the FOIA suit by Bloomberg? Will wonders never cease.

Thu, 04/01/2010 - 17:22 | 283555 faustian bargain
faustian bargain's picture's another article about the portfolio disclosures:

Thu, 04/01/2010 - 20:35 | 283813 Rainman
Rainman's picture

....and here comes the Fed's newly found transparency. Looks like the water we've been watching in the pot is finally coming to a boil.  

Thu, 04/01/2010 - 16:38 | 283509 tip e. canoe
tip e. canoe's picture

"who took the other side of those trades."

...exactly what i've been wondering...

Thu, 04/01/2010 - 21:09 | 283845 deadparrot
deadparrot's picture

The taxpayer, who else? Every dime the Fed loses can just be poofed back into existence, so how can they "lose?"

Thu, 04/01/2010 - 15:03 | 283373 GoldmanBaggins
GoldmanBaggins's picture

If I had the right to print my own money. I would give it to everyone I know, buy lots of shit I don't need and generally act like an irresponsible asshole. You see, these guys are just doing what most would do in their position. However I don't think I would bother hedging anything as long as I have ink and paper.

Thu, 04/01/2010 - 15:03 | 283374 Carl Spackler
Carl Spackler's picture

Horseman, I love your flair!

Responding not in a Jeopardy-esque format (Trebec: "I remind that contestants must answer in the form of a question") but in a Bloomberg-esque format...your responses must be in the format of the Bloomberg ticker.

Thanks for adding some wit today.  Beats these otherwise disturbing "markets".

Thu, 04/01/2010 - 15:04 | 283377 jswede
jswede's picture

the MBS portfolio does not really have any interest rate risk -- they are not going to mark to market and they are going to hold it to maturity.  those bonds are never coming out again.

Thu, 04/01/2010 - 16:12 | 283437 Dicite justitiam
Dicite justitiam's picture

Yes, can someone reconcile the buy & hold of the MBS-coma fund and the hedging of ML1?  Blackrock, Wellington, where are you guys?  (edit: thanks buzzsaw -- Fed clearly indicated ML1 was designed to be hedged and SOMA is buy and hold, go back to your lives)

I still can't believe the 'solution' is to seize $1.25T, and shoot it in the head behind the building.  Of course if the reflationary course rolls the rodeo clown down the road, when the MBS rise from their coma, a $500B loss may be lunch money.  Yeah, old news but it's still a stunner.

Thu, 04/01/2010 - 15:55 | 283452 Dicite justitiam
Dicite justitiam's picture

Not to mention the risks of aggregating that much housing-related asset into a single container.  A forced unwind of a single mega position would cause a more devastating shock than diffuse ownership. 

Assets purchased under this program are fully guaranteed as to principal and interest by Fannie Mae, Freddie Mac, and Ginnie Mae, so the Federal Reserve's exposure to the credit risk of the underlying mortgages is minimal.

Thu, 04/01/2010 - 15:13 | 283390 Joe Davola
Joe Davola's picture

..there is always soma, delicious soma, half a gramme for a half-holiday, a gramme for a week-end, two grammes for a trip to the gorgeous East, three for a dark eternity on the moon...


Thu, 04/01/2010 - 15:18 | 283395 Leo Kolivakis
Leo Kolivakis's picture

Nice piece. Like I said, we have entered the twilight zone.

Thu, 04/01/2010 - 15:33 | 283418 DoctoRx
DoctoRx's picture

If 50 bloggers knew what was going on, for sure Gentle Ben knew.  And of course Henry the P knew.  That's why he was brought in-- for the endgame.

The looting continues.  As does the accumulation of gold by the looters.

Follow the money/looter trail.

Thu, 04/01/2010 - 15:34 | 283420 wgpitts
wgpitts's picture

The DOW is worth about 4000 and the S&P 500....when the Fed and its surrogates are forced to liquidate all the assets they have accumulated, to prop up and create this fake politically motivated rally,  because of interest rate increases we will see the REAL value of the market...and it won't be a "leg" down in will be a free fall and its coming soon....all of these people should be arrested...they have looted this nation selling their garbage to the Federal Reserve Bank - all had insider information and knew when the money was coming, what to buy, what to sell and when....disgusting....all of this is to be repaid be America in high inflation and high interest rates....The depth of fraud and theft by this group is incomprehensible...This Oligarchs:!/album.php?aid=54655&id=1054329942

Thu, 04/01/2010 - 15:43 | 283422 Rick64
Rick64's picture

So a worst case scenario 10% would equal a 1 trillion dollar loss. It doesn't sound like much if you compare it to the budget deficit, and the taxpayers would shoulder the loss.

It probably would have dire consequences on market confidence though,  I doubt they would let interest get that high (10%) and if it did it would be over several yrs. and they probably anticipate the housing recovery would happen by then.

 I am sure they are hiding much worse than these holdings obviously.


Thu, 04/01/2010 - 16:44 | 283513 gmrpeabody
gmrpeabody's picture

A trillion just isn't what it used to be.

Thu, 04/01/2010 - 15:35 | 283423 dark pools of soros
dark pools of soros's picture

JW what part of 'Saddam was using Euro's for Oil' and oh btw, most of Europe was using the Euro do you not understand??


sure, they are going to help kill the Euro..  they had to stay out and let UK/USA/Aussies and a few beggar countries use up their resources so they can squeeze all the value of the Euro before it blows up...  


but you can paint all that other fantasy crap if that makes your mind rest easy

Thu, 04/01/2010 - 15:56 | 283450 JW n FL
JW n FL's picture

Saddam squeezed the prodcution numbers ever lower... verse's potential output to stabilize the cost of Oil... no dream works there buddy..


Thusly, Europe's relationship with Saddam was crushed (Russia now has the broad majority of Safe holdings) and with Saddam GONE! production opened up to stabilze the costs of Oil...

Notice that europe who had the relationships in place with Saddam, got left the fuck out!

How important is Oil to the Global economy? and U.S. interests? here's lefty Obama's (to quote the idiot "Fox News" crowd) take... Obama will push thru what Bush could only dream of... ala the Lobby and thier interests in maintaining middle market control and as well growth...


Pro-drilling Republicans unhappy with Obama drilling expansion By Sahil Kapur
Thursday, April 1st, 2010 -- 9:22 am


I dont know how you got to a place in your head that allowed you to believe that I was some how un-aware of the actions of the World verse's what is spit out / spun / spinned for the Sheepeople? But I think maybe you better understand me now at the least... and please, and I am serious... spread the word! educate the idiots where ever you find them... I dont know that we could dent the dream land most live in... but I am going down swinging or more accurately... trying to be of service to my fellow man.

Thu, 04/01/2010 - 17:36 | 283575 trav7777
trav7777's picture

They didn't actually open up new drilling.  They closed more than they opened.  Net will be down.

You assume Obama has a fucking clue...he's an empty suit, has been his entire life.  There's no METHOD to the madness, which is why I always marvel at all the conspiracy theory folks.

These guys aren't smart enough to be masters of the universe.

Thu, 04/01/2010 - 18:19 | 283634 JW n FL
JW n FL's picture

Puppets of the Lobby... and smart enough to get in the way of money thru legislation...

Thu, 04/01/2010 - 15:48 | 283441 InstantWinner
InstantWinner's picture

The Fed owning CDO's is a very disturbing fact in of itself.  D  O  O M

Thu, 04/01/2010 - 16:27 | 283492 Profit Prophet
Profit Prophet's picture


I agree with almost your whole post.  And I am not going to say that the shit won't hit the fan.  But I have to step in regarding the convexity comments.  When one understands why MBS exude negative convexity, they know that historical convexity should not apply to current MBS. 

For others:  Unlike most bonds, Mortgage Backed Securities exude something called "negative convexity".  What this means is that as rates fall (bond prices increase), MBS will gain less value (or perhaps even lose value) than a standard bond.  The -historic- reason for this is because a homeowner can exercise their "call option" on their mortgage by refinancing.  Thus, the MBS holder is subject to reinvestment risk.  That increase in reinvestment risk reduces the amount that the investor is willing to pay for the MBS.

In the case of the Fed, they have no worries about reinvestment risk because they printed the money out of thin air and can chose what to do with money that is pre-paid.  But the bigger issue is that people with mortgages are not as free to exercise their "call option" on their mortgages because most don't have enough home equity to refinance them!

In regards to increasing interest rates, the issue of convexity diminishes substantially because the homeowner's "call option" is farther out of the money.  And is therefore, worth less. 

One could argue that a dramatic increase in interest rates above the return on the MBS portfolios would cause the Fed to lose money.  But convexity won't have anything to do with it.


P. Profit

Thu, 04/01/2010 - 17:34 | 283538 Mercury
Mercury's picture


Couldn't you consider these things negatively convex from the perspective that the potential for price depreciation is simply greater than the potential for price appreciation?

Lower rates = refi risk, bad for CDO prices.

Higher rates = lower CDO prices because of the comparatively lower yields of the underlying mortgages vs. what's available in the market.

Also,  cramdowns and various forbearance programs have to throw a monkey wrench into the usual plain vanilla refi and interest rate risk calculations.




Thu, 04/01/2010 - 18:47 | 283665 Profit Prophet
Profit Prophet's picture

What your saying can happen.  But we're getting tangled up in jargon.

Bond convexity refers to how sensitive a bond's value is to a given level of change in interest rates:

So what your saying may be true, but convexity is not the proper term to use.

The various programs you mentioned would be a straight haircut from the price of the bond.  But as you pointed out, the government threw their large monkey wrench into the mix.  That may spook potential investors from buying.  But in this case too, convexity is not the proper term.

One thing I think we should keep in mind is that the Fed really doesn't have to worry about the price of these instruments.  Granted, we wouldn't want them to over pay.  But once they are purchased there is really only one thing to consider:  Is the Fed's weighted borrowing cost lower or higher than the return on the security?  Since the Fed has the ability to borrow at such low rates, chances are, they will not end up losing money.  (Even with many defaults) 

Again: I am not saying they are investing wisely.  I just believe they operate with different rules.  And I am certainly not saying they should have different rules or that they should be in the game at all. 

This is ultimately one giant clusterfuck; even if the best-case scenario is realized.  The Fed is going farther and farther down a road they never should have been on in the first place.  But I think most of us here are well aware of that.

Thu, 04/01/2010 - 20:01 | 283779 Mercury
Mercury's picture

Thanks.  I had thought negative convexity implied a downward bias in price given a significant shift in rates in either direction.

And good point - either The Fed makes money purchase--->maturity or it doesn't and periodic mark-to-market pricing is immaterial.

Thu, 04/01/2010 - 16:31 | 283497 BlingBlingBen
BlingBlingBen's picture

The  SOMA account is too big to hedge! You will end up blowing up another AIG. Its better for taxpayers to take the hit. You can simply print more money to make make up for the losses.

Thu, 04/01/2010 - 16:39 | 283511 KidDynamite
KidDynamite's picture

BINGO. and, as a bear, this scares me... what if the Fed just buys all the bad paper in the world?!?!  yeah - we get inflation - but probably not hyperinflation like people think.  After all, if a few trillion in potential losses are just made whole (by the Fed), we'd be maintaining price stability wouldn't we???

Thu, 04/01/2010 - 16:36 | 283504 dot_bust
dot_bust's picture

Ponzi Scheme: 

1. Banks securitize mortgages and sell them to everyone.

2. The mortgages, which are ARMs, reset. Homeowners can't pay.

3. To avoid collapse, the banks order us to bail them out.

4. The bailout involves the banks selling their securitized mortgages, CDOs,
to the Federal Reserve.

5. The Federal Reserve manages the U.S. Dollar. Therefore the U.S. Dollar
is now one giant CDO.

6. The Dollar collapses.

7. Any questions?

Thu, 04/01/2010 - 17:55 | 283598 Willzyx
Willzyx's picture

Does the dollar collapse cause the CDO collapse, or vice versa?  Is figuring it out supposed to be the fun part?

Thu, 04/01/2010 - 19:27 | 283726 dot_bust
dot_bust's picture

Good question. I honestly don't know. But hypothesizing about the cause and timing
could very well become favorite American past-times. 

Thu, 04/01/2010 - 16:38 | 283508 KidDynamite
KidDynamite's picture

this one is easy:  The fed hedges Maiden Lane so it can say "see, these bailouts didn't cost the Taxpayer anything in the end"


the fed doesn't hedge the $1T in MBS purchases because it's a ponzi scheme that 1) is used to help make sure that the first statement is true: all the bank stocks rally and pay back the money they owe the Fed, and 2) because it can't - as others have mentioned there is no hedge. if they hedge, they just transfer the (potential) loss to the very institutions they are trying to bail out in the first place

Thu, 04/01/2010 - 16:46 | 283512 tip e. canoe
tip e. canoe's picture

if a hedge falls in the Fed and kills a counterparty, does it make a sound?

Thu, 04/01/2010 - 20:50 | 283825 kevinearick
kevinearick's picture


Thu, 04/01/2010 - 16:45 | 283515 Lugnut
Lugnut's picture

If the sh1t truly hits the fan the next medium of exchange won't be gold coins, it will be common caliber ammo (9mm, .38, .45, 30-06). Go long Winchester and Federal

Thu, 04/01/2010 - 17:33 | 283570 trav7777
trav7777's picture

How long do you expect to live exchanging that with other people?

3/4 of those calibres have one and only one use, and that's for killing people.  If those calibres are in THAT high of a demand, you will not live long.

You will be shot or grazed and die like people did 200 years ago when the same thing happened to them.  You want Civil War medicine?  Cut it out with the SOCOM Strike Team bullshit.

Thu, 04/01/2010 - 17:03 | 283535 virgilcaine
virgilcaine's picture

The fed is insolvent,  a gold bug know this.

Thu, 04/01/2010 - 17:41 | 283581 trav7777
trav7777's picture

Durden, did you hit your head?

The Fed is not a real bank...they will print their losses.  Anything they can do to manage inflation upward.  They're not going to let the mathematics of compound interest stop them until the dollar totally collapses.  And they will go to their graves NOT understanding wtf happened.

Bernanke fancies himself a student of the Depression, but he's just an economist, and very limited in his ability to understand reality.  It's going to haunt him and the rest that all of the shit they spent so much time learning was the FLAT EARTH THEORY.  It was bullshit built atop conjecture.

They are already totally consterned by reality's unwillingness to conform itself to their rate regime.  They won't understand why more oil supply doesn't just make itself available at these prices.  I doubt 1 in 100 people understand why that is.

Economics is not the study of is the study of unproven conceptual assumptions followed by the attempted implementation thereof.  BB is doing exactly what he learnt to do in his "study" of the Depression, what he and others have convinced themselves to do.   And it's wrong.  It's all wrong.

The institution he works for has no viability in a contractionary economic climate.  His basic product is like whale oil in the 1860s or the telegraph.  It has no future.

Thu, 04/01/2010 - 19:11 | 283711 JR
JR's picture

Bernanke studied the Depression years, all right, but apparently spent too much time on Bonnie and Clyde, Ma Barker and the "Jackrabbit."

Thu, 04/01/2010 - 18:35 | 283656 economists_do_i...
economists_do_it_with_models's picture

If you have actually given any thought to these 'gloom & doom' scenarios, you would know neither gold or bullets is the answer.


If a mob of 100 people come to your nice lil house in the middle of the night, all of the gold, canned goods, tools, and whatever other 'logical' things will be gone -- along with your life.


Are you prepared to organize your own 'mob' to defend against such an offensive?  Have people on guard duty 24/7?  Can you stop someone with access to military-scale weapons and equipment?  A tank?


What happens when your glasses break?  Or your blood pressure medication runs out?


Gold?  Wealth?  lmfao  That's the *least* of your worries.


Very few people will survive in such an environment.  You better PRAY that day never comes...

Thu, 04/01/2010 - 19:36 | 283741 Rusty_Shackleford
Rusty_Shackleford's picture

"If a mob of 100 people come to your nice lil house in the middle of the night, all of the gold, canned goods, tools, and whatever other 'logical' things will be gone"


Don't be so sure of that. 


You'd be surprised how much seeing most of the guy that was just standing next to you fall back to earth as a fine pink mist will sap your desire to participate in any more mischief.


After the first ten are dead, the other 90 will most assuredly find something more productive to do.

There are plenty of easier targets out there.



Remember, when a bear attacks your camp, you don't have to be the fastest camper to survive.  You just have to be a little bit faster than the slowest camper.



Fri, 04/02/2010 - 00:37 | 283991 Dicite justitiam
Dicite justitiam's picture

Tear gas sucks.  I could only last 28 seconds of the most mild stuff.  Maybe I should go to Gaza for training.  Are you saying it's legal to acquire?  Or otherwise available?

Thu, 04/01/2010 - 19:06 | 283701 JR
JR's picture

Ben Bernanke has been called  Robin-Hood-in-Reverse, a Robbing Hood stealing from the poor and giving to the rich. Following the Maiden Lane heist, Bernanke, with assist from people such as Dodd, can say he’s sorry and move on to future heists. Another notorious American robber, John Herbert Dillinger, also was idolized by some as a latter-day Robin Hood. It’s a pity that young Dillinger had to take a bullet in the back at age 31 because he never knew all he had to do was say he was sorry and promise never to do it again. As the FBI opened fire into the back of Dillinger, killing him, his last words were "You got me!"

So far there are no pictures of Bernanke and Geithner posted in the Post Office, but the level of righteous anger is definitely rising. Note Karl Denninger’s comments on the Maiden Lane caper:

We cannot have a republic where an unelected body is left free to violate The Constitution with wild abandon and those acts are then allowed to stand…

If the individuals responsible for this blatant black-letter violation of the law do not face meaningful sanction for these acts, and neither does The Fed as an institution, can you fine folks over at The Executive, Judiciary and Legislative branches of our government please explain to us ordinary Americans why we should obey any of the laws of this land when you will not enforce the laws that already exist?

Thu, 04/01/2010 - 19:56 | 283763 geopol
geopol's picture

Double spaced...Enjoy

The FED was involved in.....




In some ways she was far more acute than Winston, and far

less susceptible to Party propaganda. Once when he happened

in some connection to mention the war against Eurasia, she

startled him by saying casually that in her opinion the war was

not happening. The rocket bombs which fell daily on London

were probably fired by the Government of Oceania itself, “just

to keep the people frightened.” Orwell, 1984, 127.



With the publication of the Report of the Commission to Investigate Terrorist Attacks

upon the United States (also known as the Kean-Hamilton Commission after its chairman

and vice-chairman), the pattern of coverup and incompetence on the part of the officially

constituted investigative agencies of the United States Government is complete. Since

September 11, 2001, no part of the United States Government has offered a convincing,

coherent, complete explanation of the events of that day, and of other events related to

them. Indeed, no US government agency has ever so much as proposed to prove the truth

of the official account, even in the way that the Warren Commission attempted to

demonstrate the veracity of its version of the Kennedy assassination.


The Kean-Hamilton Commission called no hostile witnesses, no skeptics, no devil’s

advocates. It ignored a growing number of book-length studies which have appeared in

English, French, German, and other languages around the world. It never invited to its

plenum FBI whistle-blowers like Colleen Rowley (who shared Time Magazine’s Person

of the Year honors at the end of 2002), nor did it call FBI agent Kenneth Williams, the

author of the famous Phoenix memo, to testify in its plenary meetings. The Commission

was, by contrast, happy to invite the obsessive anti-Iraq ideologue Laurie Mylroie, a

fanatic so notorious that she is dismissed with contempt as “totally discredited” even by

Richard Clarke in his book, Against All Enemies. (Clarke 232) As it will show at

various points study, the Kean-Hamilton Commission represents a cynical and

meticulously orchestrated exercise in coverup and obfuscation. The net overall result of

the Kean-Hamilton Commission has been to obscure even those few relevant facts which

had become well established in the mainstream media prior to its inception.


Before the Kean-Hamilton Commission, the chronology of events regarding the interplay

among the Federal Aeronautics Administration (FAA), the North American Aerospace

Defense Command (NORAD), and other government agencies had been fairly well

established by the 9/11 truth movement. The deliberately doctored chronologies offered

by the Kean-Hamilton staff have turned that clear picture into chaos. Before the Kean-

Hamilton operation went to work, there was an important debate about whether phone

calls received at the White House on the morning of September 11 had indicated that

unauthorized persons were in possession of top-secret US government code words. The

Kean-Hamilton Commission has now assured us that this crucial incident in effect never

happened. Before Kean-Hamilton, Congressional Committees and the National Institute

of Standards and Technology had been forced to grapple in public with the blatant

anomalies of three modern steel skyscrapers collapsing on the same day as the result of

fire – something that has happened on no other day of world history. For the Kean-

Hamilton Commission, this problem simply does not exist – it has disappeared from the

official narrative. No account has been taken of critical or skeptical commentaries, even

when these have been the centerpieces of books which have reached the top of the bestseller

charts in important countries like France, Germany, Italy, and elsewhere, or have

been telecast in prime time in these same places. The demands of the bereaved families of

9/11 have been ignored – even though it was because of the persistent lobbying of these

families that the Kean-Hamilton Commission ever came into being in the first place. A

cruel hoax has been practiced on these families, and those who thought that an attempt to

cooperate in good faith with the Kean-Hamilton Commission to guide it toward the truth

have received a bitter disappointment. The Kean-Hamilton Commission in short has

shown no decent respect for the opinions of mankind, and has submitted no important

facts to a candid world.

The Kean-Hamilton Commission has turned out to be nothing more than a colossal

exercise in begging the question. Everything that was controversial, everything that was

dubious in the eyes of billions around the world has been simply assumed to be true and

posited as the starting point for the entire inquiry. As a fallacy this has been around since

the medieval schoolmen, who called it petitio principii. In the hands of the Kean-

Hamilton Commission, begging the question is meant to work as an arrogant,

bureaucratic act of superior power. Believe this, said the Inquisition, or be damned.

Believe this, says the Kean-Hamilton Commission, or be vilified as a paranoid obsessed

with conspiracies. Thus, when the 9/11 commission was created, it formed nine

investigative teams. The first of these was entitled: “Al Qaeda and the Organization of

the 9/11 Attack.” That is a clear case of rush to judgment and jumping to conclusions,

since such a finding should be the end result of an inquiry, and not its starting point.

For the Kean-Hamilton Commission is not a contribution to scholarly debate. It is just as

much a part of the US government’s assault on the world as an F-16 bombing Fallujah.

For the Kean-Hamilton Commission is an act of ideological terrorism worthy of Senator

Joe McCarthy. Behind it stands the taboo proclaimed by the figurehead of the regime:

We must speak the truth about terror. Let us never tolerate outrageous

conspiracy theories concerning the attacks of September the 11th,

malicious lies that attempt to shift the blame away from the terrorists

themselves, away from the guilty. (UN General Assembly, November 10,


It is a point of view at variance with the best moments in American history, as we intend

to show. But no amount of bureaucratic arrogance has been able to paper over the

manifold absurdities, the contradictions, the impossibilities, the outrageous flaws that

infest the official version of the 9/11 events. The Kean-Hamilton Commission simply has

no answer for questions about how the alleged hijackers were identified, how they were

able to operate, why WTC Building 7 collapsed, why air defense was non-existent, what

hit the Pentagon, what happened over Shanksville, what happened to the insider trading,

and many more. For any serious, intelligent person – and there are many – the Kean-

Hamilton pastiche can only be rejected.

The failure of the Kean-Hamilton Commission leaves the world with the imbecilic myth:

the four airliners were hijacked by nineteen Arabs, from Saudi Arabia, Egypt, and

Kuwait. Their squad leaders were Atta, Shehhi, Hanjour, and Jarrah. Their “mastermind”

was Khalid Sheikh Mohammed. Their rear echelon was Ramzi Binalshib. Their guru was

Osama Bin Laden, the terrorist pope who lives in a cave. From his distant grotto in the

mountains of Afghanistan, Osama Bin Laden, the diabolical genius of the twenty-first

century, directed the worldwide network that attacked the United States.

Thu, 04/01/2010 - 23:07 | 283940 JR
JR's picture

It is wrong by those who disagree to try to silence theories and questions and suppositions with a ‘junk’ simply because they find an explanation ‘off the wall.’ The objective should be the pursuit of truth wherever it can be found. I, for one, have learned through experience that governments, including our own, often engage in political cover-ups and whitewash to deceive and perhaps even hide their own duplicities.  What possible motive do people have for silencing theories regarding such monumental, and questioned, events in America’s history as the Kennedy assassination, the Oklahoma City bombing, the 9/11 attacks, AIG, Iraq and WMDs and all the rest?

It is vital that Americans pursue truth if this nation is to be governed by free men with justice for all; that pursuit means we need to hear all the evidence, to counter the lies, from all the sides (in this cases that testimony would include 1000s of dissenting engineers), see the tests, watch the videos, listen to the experts…

When a government refuses to address all the questions and destroys the evidence as it did in the Kennedy assassination, in 9/ll and the Oklahoma City bombing, et cetera, it is no different from the Fed saying, We created and spent the $23.7 trillion properly, take our word for it.

That is not what the Founders had in mind.  As Benjamin Franklin said as he emerged from the long task now finished at the Constitutional Convention in Philadelphia on September 18, 1787 when asked: "Well Doctor, what have we got, a republic or a monarchy?"

"A republic if you can keep it," responded Franklin.

Certainly, that republic now hangs in the balance.

Fri, 04/02/2010 - 11:26 | 284317 WaterWings
WaterWings's picture

Orwell was a genius.

Iron Mountain Report, anyone?

What gives the war system its preeminent role in social organization, as
elsewhere, is its unmatched authority over life and death. It must be emphasized
again that the war system is not a mere social extension of the presumed need
for individual human violence, but itself in turn serves to rationalize most
nonmilitary killing. It also provides the precedent for the collective willingness
of members of a society to pay a blood price for institutions far less central to
social organization that war.

Thu, 04/01/2010 - 22:21 | 283902 FischerBlack
FischerBlack's picture

Why would the Fed release this? Either you're missing something, or this release is a cry for help.

Fri, 04/02/2010 - 01:16 | 284007 faustian bargain
faustian bargain's picture

court order from Bloomberg's FOIA suit, November 2008.

But you can bet your bottom dollar they're not showing their full hand with these PDFs.

Fri, 04/02/2010 - 01:17 | 284009 faustian bargain
faustian bargain's picture

You know you're driving an odd truck when the likes of Robert Reich are jumping on the bandwagon:

Mon, 04/12/2010 - 04:33 | 296082 mark456
mark456's picture

Good linux hosting option package offered by ucvhost which not only provides the best in terms of hosting packages but also believes in truly being there for the customer, 24x7. windows vps Moreover , they offer unlimited bandwidth as well as nearly 1GB storage along with database maintenance, email facility along with storage, availability of sub domain and many other important features for a very low price. ucvhost

Sun, 06/05/2011 - 08:30 | 1340924 sun1
sun1's picture

I have to admit that I have never heard about this information I have noticed many new facts for me. Thanks a lot for sharing this useful and attractive information and I will be waiting for other interesting posts from you in the nearest future.keep it up. car insurance quote

Do NOT follow this link or you will be banned from the site!