Bank of New York

Fed chairman Ben Bernanke is covered in a long profile by Roger Lowenstein in the Atlantic. The sympathetic account takes the reader blow-by-blow through the criticism that he has received from virtually all quarters during his tenure as Fed chair. What Lowenstein hones in on are the reviews and criticisms of Bernanke’s performance in “resurrecting the economy” — the interest rate policy, his interpretation of the dual mandate, quantitative easing, Operation Twist, etc. But for a piece that clocks in at 8,287 words, Lowenstein pays scant attention to the emergency actions taken to save the financial system itself.

• BHP Billiton sees China iron ore demand flattening (Reuters)
• Australia Passes 30% Tax on Iron-Ore, Coal Mining Profits (Bloomberg)
• State Capitalism in China Will Fade: Zhang (Bloomberg)
• Venizelos quits to start election campaign (FT)
• Fed’s Dudley Says U.S. Isn’t ‘Out of the Woods’ (Bloomberg)
• China Is Leading Foreign Investor in Germany (WSJ)
• Fed undecided on more easing: Dudley (Reuters)
• Martin Wolf: What is the real rate of interest telling us? (FT)

All you need to read.

The added weight on the gross national debt as well as the dis-incentive for people to seek better education would prove to be one of the greatest risk for America as a whole.

And the real lesson, dear friends, is that the good old USA is a subprime nation

We have a "let's pretend" economy: let's pretend the unemployment rate actually reflects the number of people with full-time jobs and the number of people seeking jobs, let's pretend the Federal government borrowing 10% of the GDP every year is sustainable without any consequences, let's pretend the stock market actually reflects the economy rather than Federal Reserve monetary intervention, and so on. We also have a "let's pretend" education/student-loan game running: let's pretend college is "worth" the investment, and let's pretend student loans are about education. There are three dirty little secrets buried under the education/student-loan complex's high-gloss sheen: 1. Student loans have little to do with education and everything to do with creating a new profit center for subprime-type lenders guaranteed by the Savior State. 2. A college diploma's value in the real world of getting a job and earning a good salary in a post-financialization economy has been grossly oversold. 3. Many people are taking out student loans just to live; the loans are essentially a form of "State funding" a.k.a. welfare that must be paid back. We've got a lot of charts that reflect reality rather than hype, so let's get started. Despite all the bleating rationalizations issued by the Education Complex, higher education costs have outstripped the rest of the economy's cost structure. Funny how nobody ever asks if there is any real competitive pressure in the Education Complex; there isn't, and why should there be when students can borrow $30,000 a year?

German lawmakers are to review Bundesbank controls of and management of Germany’s gold reserves.  Parliament’s Budget Committee will assess how the central bank manages its inventory of Germany’s gold bullion bars that are believed to be stored in Frankfurt, Paris, London and the Federal Reserve Bank of New York, according to German newspaper Bild.  The German Federal Audit Office has criticised the Bundesbank’s lax auditing and inventory controls regarding Germany’s sizeable gold reserves – 3,396.3 tonnes of gold or some 73.7% of Germany’s national foreign exchange reserves. There is increasing nervousness amongst the German public, German politicians and indeed the Bundesbank itself regarding the gigantic risk on the balance sheet of Germany's central bank and this is leading some in Germany to voice concerns about the location and exact amount of Germany’s gold reserves. The eurozone's central bank system is massively imbalanced after the ECB’s balance sheet surged to a record 3.02 trillion euros ($3.96 trillion) last week, 31% bigger than the German economy, after a second tranche of three-year loans. The concern is that were the eurozone to collapse, Bundesbank's losses could be half a trillion euros - more than one-and-a-half times the size of the Germany's annual budget. In that scenario, Germany’s national patrimony of gold bullion reserves would be needed to support the currency – whether that be a new euro or a return to the Deutsche mark.  The German lawmakers are following in the footsteps of US Presidential candidate Ron Paul who has long called for an audit of the US’ gold reserves. It is believed that some 60% of Germany’s gold is stored outside of Germany and much of it in the Federal Reserve Bank of New York.

Nearly two years after his catastrophic foray into Op-Ed writing, here is Tim Geithner's latest, this time making the hypocritical case to "not forget the lesson from the financial crisis"... which he himself ushered on America as head of the New York Fed. Frankly we are quite sure it is not even worth reading this drivel: the unemployed man walking has been a total disaster during his entire tenure (at both the New York Fed where he supervised all the banks that subsequently fell, and the Treasury), and we are fairly confident that reading anything written by this pathological failure will cost collective IQs to drop by 10 points at a minimum. Hey Tim: is there a risk the US can get downgraded? Any risk?

$15 Trillion Dollar Fraud … Or Nigerian Style Scam?

Since nobody else has any interest in downtown NY real estate, Goldman's Bill Dudley, currently incidentally in charge of the New York Fed, has decided to step up. "The Federal Reserve Bank of New York (New York Fed) today announced that it has acquired the building at 33 Maiden Lane for $207.5 million from Merit US Real Estate Fund III, L.P. and established a new, wholly owned limited liability company called Maiden & Nassau LLC to serve as owner of the building. The acquisition provides a cost-effective, long-term alternative to the current practice of leasing space in this and other buildings and allows for greater control over maintenance, operation and security of the building." As a reminder, the 9th floor of 33 Liberty is where the ever elusive, but always present Plunge Protection Team, pardon the "markets group" at the Federal Reserve is housed (more here). And although in recent days it is no secret that the bulk of Fed open market stock order are routed via that one certain HFT powerhouse out of Chicago, it is always a good idea to keep all the market manipulating facilities under one roof. And so, the Fed now will have full domain over everything that transpires under its own roof. And since the building likely has an extended basement, it provides Dudley, and his muppet Ben Bernanke with a convenient location where to store the soon to be confiscated 107 tons of Greek gold.

The real world revolves around cash flow. Families across the land understand this basic concept. Cash flows in from wages, investments and these days from the government. Cash flows out for food, gasoline, utilities, cable, cell phones, real estate taxes, income taxes, payroll taxes, clothing, mortgage payments, car payments, insurance payments, medical bills, auto repairs, home repairs, appliances, electronic gadgets, education, alcohol (necessary in this economy) and a countless other everyday expenses. If the outflow exceeds the inflow a family may be able to fund the deficit with credit cards for awhile, but ultimately running a cash flow deficit will result in debt default and loss of your home and assets. Ask the millions of Americans that have experienced this exact outcome since 2008 if you believe this is only a theoretical exercise. The Federal government, Federal Reserve, Wall Street banks, regulatory agencies and commercial real estate debtors have colluded since 2008 to pretend cash flow doesn’t matter. Their plan has been to “extend and pretend”, praying for an economic recovery that would save them from their greedy and foolish risk taking during the 2003 – 2007 Caligula-like debauchery.

Debt default means huge losses for the Wall Street criminal banks. Of course the banksters will just demand another taxpayer bailout from the puppet politicians. This repeat scenario gives new meaning to the term shop until you drop. Extending and pretending can work for awhile as accounting obfuscation, rolling over bad debts, and praying for a revival of the glory days can put off the day of reckoning for a couple years. Ultimately it comes down to cash flow, whether you’re a household, retailer, developer, bank or government. America is running on empty and extending and pretending is coming to an end.

And I thought securitization ment they where going to keep the loan docs in a safe place in some bank vault some where...

This is just a small example of what we are uncovering. If we learned anything from the robosigning scandal, if there are more than two “irregularities,” there are thousands.

One thing is for certain, the litigation is beginning to shift from minor players to major players at the core of the Financial Crisis. Investors take note, this is a major shift and needs to be monitored as it will have major implications for market dynamics going forward.

• New Greek demands threaten debt deal (FT)
• Greek Finance Minister Heads to Brussels; Loan Talks Stall (WSJ)
• Talks Stalled on Greek Bailout as Venizelos Heads to Brussels (Bloomberg)
• US banks near historic deal on foreclosures (FT)
• Obama: Europe needs "absolute commitment" on debt crisis (Reuters)
• Fed's Lacker sees no need for more easing for now (Reuters)
• Europe compromise urged at summit (China Daily)
• China to Punish Illicit Bank Lending, Shanghai Securities Says (Bloomberg)
• Monti Meets Obama Amid ’Spectacular Progress’ (Bloomberg)
• Draghi’s First 100 Days Presage Greek Help (Bloomberg)