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The Unspoken, Festering Secret At The Heart Of Shadow Banking: "Self-Securitization" ... With Central Banks

Tyler Durden's picture


By now everyone has heard of securitization: the process whereby banks take risky assets on their books, package, tranche them, and then re-sell them to yield chasing fiduciaries of widows and orphans. The conversion process can be nebulous, usually involving a 20 year-old evil French mastermind working for Goldman, and a billionaire hedge fund manager, who select the worthless securities put into the weakest tranche, just so the abovementioned two parties can short it while misrepresenting their conflicts of interest, and make a boatload of money when the whole securitized structure implodes. The process usually takes place "off balance sheet" via Special Purpose Vehicles so it is completely unregulated, and as such allows massive leverage.

According to many, the hidden leverage embedded in the securitization pipeline is what catalyzed the 2008 near-death experience of the financial markets.

All of this is well-known to most.

What however is certainly not known, because until a few days ago the concept did not technicall exist, is what emerged deep from the bowels of the FSB's 2013 "Global Shadow Banking report", and what is barely even defined anywhere in popular literature, which thus we have defined as the "unspoken, festering secret at the heart of shadow banking."

Presenting self-securitization.

What is "self-securitization"? Go ahead and Google it: there doesn't exist any technical definition of this heretofore unheard of phrase.

Rather the term, conceived by the FSB as a means of making the total size of the $71 trillion shadow banking sector somewhat more palatable, is defined as follows:

Self-securitisation (retained securitisation) is defined as those securitisation transactions done solely for the purpose of using the securities created as collateral with the central bank in order to obtain funding, with no intent to sell them to third-party investors. All of the securities issued by the Structured Finance Vehicle (SFV) for all tranches are owned by the originating bank and remain on its balance sheet.

At this point alarm bells should be going off. And if they aren't, here is some more color.

The numbers for OFIs presented in sections 2 to 4 of this report include all financial assets of Structured Finance Vehicles (SFVs), regardless of who holds the securitised products. However, in a number of jurisdictions, some of these products are returned back onto the balance sheet of the bank that originally provided the asset to be securitised. This so called self-securitisation, or retained securitisation, is defined as those securitisation transactions done solely for the purpose of using the securities created as collateral with the central bank in order to obtain funding, with no intent to sell them to third-party investors. All of the securities issued by the SFV for all tranches are owned by the originating bank and remain on the bank’s balance sheet, so that third-party investors do not own any of the securities issued by the SFV. These assets should not be included in the shadow banking figure, as prudential consolidation rules consider them as banks’ own assets and as such subject to consolidated supervision and capital requirements.


...  some of the assets that are currently ‘self-securitised’ by banks may at some point be sold to third parties when financial conditions improve.

Wait a minute: a company is "securitizing" assets.... which it then keeps, but only after it has "obtained funding with a central bank"? What?

Judging by the countries whose shadow bank institutions are the most aggressive participants in "self-securitization", it gets clearer just what is going on here:

While Italy and Spain are clear, why is Australia on this list?

While the large increase in Australian banks’ self-securitisation of residential mortgage-backed securities (RMBS) started in 2008 (i.e. before Basel III was developed), the amount of self-securitisation is expected to stay high going forward as these securities are eligible as collateral for the Reserve Bank of Australia’s Committed Liquidity Facility (CLF). Indeed some banks are gearing up already for the CLF. Given the low level of government debt in Australia, the Australian prudential regulator has adopted elements of the Basel rules that allow banks to count a committed liquidity facility provided by the central banks as part of their Basel III liquidity requirements.

So that very strict Basel III requirements are permissive enough to allow... shadow "banks" to engage in self-securitization with their central bank? Just brilliant.

Finally, what amount of circularly (non) securitized, central-bank backstopped securities are we talking here?

Answer: $1,200,000,000,000.

That is the amount of unlevered notional that shadow (and regular) banks engage in circular check-kiting games with central banks for, and in the process obtaing "funding." As one trading desk explained it:

you take yr worst assets... package up in an spv (which removes em from yr gaap balance sheet) then flip to central bank for cash at modest haircut and boom revenues...

And presto: magic balance sheet clean up and even more magical "revenues."

But wait, there's more (spoiler preview: take the above quote and put in on constant rewind)

Where this mindblowing, circular scheme in which riskless central banks serve as secret sources of incremental bank funding, i.e., free money, gets completely insane, is the realization that these self-securitized assets can also participate in rehypothecation chains. Recall from our exposition yesterday on the permitted leverage resulting from collateral reuse in a repo chain which is fundamentally what shadow banking is all about: unregulated, stratospheric leverage.

We added:

So... three participants result in 4x leverage; four: in roughly 6x, and so on. Of course, these are conservative estimates: in the real, collateral-strapped world, the amount of collateral reuse, and thus the number of participants is orders of magnitude higher. Which means that after just a few turns of rehypothecation, leverage approaches infinity.

Which means that should these same banks that self-securitize with Central Bank X, then proceed to re-use the same security with the same counterparty - i.e., their host central bank, or the Fed of course - then this $1.2 trillion in assets, already carried off-balance sheet with Basel III's blessings, can get 2x, 3x, 5x, 8x, 13x or more turns of leverage on them, as for the shadow bank it is the central bank that is the (up to infinity) levered counterparty. And the central bank, as everyone knows, can always just print money if and when the worthless collateral backing the bank's self securitization ends up worthless.

The implication of this unprecedented shadow banking circle jerk, which could very easily make even the direct wealth transfer resulting from trillions in QE pale by comparison, is so stunning that we leave it up to the reader to come to their own conclusion.


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Fri, 11/15/2013 - 17:48 | 4159240 chunga
chunga's picture

That is SO fucked up!


Fri, 11/15/2013 - 18:01 | 4159263 Say What Again
Say What Again's picture

In many ways, this is similar to a nuclear reaction.  One electron (one loan) hits another and releases all this energy (more rehypothecated capital), and continues in an exponential fashion, until things go boom.

"rehypothecation chains" == Uranium 235.

That's why they called it the "Manhattan Project"

It all makes sense now.

Fri, 11/15/2013 - 18:02 | 4159276 johnQpublic
johnQpublic's picture

is that why my head exploded after reading this?

Fri, 11/15/2013 - 18:05 | 4159285 Say What Again
Say What Again's picture

Allow me to clear this up for you...

92U235 +0n1 --> 55Cs140+ 37Rb93 +3 0n1 + Energy

Fri, 11/15/2013 - 18:06 | 4159289 johnQpublic
johnQpublic's picture


Fri, 11/15/2013 - 18:08 | 4159300 Say What Again
Say What Again's picture

What do you think caused that orange glow in the briefcase every time I opened it.  I couldn't show it to the audience because they might have thought we were turning Japanese.

Fri, 11/15/2013 - 18:13 | 4159324 johnQpublic
johnQpublic's picture

you really think so?

Fri, 11/15/2013 - 18:14 | 4159330 Say What Again
Say What Again's picture

I couldn't show it to John Q Public either.

Fri, 11/15/2013 - 18:21 | 4159346 johnQpublic
johnQpublic's picture

That is some fucked-up repugnant shit

Fri, 11/15/2013 - 18:29 | 4159360 Keyser
Keyser's picture

Careful, he might start reciting Ezeikiel 25:17. 

Fri, 11/15/2013 - 18:34 | 4159375 Say What Again
Say What Again's picture
Mind if I have some of your tasty beverage to wash this down with?
Fri, 11/15/2013 - 18:44 | 4159405 Jack Napier
Jack Napier's picture

The last straw is finally taking form. The law of exponents is reaching its inevitable culmination.

Remember Chris Martenson's analogy of the magic exponential water drop in a stadium that doubles in size every minute. It may go hours or days without anyone noticing the tiny puddle, but once they start getting water around their ankles it will be less than 10 minutes to stampede for the door before the stadium is filled. We are on that cusp now. Time is not your friend in this game. Don't waste it.

And don't get suckered in by BitCoin or leveraged assets. Tangible assets will be king before the decade is done.

Fri, 11/15/2013 - 18:49 | 4159420 Say What Again
Say What Again's picture

Exponential growth....

I love this old guy

He spells it out in ways that even a central banker could understand, but I doubt they care.

Fri, 11/15/2013 - 19:16 | 4159482 Stackers
Stackers's picture

So I want to create a security backed by my collection of Wayne Newton signed vinyl record albums and post it with the Federal Reserve for a one billion dollar loan (they are worth 10x's that at least) and I get to keep my Wayne Newton albums ? Win Win !!!!

Fri, 11/15/2013 - 19:26 | 4159502 HardAssets
HardAssets's picture

These guys make it so complicated now. (Smoke screen.)

When they get their global neo-feudalism in place, they'll just make commands & decrees and get whatever they want from the serfs. No 'money', 'markets' or 'accounting' required.

Fri, 11/15/2013 - 19:27 | 4159508 CH1
CH1's picture

The system is DOOMED.

Fri, 11/15/2013 - 19:31 | 4159514 quintago
quintago's picture

"self securitization"

Ha!! The last time I heard this term was at the peak of 2007. This was happening wrt mortgage lenders who were packaging things up so quickly, that they resorted to this practice so they could re-hypothecate their own shit loans into additional warehouse lines, compounding their ability to borrow in advance of their ability to sell.

Of course, when the credit markets collapsed, it compounded their problems. In this case, it is even worse because it's no longer the shite mortgage lenders like CW, but their "counterparties" up the chain who are involved in these shenanigans.

Sat, 11/16/2013 - 01:03 | 4160070 Harlequin001
Harlequin001's picture

I don't see the problem. We've been doing it for years and it hasn't blown up yet has it?

Chill baby chill, and oh, er, go buy some gold...

Sat, 11/16/2013 - 05:56 | 4160214 NoDebt
NoDebt's picture

BitCoin just hit $450.

I think it's time to take some profits.  In anything you have profits to realize.  You are now experiencing the parabolic phase of the market.

Meanwhile, on ground level.... the "real" economy isn't doing so well.  Perhaps even recessionary.

I have been here twice in the last decade.  This is exactly what it felt like near the top.  You hear that?  That's the mythical bell they don't ring at the top.

Sat, 11/16/2013 - 07:29 | 4160245 GetZeeGold
GetZeeGold's picture





BitCoin just hit $450. I think it's time to take some profits.


That's just what they would be expecting us to do. Don't fall for it.


Fri, 11/15/2013 - 19:34 | 4159525 WillyGroper
Sat, 11/16/2013 - 09:56 | 4160320 RSloane
RSloane's picture

Almost. You are backing up your collection of Wayne Newton signed vinyl record albums with unmatched socks from your sock drawer.

Fri, 11/15/2013 - 22:42 | 4159744 Radical Marijuana
Radical Marijuana's picture

I enjoyed your insightful comments, Say What Again. Your name could hardly be more appropriate handle to comment on this excellent Zero Hedge article! I see it as the Bizarro Mirror Worlds being on hinges, that can be turned in on each other, so that their reflections reflect back on each other an increasing number of times. Self-reference in the form of self-securitization! Of course, this is all based on its fundamental source, which the legalized counterfeiting of the public money supply out of nothing, as debts, by private banks. After that fundamental fraud was achieved by the international banksters throughout the Anglo-American (Zionist) empire, which was able to dominate most of the rest of the world, it automatically runs away with itself, indeed, by a kind of chain reaction of frauds, which is best understood as its exponential growth driving overshoot in a nutshell ...

Fri, 11/15/2013 - 20:41 | 4159648 Kirk2NCC1701
Kirk2NCC1701's picture

Jack, seeing that you go by the fine name of "Napier"*, I'd imagine you know plenty about exponential functions.  :-)

* John Napier...

Sat, 11/16/2013 - 04:38 | 4160193 joe90
joe90's picture

Ahh memories of a well worn "Napierian" log book and slide rule.

Sat, 11/16/2013 - 07:28 | 4160243 Oracle of Kypseli
Oracle of Kypseli's picture

@ Jack Napier

<<<<< but once they start getting water around their ankles it will be less than 10 minutes to stampede for the door before the stadium is filled. >>>>

But if this doubling continues for several more minutes, the waters of the whole Pacific ocean will be needed.

Run for cover and accumulate food, ammunition gold and silver. Water will be plenty and toilet paper will be reduntant 


Fri, 11/15/2013 - 20:07 | 4159600 Eeyores Enigma
Eeyores Enigma's picture


You gots to be pretty limber to do that.

Fri, 11/15/2013 - 21:57 | 4159788 dick cheneys ghost
dick cheneys ghost's picture

If I could lick my own balls, I'd never leave the house

Sat, 11/16/2013 - 11:34 | 4160445 11b40
11b40's picture

Old joke.

"why does a dog lick his balls?"


Because he can.

Fri, 11/15/2013 - 19:37 | 4159533 Payable on Death
Payable on Death's picture

jqp, your comment is the real reason I read ZH.

Fri, 11/15/2013 - 18:14 | 4159327 NoDebt
NoDebt's picture

Hear that?  That's the sound of bankers LAUGHING at us.  

I'm thinking that it IS about time to roll the guillotines.  Obviously SOMEBODY blessed this new ponzi variant.  Who?  Oh yeah, other bankers.

Fri, 11/15/2013 - 18:45 | 4159410 Bangin7GramRocks
Bangin7GramRocks's picture

It's like when a phony phone caller keeps calling the puppet head TV host a jizz face and dipshit, then finally needs to tell the empty suit that he is being pranked. The bankers must be flabbergasted that they can pull any scheme, make up any bullshit and hardly any Americans even care. Goldman could restart the slave trade and I don't think it would result in an indictment!

Fri, 11/15/2013 - 19:09 | 4159465 Al Huxley
Al Huxley's picture

Yeah, I've said the same thing - I bet they have internal office contests to see who can get away with the most flagrant, egregious lie, breach of public trust, criminally fraudulent activity, etc...  Of course by now it's gotten so far out of hand that the fun must be running out - break the law, rape the public enough times and the thrill and novelty must wear off.

Fri, 11/15/2013 - 19:35 | 4159526 NoDebt
NoDebt's picture

I bet it never gets old for them.

Fri, 11/15/2013 - 21:20 | 4159703 Eternal Complainer
Eternal Complainer's picture

This is why they'll need to up the ante going forward and add erotic asphyxiation and speedballs to the mix.

Sat, 11/16/2013 - 10:52 | 4160374 chemystical
chemystical's picture


Next they'll tell us, "Yeah, as a matter of fact, one of the ingredients in matzo is the blood of gentile children who we kidnap and then slaughter every Easter.  Those old "myths" were spot on; our massive PR machine (publishing, television, edukation, gov't) put a stop to them and demonised all who doubt us...kinda like everything else we do."

"On a related note, do you think it's a cohencidence that the abortion mill industry and pro-abortion groups are founded, funded, and promoted by us?"


Sat, 11/16/2013 - 22:47 | 4161665 Jafo
Jafo's picture

The guys that dreamed this scheme up are a sure bet to receive this years John Law award for Advancing the Science of Banking at the Bankers Ball

Fri, 11/15/2013 - 19:54 | 4159571 booboo
booboo's picture

Call it what you will but outside the banking industry it would have no value what so ever. That alone should tell you that we are dealing with some magic fairy dust believing mother fuckers and give you a hint to what the value of a dollar of currency will be worth 5 years hence.

Fri, 11/15/2013 - 22:03 | 4159802 Simplifiedfrisbee
Simplifiedfrisbee's picture

During the rehypothecation chain, are the assets used as collateral tangible or intangible?

Sat, 11/16/2013 - 12:59 | 4160538 noless
noless's picture

Intangible, although i guess that you could pretend that somewhere deep deep down there was a claim to something real..

Sat, 11/16/2013 - 08:40 | 4160277 starfcker
starfcker's picture

uhhh... goldman did restart the slave trade. it's called most favored nation trading status with china. you are correct. no indictments

Fri, 11/15/2013 - 22:22 | 4159847 MiltonFriedmans...
MiltonFriedmansNightmare's picture

I'll lay you 10:1 odds that whomever dreamt this one up is a 33rd degree Freemason; purely Luciferian.

Sat, 11/16/2013 - 04:03 | 4160185 Element
Element's picture

Yeah fine, just don't forget the govt and decades of prime ministers, and all the past cabinets and congresses that allowed it and all the public servants and 'advisory' parasites and lawyers who enabled it.



Fri, 11/15/2013 - 22:11 | 4159823 Yes_Questions
Yes_Questions's picture



a former office wife (Mrs. Questions undisclosed the first) thought it was your soul.

had something to do with that band aid on your neck.


and you rock tonight btw.

Fri, 11/15/2013 - 18:20 | 4159341 salvadordaly
salvadordaly's picture


Fri, 11/15/2013 - 19:59 | 4159586 miro1a
miro1a's picture

Seriously? Uranium gets hit by netron releasing 3 neutrons, energy, Rubidium and some cesium.  Sheesh.

Sat, 11/16/2013 - 01:50 | 4160118 Say What Again
Say What Again's picture

Yes, I'm Serious.

Sincerely,   Mr. Schrödinger

Fri, 11/15/2013 - 18:36 | 4159383 DCFusor
DCFusor's picture

Finally, someone who speaks English!

Fri, 11/15/2013 - 19:27 | 4159488 HardAssets
HardAssets's picture

<delete>   off topic, sorry

Sat, 11/16/2013 - 06:13 | 4160223 Cadavre
Cadavre's picture

That looks like the empirical formula for instant water.

You know ...

Empty a packet of "Instant Water" into a glass. Fill the glass with water, and voile, INSTANT WATER!

I believe self-securitization is the only available structure to rehypotecate counterfeit currency before it's actually printed.

Figured out what the shutdown was all about. Lamestream cadres of Krugman (the guy that gave America's Shabby Sheik Wal Mart Elite the prospect of a War On Space Aliens as medicine for the dead broke dead beat US of A's mafia economy) clones were blabbing out their well boned and sloppy honed kazoos that the shutdown will hair cut a half point off GDP.

Why is that significant. Well the White Shoe Boy K-Street Kiddie Brothel Queens on CSPAN and our new FED chair have another double faked stat providing some voodoo logic thingamabob for another one of them  "what's new" arguments to continue easing.

Lest we forget. "Soylent Green is People". But a banker's flanks make some mighty tender and tasty USDA premium fillets. That why people breed bankers and politicos, sweet meat for the spit.


Sat, 11/16/2013 - 10:55 | 4160382 PrintemDano
PrintemDano's picture

Actually one thermal neutron which causes a U235 atom to fission then releases 2.43 neutrons of which one in a critical reaction then causes one other fission.  The other 1.43 neutrons are lost to reactor "poisons", or are lost to the outside of the reactor, or absorbed by the control rods.  In a supercritical reactor more than one neutron goes on to cause a fission this is used to increase power, ....Financially we are at the prompt critical stage......this is bad....

Prompt-critical assemblies are created by design in nuclear bombs.


Our financial system is just about at the prompt critical stage.

Sat, 11/16/2013 - 11:39 | 4160448 MontgomeryScott
MontgomeryScott's picture

Arnie Gunderson calls it an 'Uncontrolled Criticality' (in reference to fhe Fukushima thing).

All that is now needed is a big financial earthquake, followed by a tsunami. The reactors are ramping up to 110%, now.

Is this like the ARM Treasury sales coming up?

Self-securitization sounds a lot like a twisted sex act. Unfortunately, all humanity is gonna get fucked by these actions.

Fri, 11/15/2013 - 20:16 | 4159615 runforthehills
runforthehills's picture

nice little trick to avoid marked-to-market accounting of shitty assets and leverage them at an inflated value !

and banks were probably advised by Big4 accounting firms to do this (who remembers Enron anyhow..)

Fri, 11/15/2013 - 22:21 | 4159843 Yes_Questions
Yes_Questions's picture



Smartest guys in the room.


kicked off the era of greatests heists.


oh, and they did not kill kenny..

Fri, 11/15/2013 - 18:02 | 4159278 NOTaREALmerican
NOTaREALmerican's picture

Re:  That's why they called it the "Manhattan Project"

+10  too funny!

Fri, 11/15/2013 - 18:43 | 4159406 Say What Again
Say What Again's picture

Isn't it a bit odd that the UN never looked for rehypothecated loans when they were investigating Iran?

Fri, 11/15/2013 - 18:03 | 4159281 chunga
chunga's picture

Even John Corzine would blush.

(well maybe not)

Fri, 11/15/2013 - 18:45 | 4159414 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Like the way he does in jail when taking it up the ass......... oh wait, never mind.

Fri, 11/15/2013 - 18:22 | 4159345 LawsofPhysics
LawsofPhysics's picture

You are correct sir.  I am thinking about "self-securitizing" as well.  Get your LOP "notes" here!


Once this thing goes "nuclear";

The good will be the we will all be trillionaires and the bad new will be that we will all be trillionaires.

Fri, 11/15/2013 - 18:55 | 4159435 TheFourthStooge-ing
TheFourthStooge-ing's picture


In many ways, this is similar to a nuclear reaction.  One electron (one loan) hits another and releases all this energy (more rehypothecated capital), and continues in an exponential fashion, until things go boom.

Substitute neutron for electron and you may be on to something here.

Fri, 11/15/2013 - 19:09 | 4159454 akak
akak's picture

When nuclear reactionary nitpickings of US 'american' eternal nature asspire to blob-up the progrational seeking of symmetry between leptons and hadrons (not to mention the embareassingly diminutive Chinese Citizenism hardons), hey, it's just the same old US 'american' inability to sustain the logical chain reaction of monolizing the fissionizing of the speeching means.  Same old song on the other foot, one more than is less and then some.

Fri, 11/15/2013 - 19:27 | 4159480 Say What Again
Say What Again's picture

You're right.  It is clear in the following formula

92U235 + 0n1 --> 55Cs140+ 37Rb93 +3 0n1 + Energy

there is one 0n1 being added to the soup.  Also note that there are some Unleaded Gas Futures (RB) that are left over as a byproduct

Sorry,  I skipped out on that class to hang out with a hot co-ed, specializing in "business administration"  It was worth every last neutron I had.

BTW - I did give you a +1 because its good to know these things for future reference.

Fri, 11/15/2013 - 21:21 | 4159702 Kirk2NCC1701
Kirk2NCC1701's picture

Then you must know about the "Sex life of an Electron"... something all 1st-year engineering students have learned, no doubt:


One night when his Charge was high, Micro Farad decided to try and find a cute Coil to discharge into. He picked up Milli Amp and took her for a ride on his Megacycle. They rode across the Wheatstone Bridge and parked in a Magnetic Field near a Flowing Current.

Micro Farad became Attracted to Milli Amps Characteristic Curves, and finally had her Resistance at a minimum, and with his Field fully Charged, he laid her on the Ground Potential, raised her Frequency and lowered her Capacity and pulled out his High Voltage Probe, inserting it into her High Voltage Socket connecting them in Parallel, and began to Short Circuit her Shunt.

Fully Excited, Milli Amp shouted "Mho, Mho, give me Mho". With his Tube operating at maximun Peak, and her Coil Vibrating from the Current Flow, she also reached her maximum yield.

The excess Current had got him hot, Micro Farad was rapidly Discharging and was soon drained of every Electron.

They Fluxed all night, trying various Connections and Sockets, until his Barmagnet had lost its Field Strength.

Afterwards, Milli Amp tried Self Induction and damaged her Solenoid. With his Battery fully discharged, Micro Farad was unable to Excite his Generator, So they ended up by Reversing the Connections and Blowing each others Fuses.

Sat, 11/16/2013 - 07:42 | 4160251 Oracle of Kypseli
Oracle of Kypseli's picture

<<<<<<< He picked up Milli Amp and took her for a ride on his Megacycle. >>>> Only to find out that she was on her menstrual-cycle 

Sat, 11/16/2013 - 11:12 | 4160407 chemystical
chemystical's picture

Two atoms were walking down the street when one stopped and said to the other, "I think I just lost an electron."  The 2nd atom replied, "Are your certain?"  The 1st said, "Yeah, I'm positive."

God I'm getting old.  That garnered groans from Gen Chem students 30 yrs ago too. 

Fri, 11/15/2013 - 18:55 | 4159436 KnightTakesKing
KnightTakesKing's picture

So when the goddamn motherfucker blows and the medium priced home is worth $500, every Tom, Dick and Mary will be on the hook to payoff their $200K mortgage. Except Tom, Dick and Mary have now lost their jobs due to the banks blowing up the worldwide financial system.

Ergo, banks and central banks then foreclose on their ass and now own 99.8% of all homes worldwide.

Ok, got it.

Fri, 11/15/2013 - 20:13 | 4159609 Oquities
Oquities's picture

bingo, mofo, bingo!

Fri, 11/15/2013 - 22:41 | 4159879 Yes_Questions
Yes_Questions's picture



which begs the question: can a money-price really be determined on one's home?


for example, if the mother blows and the fuck tards squeezing themselves with the notion of owning everthing start receiving body parts of those they've hired to actually carry out the attempted theft instead of the deeds, well..


then they'll have to hire replacement collection folk and what if our squeezers continue to receive only their parts, and no deeds?


juss riffing




Sat, 11/16/2013 - 07:52 | 4160256 Oracle of Kypseli
Oracle of Kypseli's picture

Banks can not handle a large number of foreclosures as the maintenance and the taxes will be overwhelming. They will let the buyers stay in for free or squaters will invade them.

We need a reset which may take sometime but it would be sudden. Don't get caught with too much paper money in the bank or the safe.

Large city dwellers will be very vulnerable. (Yes that includes cannibalism)

Sat, 11/16/2013 - 00:35 | 4160035 YC2
YC2's picture

I thought that was the plan last time around?  However it seems like a bunch of private equity firms took the property off their hands, and only for a trade.  I dont think this is the end game

Sat, 11/16/2013 - 11:22 | 4160421 chemystical
chemystical's picture

The Great Depression still ranks as the largest transfer of wealth in world history.  Zero Sum Game. 

Provided that the relationship between the value of labor and the cost of housing holds, then all will be well. 

Oh, wait, if we import 15MM laborers willing to do your job for less, and if we import $500BN/yr of goods (outsourced labor), then that relationship has been blurred and corrupted. 

<smacks self in the head> Shit, ok, NOW I get it.

Maybe that Adolph guy was right on several fronts.

Sun, 11/17/2013 - 13:13 | 4162529 trader1
trader1's picture

"So when the goddamn motherfucker blows and the medium priced home is worth $500, every Tom, Dick and Mary will be on the hook to payoff their $200K mortgage. Except Tom, Dick and Mary have now lost their jobs due to the banks blowing up the worldwide financial system.

Ergo, banks and central banks then foreclose on their ass and now own 99.8% of all homes worldwide."


so, it's back to serfdom?  perhaps, but i highly doubt this possibility...

i cannot imagine corporations who would sacrifice all their high-margin, western-paying customers to sell to the bottom of the pyramid in latin america, africa, asia, ...?  to the same bottom of the pyramid that derives its current livelihood from selling agricultural and tech products to the western middle class that just got sold out by the bankers.  this would only work if there's an emerging market consumer class large enough to displace the western one.  maybe, but it's a bit more of a longshot...

in any case, no one with any humanity wants to blow up the financial system, because the consequences are too great to bear.  they know it, which is why we have QE.  we are past the point of no return, and the only answer it to continue QE until the real powers behind scenes finish their debate on the design and implementation of the next international financial and monetary system.  it'll be announced on a sunday...

but just to entertain your scenario once more, it only makes sense if said bankers want to seriously depopulate the western world and turn it into a jackson pollock canvas full of human blood.  besides, where do the bankers go to hide from a middle class who just got fucked over big time?  elysium?  fuck elon musk and his extra-planet colony dreams.  he can't even build a stable automobile.  



Fri, 11/15/2013 - 19:12 | 4159473 HardAssets
HardAssets's picture

" But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism . . .  "

Thomas Jefferson - Declaration of Independence 1776

Sat, 11/16/2013 - 00:41 | 4160045 odatruf
odatruf's picture

I don't think we'd again find 56 people willing to mutually pledge to each other their lives, their fortunes, and their sacred honor.

Sat, 11/16/2013 - 12:27 | 4160498 HardAssets
HardAssets's picture

not in Congress, that's for sure



Fri, 11/15/2013 - 21:29 | 4159724 Kirk2NCC1701
Kirk2NCC1701's picture

re 'Say What Again' comment on U235 reactions...

I'd liken the Derivatives market to the Deuterium core inside an A-bomb, waiting to get ignited and lead to a MF'ing FUSION reaction.  Presto, a Hydrogen bomb!

The fallout?  Unbearable Fukushitsa hits the fan.

Fri, 11/15/2013 - 18:54 | 4159429 RockyRacoon
RockyRacoon's picture

Google it now and there are over 800,000 results -- with the ZH article at the top.

Talk about your going viral....

Fri, 11/15/2013 - 21:40 | 4159752 resurger
resurger's picture

Did you try "TWERKING" or "DIXON CIDER"

Fri, 11/15/2013 - 22:52 | 4159864 PT
PT's picture

Over here we call it Dickens Cider but your way works too.  "I just can't start the day without my Dickens Cider".

Specialty drink made at an olde English Pub they built near a poultry farm so they called it The Cock and Pullet.

Sat, 11/16/2013 - 11:26 | 4160434 chemystical
chemystical's picture

My wife sometimes prefers a hot Dickens Cider, but she always opts for a Hard Dickens Cider.

We bought her car at Pinkley Ford.  We didn't opt for the warranty because she pefers that only I service her Pinkley Taurus.


Sat, 11/16/2013 - 02:59 | 4160147 prains
prains's picture



you're all making it sound WAY more complicated than it need's a ponzi


plain, vanilla ponzi, two scoops is all......,ponzi,ponzi,ponzi

Sat, 11/16/2013 - 09:43 | 4160313 doctor10
doctor10's picture

In plainspeak-the portion of the sh*^ the taxpayer is now on the hook for is off the bank's books

Fri, 11/15/2013 - 17:52 | 4159247 Sufiy
Sufiy's picture

Senator Vitter (R-LA) asks Janet Yellen about Audit the Fed. Who owns the Federal Reserve?

And the answer is ... no surprises here.

Mike Maloney: The Biggest Scam In The History Of Mankind - Hidden Secrets of Money 4 GLD, MUX, TNR.v, GDX  "Finally, in this episode everything comes together and Mike Maloney presents The Federal Reserve System in all its glory.  With over 1 million views only on this YouTube channel the information is going out now. Mike Maloney has made the great job - everything is explained in crystal clear terms and now you can start move forward and understand why FED is as "Federal" as Federal Express and who owns it, why there is ongoing manipulation of Gold and Silver and nobody can be held accountable for it and what will happen next with QE and Taper."

Glenn Beck Exposes the Private Fed; Gets Fired by Fox

Fri, 11/15/2013 - 21:13 | 4159684 Kirk2NCC1701
Kirk2NCC1701's picture

Cool, thx!.  I like G. Edward Griffin's comment about the MANDRAKE MECHANISM* (26:10)

* Mandrake Mechanism explained:

This Mechanism + Derivative, etc, etc -->  MASSIVE Wealth Transfer, from the many to the few.  The 0.5% or less turn the rest of the 99.5% into their Debt Slaves, via a series of Nested, Leveraged Controls (NLC).  Even many ZH readers (much less the common Joe Public or even the the "educated") have a clue about NLC.  / They'd rather yip & yap like a bunch of puppies, or topic-hop ADHD kids. /s

Fri, 11/15/2013 - 17:53 | 4159252 Seer
Seer's picture

I'm confused...

I thought that less regulations was supposed to make things work better, and here we are complaining that things are fucked up because of a lack of regulations?

Fri, 11/15/2013 - 18:01 | 4159275 NOTaREALmerican
NOTaREALmerican's picture

Re:  I thought that less regulations was supposed to make things work better, and here we are complaining that things are fucked up because of a lack of regulations?

I think the "invisible hand" is "Self-Securitizating" itself - which can cause banksters to go blind and get hair on the back of their hands.

Fri, 11/15/2013 - 18:20 | 4159336 Say What Again
Say What Again's picture

You should read; "All the Devils are Here"

The book talks about how hard the Banks & Mortgages companies fought to remove regulation.  There are examples of a city placing a restriction of the type of loan that could be made, and the Mortgage Bankers Lobby group went to the state (and Federal) supreme court to have the restriction overturned, forcing the municipality to watch in horror.

And... they never went to court for that (of course they would NEVER go to jail).

How FU is that?

Fri, 11/15/2013 - 21:33 | 4159732 resurger
resurger's picture

OFC! They dont want fucking regulation ever!

They were supposed to implement Basel III in 2013, got pushed to 2016 and then again maybe to 3013 who fucking knows.

Basel III can never regulate anything, i think we have passed the regulation point long time ago.

CAR (Capital Adequecy Ratio) Tier 1+ Tier 2/ RWA (Risk Weighted Assets), how much do you think they assign for the RWA?! OF course a fucking zero.

The Tylers have posted so many articles about the REPO operations to aquire cheap fundings, REHYPO till you eyeballs bleed.


Sat, 11/16/2013 - 04:14 | 4160188 Element
Element's picture


Fri, 11/15/2013 - 18:15 | 4159329 adr
adr's picture

"If you are being raped and can't do anything about it. You might as well at least try to enjoy it."

- some dude from India

Fri, 11/15/2013 - 19:11 | 4159469 Al Huxley
Al Huxley's picture

Yeah, but I heard he was just requoting Blankfiend.

Fri, 11/15/2013 - 20:16 | 4159614 Oquities
Oquities's picture

it was actually a politician from Texas

Fri, 11/15/2013 - 18:44 | 4159408 nickels
nickels's picture

Hello--Hello?-- I want to report a crime--------

Sat, 11/16/2013 - 13:04 | 4160547 PrintemDano
PrintemDano's picture

The # you are trying to call has been disconnected.  No forwarding # is available.  Thank You and good -bye....

Fri, 11/15/2013 - 20:14 | 4159612 FreeMktFisherMN
FreeMktFisherMN's picture

the unfettered market where prudence is rewarded and unprofitability punished is the best regulator. No backstops and bailouts. Everything voluntary, and reputations would matter. Just like FDIC, which makes people abdicate any responsibility when it comes to ascertaining integrity of the institution in which they are putting their money, as they couldn't care less right now that these banks are leveraged to the hilt in CDS and other synthetic derivatives notionally in the stratosphere. In a true free market there would be private, competing consumer report-like agencies that would rate banks as with any other business on trustworthiness, etc, and the bad ones would lose business in a hurry.


The market protects us better than could any bureaucrat. And obviously the revolving door between bureaucrats and the 'private' sector speaks for itself, but even 'well intended' bureaucrats just create moral hazard, and obviously in the first place any statism implies the use of coercion and theft.


Fri, 11/15/2013 - 20:27 | 4159625 Bazza McKenzie
Bazza McKenzie's picture

Well you really are confused.  This is being done in accordance with rules provided by "the regulators", ie this is being done in accordance with regulations, not in the absence of them.

Regulations exist for the benefit of the regulators and those parties who own them or pay them.  It was always so.  If you don't understand that, you are worse than confused.

Fri, 11/15/2013 - 23:49 | 4159964 FreeMktFisherMN
FreeMktFisherMN's picture

Yep. Regs like licensing and whatnot are just to create more jobs for bureaucrats and control over people and resources. Cronyism at its best. 

The big corporations use regs that cost a ton to comply with to build moats around would be competitors into their market share, as only they can handle the legal costs. This along with the inflation is why many of these big publicly traded companies are doing so well. The small businesses are getting swallowed up. In many cases it's not the economies of scale efficiency why there isn't more competition, it's the special interests on behalf of the big companies using the state to keep out competitors. 

Sat, 11/16/2013 - 13:16 | 4160563 PrintemDano
PrintemDano's picture

Regulations are used to destroy competition by small growing businesses, keeping the big boys in power.  They have the regulators/politicians on the payroll so ignore the regulatuions anyway.

Fri, 11/15/2013 - 17:56 | 4159259 Pairadimes
Pairadimes's picture

Re-hypothecate like a BOSS!

Fri, 11/15/2013 - 18:03 | 4159280 max2205
max2205's picture

What!  Really!  Maybe the banks can resecuritize the payoff on all mortgages that will close 30 years from now and throw that amount on top

Fri, 11/15/2013 - 18:03 | 4159284 johnQpublic
johnQpublic's picture

whats a word to describe a ponzi ponziing a ponzied ponzi scheme?

Fri, 11/15/2013 - 18:06 | 4159288 Skateboarder
Skateboarder's picture


Fri, 11/15/2013 - 18:11 | 4159313 Say What Again
Say What Again's picture
Möbius Toilet Paper
Fri, 11/15/2013 - 18:14 | 4159331 Oracle 911
Oracle 911's picture

No shit, this economics system will collapse, the good news is, the big vampire squid corporations like Monsanto, BP, ESSO or Goldman Sachs will collapse within it.

Fri, 11/15/2013 - 18:24 | 4159352 Skateboarder
Skateboarder's picture

They will hold on to dear life and try to febreeze away the USD with SDR. It's the only way to continue this exponential function. We cannot stop.

*runs off the cliff*

Fri, 11/15/2013 - 19:13 | 4159476 Keyser
Keyser's picture

Nah, as usual the board of directors and all the C level folks will pull the ripcord and wind up in Buenos Aries, while letting the working stiffs hang in the breeze.  

Fri, 11/15/2013 - 18:11 | 4159315 NoDebt
NoDebt's picture


Fri, 11/15/2013 - 19:13 | 4159474 CHX
CHX's picture


Sat, 11/16/2013 - 13:18 | 4160564 PrintemDano
PrintemDano's picture

If you say Ponzi one mo time....

Fri, 11/15/2013 - 18:05 | 4159287 johnQpublic
johnQpublic's picture

with this one secret trick................

Fri, 11/15/2013 - 18:21 | 4159344 putaipan
putaipan's picture

so that's where all the hypothetical came from.

Fri, 11/15/2013 - 18:06 | 4159290 q99x2
q99x2's picture

My conclusion is that students and anyone else that owes debt to banks or bank controlled governments have a moral obligation not to pay them a penny because bankers are the enemies of humanity and have declared war against everyone else.

Fri, 11/15/2013 - 18:13 | 4159325 adr
adr's picture

Yeah, but they made it so you can't afford anything with a job so you need to use credit, and you can't get credit unless you attempt to pay them back.

Fri, 11/15/2013 - 18:23 | 4159351 hmmmstrange
hmmmstrange's picture


Let me guess, You spent 6 years on an arts degree and are 120k in debt and want someone to bail you out of your poor decision?

Fri, 11/15/2013 - 18:37 | 4159390 Urban Redneck
Urban Redneck's picture

You're missing the (evil) beauty of it... "your" debt obligation has already been packaged and flipped back the central bank... the bank has already replaced the fiat it indebted you with, and pocked some NIM (profit) and moved on to the next "customer"... by not paying back the indebtedness you are defaulting on an obligation to the CB, which the congress critters will bail out with EVEN MOAR of YOUR MONEY... Welcome to the debt serf circle jerk, the bankers took FDRs words (we owe it to ourselves) to heart when it came to restructuring risk transference after Ben & Hank deployed the nuclear option. Did people actually think there were customers (other than the FED) lining up around the block for the increasing volume of vintage 2012 and 2013 Gen-Y Mutant NINJA CDO's?

Sat, 11/16/2013 - 04:52 | 4160197 joe90
joe90's picture

The way I see it is if you (a real person) signs up with a corporate entity (a fiction) for a loan and accept a ledger entry as "money" then you are complicit.  I can talk but, I exchange hours of my week for a ledger entry that gets me stuff.

Fri, 11/15/2013 - 18:07 | 4159295 unwashedmass
unwashedmass's picture

Are you fucking kidding me????????????????????????? 

Fri, 11/15/2013 - 18:12 | 4159317 adr
adr's picture

So a CEO walks into his CFO's office and says, "What the fuck man, this financial statement says we're bankrupt."

The CFO says, "Really, well I told you that acquisition was a bad idea."

CEO, "No you said it was a good idea."

CFO, "Shit really. Hold on."

CFO changes one of the Excel formulas. "There, now we have a $1.2 billion profit."

CEO, "Yeah I thought so. That's better."

Fri, 11/15/2013 - 21:53 | 4159777 Herd Redirectio...
Herd Redirection Committee's picture

Or even reclassifying some expenses as assets, and then there was that money the company borrowed that was accidentally recorded as revenue....

Fri, 11/15/2013 - 18:12 | 4159318 mantrid
mantrid's picture

that's even better than QE. with QE, stuff sits on balance sheets. this is like central bank buying bonds without actually getting them.

Fri, 11/15/2013 - 18:13 | 4159323 spekulatn
spekulatn's picture

This article reads like a Marla Singer. 

Great stuff here, ZH.

Sun, 11/17/2013 - 13:16 | 4162550 trader1
trader1's picture

maybe she heard my call to show a signal... ;-)

Fri, 11/15/2013 - 18:20 | 4159342 Peter Pan
Peter Pan's picture

We who cry wolf must be honest and admit that despite the rotteness of the system they not only manage to keep the system standing but to also keep the rotteness growing.

The question as always is, what will trigger the explosion?

Fri, 11/15/2013 - 18:32 | 4159369 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Hubris usually is the downfall of human driven systems.

Fri, 11/15/2013 - 18:35 | 4159379 centerline
centerline's picture

who knows?

But, one thing is for sure... the more this goes on the more unstable it gets.

Fri, 11/15/2013 - 18:25 | 4159349 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

This is definitely one of the more enlightening articles as of late. Someone who understands this in greater detail really needs to explain it to enough people over in Rand Paul's office so they can sell the audit the fed bill with a possibly higher degree of success in getting it passed in turn for Yellow Stains nomination. Might want to explain it to the Sqauw's people also.

Sat, 11/16/2013 - 02:53 | 4160159 tradewithdave
tradewithdave's picture

Could someone explain Rand's hair while you're 'splainin' things...

Sat, 11/16/2013 - 04:44 | 4160195 Element
Element's picture

He's an opportunist, next time an opportunity requires pragmatic dumping of principle, he'll just do it again. His hair is the expression of the inner-conflict.


(sorry, all I got dave)

Sat, 11/16/2013 - 12:36 | 4160513 11b40
11b40's picture

That apple may not have fallen far from the tree, but I think it rolled down hill after it hit the ground.

Sat, 11/16/2013 - 12:44 | 4160522 Herd Redirectio...
Herd Redirection Committee's picture

The number one way Ron Paul was compromised was through his son, IMO.  Wouldn't want anything to happen to Rand's burgeoning political career, now would we?

Fri, 11/15/2013 - 18:25 | 4159355 RaceToTheBottom
RaceToTheBottom's picture

Hey, I am going to use that line:

"Don't worry honey, I promise to "Self Securitize""

Fri, 11/15/2013 - 18:26 | 4159357 jmcadg
jmcadg's picture

I guess that means mucho of this!

Fri, 11/15/2013 - 18:30 | 4159364 hmmmstrange
hmmmstrange's picture

Liar loans for the bankers!

Fri, 11/15/2013 - 18:46 | 4159417 Bangin7GramRocks
Bangin7GramRocks's picture

And you fuckers laughed at the trillion dollar coin! At least that was straight forward money invention.

Fri, 11/15/2013 - 19:46 | 4159551 Peter Pan
Peter Pan's picture

Plus it's easier to roll that coin down the street than to kick the can.

Fri, 11/15/2013 - 18:30 | 4159365 buzzsaw99
buzzsaw99's picture

it sounds like they are monetising dog shit

Fri, 11/15/2013 - 18:58 | 4159443 Al Huxley
Al Huxley's picture

That's pretty much the definition of collateralized subprime mortgages.

Fri, 11/15/2013 - 19:09 | 4159461 Urban Redneck
Urban Redneck's picture

No that would be a PPP for a methane power plant, and those actually pre-date the financial crisis...

And if you think I'm joking about bankers monetizing LITERAL SHIT...

Fri, 11/15/2013 - 18:33 | 4159373 centerline
centerline's picture

Not surprised at all.  Leverage is going to hit near infinity due to diminishing returns.  Financial transactions have to get more and more clever (criminal one would argue) to allow for such leverage.

Sure enough, when this puppy blows, the entire banking sector as we know it is going down.  The only thing that will matter at that point will be what you physically have.

Fri, 11/15/2013 - 18:34 | 4159374 ptoemmes
ptoemmes's picture

So, instead of a yard sale I should self-securitize with the FED.

Fri, 11/15/2013 - 18:36 | 4159385 buzzsaw99
buzzsaw99's picture

yeah, have your dog shit and eat it too. meanwhile you can buy moar dog shit.

Fri, 11/15/2013 - 18:36 | 4159380 Peter Pan
Peter Pan's picture

This particular mechanism reminds of the reversble suit that came out some years ago. Do you really have two suits or one?

Fri, 11/15/2013 - 20:02 | 4159588 booboo
booboo's picture

Yes, so the shit stains shows all the time, sounds about right.

Fri, 11/15/2013 - 18:38 | 4159391 RMolineaux
RMolineaux's picture

Excellent piece of work here.  My compliments.  We need to explain this to a wider audience.

Fri, 11/15/2013 - 18:53 | 4159426 Peter Pan
Peter Pan's picture

I agree but what success have we had so far in exposing fiat, fractional banking, QE, manipulation of LIBOR, gold, silver and commodities, Snowden's revelations and so on?

The fact of the matter is that 95% of people have sheep brains that can't see or think beyond their daily routine. The strength of that routine combined with money tricks and a steady flow of propaganda maintains the momentum more than we can imagine.

Sat, 11/16/2013 - 12:46 | 4160514 Brindle702
Brindle702's picture

Habit is thus the enormous fly-wheel of society, its most 

precious conservative agent. It alone is what keeps us all 

within the bounds of ordinance, and saves the children of 

fortune from the envious uprisings of the poor. It alone 

prevents the hardest and most repulsive walks of life from 

being deserted by those brought up to tread therein. It 

keeps the fisherman and the deck-hand at sea through the 

winter ; it holds the miner in his darkness, and nails the 

countryman to his log-cabin and his lonely farm through 

all the months of snow ; it protects us from invasion by the 

natives of the desert and the frozen zone. It dooms us all 

to fight out the battle of life upon the lines of our nurture 

or our early choice, and to make the best of a pursuit that 

disagrees, because there is no other for which we are fitted, 

and it is too late to begin again. It keeps different social 

strata from mixing. Already at the age of twenty-five you 

see the professional mannerism settling down on the young 

commercial traveller, on the young doctor, on the young 

minister, on the young counsellor-at-law. You see the little 

lines of cleavage running through the character, the tricks 

of thought, the prejudices, the ways of the shop, in a 

word, from which the man can by-and-by no more escape 

than his coat-sleeve can suddenly fall into a new set of 

folds. On the whole, it is best he should not escape. It 

is well for the world that in most of us, by the age of thirty, 

the character has set like plaster, and will never soften 


William James 1890 "The Principles of Psychology"

Sat, 11/16/2013 - 13:35 | 4160591 My Days Are Get...
My Days Are Getting Fewer's picture

What keeps you alive - per Zorba:

“A man needs a little madness, or else... he never dares cut the rope and be free.” 
Nikos Kazantzakis



Fri, 11/15/2013 - 18:38 | 4159393 Cornholiovanderbilt
Cornholiovanderbilt's picture

The great culling is on the way

Fri, 11/15/2013 - 18:39 | 4159394 bentaxle
bentaxle's picture

He said........yaddayaddayadda....

.......(up to infinity)......yaddayadda.

It's enough to turn you into a wife-beater, (unless your wife's bigger than you, maybe?)


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