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US Treasury Admits It Conducted A Circular Ponzi Scheme For Years

Tyler Durden's picture




 

While one may wonder about the implications of the just announced "accelerated windown" of the GSEs, predicated in no small part by the surge in animosity between Tim Geithner and the FHFA's Ed DeMarco, there is one aspect of the announcement that is completely and utterly unambigious: as part of its justification to demand faster liquidation of Fannie and Freddie's "investment portfolio" Tim Geithner gave the following argument:

This will help achieve several important objectives, including... Ending the circular practice of the Treasury advancing funds to the GSEs simply to pay dividends back to Treasury

In other words not some fringe blog, not some "partisan" media outlet, not some morally conflicted whistleblowing former employee seeking immunity, but the US Trasury itself just admitted it had been engaged in circular check kiting scheme, which essentially has all the components of a Ponzi scheme in it, ever since the nationalization (about which there is no now doubt and which means the GSE's $6 trillion in debt is now fully on the Treasury's balance sheet) of Fannie and Freddie in 2008.

Transfer one more conspiracy theory into the conspiracy fact bin.

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Fri, 08/17/2012 - 09:30 | 2713835 diogeneslaertius
diogeneslaertius's picture

Transfer one more conspiracy theory into the conspiracy fact bin.

 

MISSION ACCOMPLISHED

 

(someone find me an aircraft carrier to land on)

Fri, 08/17/2012 - 09:38 | 2713870 Dalago
Dalago's picture

Hey guys... we've been fucking you over.  No lube.  Sooo... how are thiiiiiiings??

Fri, 08/17/2012 - 09:47 | 2713896 Precious
Precious's picture

He should admit it about the banks too.

Fri, 08/17/2012 - 10:08 | 2713959 Doubleguns
Doubleguns's picture

Do not forget that a great portion of that transfer does not come back to the treasurey. It goes to the bond holders in places like ummmmm........China!!

Fri, 08/17/2012 - 10:41 | 2714085 Stock Tips Inve...
Stock Tips Investment's picture

That's one of the serious distortions of U.S. economy. There must be a national sacrifice to end the unlimited growth of public debt. In the long term, we subtract competitiveness and make us poorer.

Sat, 08/18/2012 - 09:53 | 2714157 LMAOLORI
LMAOLORI's picture

 

 

 

Yes and another thing this $6 Trillion was not on obama's budget the American people should be told the truth about what our debt really is...

 

Obama's Budget Has One Small, Missing Piece.... For $6.3 Trillion Dollars

snip

 

"Today, to much fanfare, the administration released its ridiculous $3+ trillion budget (we say + because at that size the one thing certain is that the budget will certainly never hit the target and while we wish it would be lower, we are certain it will end up materially higher), which consists of a "short" 192-page summary section and a 1420 page appendix. We are confident that not one politician will read the whole thing from cover to cover. We won't either. Not because we don't care about what's in it, but because we are much more concerned with what is not included, namely $2.8 Trillion and $1.9 Trillion of MBS guaranteed portfolios at Fannie and Freddie, and an additional $782 billion and $809 billion in company debt outstanding for the two GSEs, respectively. This amounts to a total of $6.3 trillion in liabilities which should be counted toward the budget. And yet, oddly, the error-checker somehow made this rather justifiable omission: after all if we were to look at a number which written out looks as follows $6,264,000,000,000.00, we would also probably just avoid it - it is somewhat difficult to hide a number that big even in the 1,420 pages of the budget's appendix. That's ok, we are here to remind them about the omission, and also to remind Mr. Orszag, who himself, in that long ago 2008, espoused that these companies should be put on the Federal Budget. Isn't it strange what one and a half years worth of realizations just how broken beyond repair the system is, will do to one's convictions?"

more

http://www.zerohedge.com/article/obamas-budget-has-one-small-missing-piece-63-trillion-dollars

Crony Socialism Strikes Back: Geithner Retaliates Against DeMarco; Accelerates Wind Down Of GSE Treasury Backing

http://www.zerohedge.com/news/socialism-strikes-back-geithner-retaliates-against-demarco-accelerates-wind-down-gse-treasury-b

 

More on Orzag

Corporate Crime, Russia, Peter Orszag and Getting Away with Murder

http://corporatecrimereporter.com/morgenson07282011.htm

Fri, 08/17/2012 - 09:39 | 2713872 malikai
malikai's picture

I like the way they frame it. One could read that and think "yea, it's no big deal'.

Fri, 08/17/2012 - 10:08 | 2713961 Hype Alert
Hype Alert's picture

And the channel quickly brings up a picture of Assange and the latest attempts at bringing him to "justice".

Fri, 08/17/2012 - 10:22 | 2714015 tekhneek
tekhneek's picture

Well he can't just come out and say it's one big circle jerk now can he...

Fri, 08/17/2012 - 10:35 | 2714056 Big Slick
Big Slick's picture

This is big!

AND EVEN MORE THAN WHAT IS WRITTEN IN THIS ZH PIECE, the Treasury press release states... "The agreements will replace the 10 percent dividend payments made to Treasury on its preferred stock investments in Fannie Mae and Freddie Mac with a quarterly sweep of every dollar of profit that each firm earns going forward."

So if I get this right, instead of this situation being a public ponzi and a government embarassment, they're  going to change the rule of law so that the  "circular practice of the Treasury advancing funds to the GSEs simply to pay dividends back to Treasury" is replaced by a "why bother" accompanied by an non-transparent process.

Henry Hill: "This is the bad time."

 

Fri, 08/17/2012 - 10:38 | 2714068 Precious
Precious's picture

They are going to save time and remove the middleman.

In the future the Treasury, on the money it prints, will simply pay interest to itself.

Fri, 08/17/2012 - 11:33 | 2714221 fockewulf190
fockewulf190's picture

My phyzz stack just gained another magnification of brightness. Time to burn some more fiat powder right quick and add to this bitch pronto.

Fri, 08/17/2012 - 11:57 | 2714248 Big Slick
Big Slick's picture

In considering the additional condition in the Treasury Press Release mentioned in my above post:

"The agreements will replace the 10 percent dividend payments made to Treasury on its preferred stock investments in Fannie Mae and Freddie Mac with a quarterly sweep of every dollar of profit that each firm earns going forward."

The broadness of the new term sends shivers down my spine.  Obviously this term has absolutely no intent.  Becuase if by miracle, the "profits" were twice as much as the old 10% dividend, that would be not acceptable to the GSE.  If profits are less (and they are 99.99% likely to be MUCH LESS), the "circle" is allowed to be broken. 

It's obvious here that the Treasury is trying to figure out how to get rid of a dead body.

!!!One more thing, can anyone extract a hint from the presser text (though hugely & subjectively implied) on the govt's plan for direction of interest rates?

 

Fri, 08/17/2012 - 09:32 | 2713842 Jason T
Jason T's picture

Game Over

Insert Coin

Fri, 08/17/2012 - 10:15 | 2713987 pods
pods's picture

Great, now I have that voice from Gorf in my head:

"Insert coin, Insert coin......"

http://en.wikipedia.org/wiki/Gorf

Fri, 08/17/2012 - 10:40 | 2714075 Big Slick
Big Slick's picture

Remeber Berzerk?  "Stop the intruder."

Bernanker: "The dollar must not escape"

http://www.youtube.com/watch?v=gb4gWvqbsYA

Fri, 08/17/2012 - 09:34 | 2713845 Debtonation
Debtonation's picture

Predictable

Fri, 08/17/2012 - 09:35 | 2713848 buzzsaw99
buzzsaw99's picture

the agencies books are as rotten as the big banks. losses in the trillions yet to come and yes turbo timmy will be writing more checks. that rat bastard never told the truth in his whole worthless life.

Fri, 08/17/2012 - 09:37 | 2713857 Robot Traders Mom
Robot Traders Mom's picture

Thanks for coming by yesterday, Buzz!

Fri, 08/17/2012 - 09:36 | 2713852 Robot Traders Mom
Robot Traders Mom's picture

At this point, it really wouldn't surprise me if Geithner was moonlighting on ZH as my kid.

 

The shit they say certainly matches up.

Fri, 08/17/2012 - 09:50 | 2713911 Dr. Engali
Dr. Engali's picture

I am probably going to regret saying this, but I think you're off base. Your kid.....is not quite a dumb as Turbo Timmy. There I said it..ugh

Fri, 08/17/2012 - 10:03 | 2713948 Robot Traders Mom
Robot Traders Mom's picture

Don't sell yourself short, Judge. He's a tremendous slouch!

Fri, 08/17/2012 - 10:03 | 2713947 Agent P
Agent P's picture

Quit being such a helicopter mom and let your kid start posting soft porn pics again! 

Fri, 08/17/2012 - 09:36 | 2713859 Winston Churchill
Winston Churchill's picture

Oh dear.

Debt/GDP is now 140% +

Hello to  the Greek province of Amerikanos.

Fri, 08/17/2012 - 09:36 | 2713860 Rattling Bones
Rattling Bones's picture

In fairness, Geithner could always, reasonably, claim that he didn't know what he was talking about.

Fri, 08/17/2012 - 09:43 | 2713886 Seorse Gorog fr...
Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

He could just blame it on TurboTax. Usually works for me.

Fri, 08/17/2012 - 09:45 | 2713864 Mercury
Mercury's picture

Not so fast Timmah!

Think of the opportunity here.  Those GSEs could be securitizing those circular payments and selling them to yield-strapped pension plans.

That's just the kind of product innovation and American can-do spirit we need to see from our nation's public-private partnerships.

Go ahead, you know you haven't practiced this one in a while....get on the stool, stand in front of the mirror and belt out your best:   Welcome to the recovery!

 

Fri, 08/17/2012 - 09:41 | 2713876 TheDarkKnight
TheDarkKnight's picture

At this rate we're gonna need a bigger bin

Fri, 08/17/2012 - 09:41 | 2713877 lizzy36
lizzy36's picture

Hey maybe Geithner can get a job with former Obama operative, Corzine.

2/4 the price of 1 LLP.

Fri, 08/17/2012 - 12:09 | 2714322 ptoemmes
ptoemmes's picture

And should they get any customers they can be TurboCorzined.

 

 

Fri, 08/17/2012 - 09:48 | 2713885 Dr. Engali
Dr. Engali's picture

 

but the US Trasury itself just admitted it had been engaged in circular check kiting scheme,

 

I'm not sure if you meant Trashury or Treasury. By the way it is currently operated why don't we just go with Trashury?

Fri, 08/17/2012 - 10:11 | 2713973 Dr. Richard Head
Dr. Richard Head's picture

The funny thing is that the plebes go to jail for check kiting.  For the cabal it matters not.

My Mexican immigrant neighbor was renting a house next to me for two years.  He ran a "payroll" company during that time.  Turns out it was a check kiting scheme.  Police officer is the neighbor on the other side of me and he asked if I knew of Mexican's whereabots after he disappeared leaving his pregnant wife and three kids behind.  They were looking to serve a warrant for his arrest.

Since Timmy is working on behalf of keepinf the ponzi going, he will certainly receive a nice promotion when his Treaserve sentence is done.  Possibly a top spot at Corzine's Cornhole Hedge fund?

Fri, 08/17/2012 - 09:45 | 2713889 Rainman
Rainman's picture

Counting Solyndra, GM , AIG , etc. these Obama operatives really know how to vaporize taxpayer fiat.

Fri, 08/17/2012 - 09:46 | 2713894 jefe95
jefe95's picture

Are there any regulators or journalists or anyone, other that ZH, that are shining a spotlight on this outright fraud??  Banana republic indeed.

Fri, 08/17/2012 - 11:12 | 2714169 notbot
notbot's picture

That's why we need a non-democrat in the white house, so the press will go after stories like...um, I don't know, white house leaks of CIA info, college transcripts that might show you registered as a foreign student, wars you start, tax payer money you spend on black holes like the GSEs.  

Or we can just focus on whether Mitt payed cap gains rates (how shocking!!!).

Fri, 08/17/2012 - 12:50 | 2714523 Canaduh
Canaduh's picture

Don't blame me, I voted for Kodos.

Fri, 08/17/2012 - 09:47 | 2713897 asteroids
asteroids's picture

Well Timmah, no one put a gun to your head to start doing it, so stop whining. If you don't like things then stop funding them. What a weasel.

Fri, 08/17/2012 - 09:47 | 2713899 Bay of Pigs
Bay of Pigs's picture

I remember telling my mortgage business buddies on the day Fannie was nationalized that the country was finished (Sept. 6th, 2008).

They laughed at me.

 

Fri, 08/17/2012 - 10:18 | 2713991 Disenchanted
Disenchanted's picture

 

Bay of Pigs said:

 

"the day Fannie was nationalized that the country was finished (Sept. 6th, 2008)."

 

Hold it! Stop the presses...You mean the 'communist marxist muslim' had nothing to do with that!? /s

 

Keep it in your pants red team operatives, I despise the corporatist/fascist Obama as much as I did Bush II. But it's high time that some of you also acknowledge your team's role in our situation.

 

signed,

'no teamer'

 

You can freely substitute the name G. W. Bush in place of Romney in the following(except for #2):

 

The fact is that there is no essential difference between the so-called corporate-sponsored "choices" couldn't be more clear than a list of 40-points compared in a Michael Snyder piece at The American Dream this week.  Among his 40-points in common?

 

 

"1. Barack Obama and Mitt Romney both supported TARP.

2. Mitt Romney supported Barack Obama's "economic stimulus" packages.

3. Mitt Romney says that Barack Obama's bailout of the auto industry was actually his idea.

4. Neither candidate supports immediately balancing the federal budget.

5. They both believe in big government and they both have a track record of being big spenders while in office.

6. Barack Obama and Mitt Romney both fully support the Federal Reserve.

7. Barack Obama and Mitt Romney are both on record as saying that the

 president should not question the "independence" of the Federal Reserve.

8. Barack Obama and Mitt Romney have both said that Federal Reserve Chairman Ben Bernanke did a good job during the last financial crisis.

 

 

You owe it to yourself to click over here and read his whole column.  The list goes on and on...

 

h/t UrbanSurvival

Fri, 08/17/2012 - 10:42 | 2714070 Disenchanted
Disenchanted's picture

 

 

 

btw I'll take issue with #3 in my previous post...some of you 'red teamers' seem to have forgotten this as well:

 

WASHINGTON — The emergency bailout of General Motors and Chrysler announced by President Bush on Friday gives the companies a few months to get their businesses in order, but hands off to President-elect Barack Obama the difficult political task of ruling on their future.

source: http://www.nytimes.com/2008/12/20/business/20auto.html?_r=2&hp   (Dec. 19, 2008)

Fri, 08/17/2012 - 11:01 | 2714138 Bay of Pigs
Bay of Pigs's picture

Spanky and Buckwheat are both are pathological liars.

Ultimate Mitt Romney Flip-Flop Collection

http://www.liveleak.com/view?i=e80_1345168212

Fri, 08/17/2012 - 15:24 | 2715015 malek
malek's picture

So what's your point?

We should still vote for the Messiah this time?

Fri, 08/17/2012 - 09:50 | 2713910 Seasmoke
Seasmoke's picture

Circle Jerks are never as good as they seem

Fri, 08/17/2012 - 10:12 | 2713978 Dr. Richard Head
Dr. Richard Head's picture

Especially when you are the first to drop your load.  Post ciotal remorse indeed.

Fri, 08/17/2012 - 09:52 | 2713917 tuttisaluti
tuttisaluti's picture

The Fan starts to turn.

Fri, 08/17/2012 - 10:13 | 2713979 Dr. Richard Head
Dr. Richard Head's picture

Shits been flying for some time now.  We need to introduce these two soon.

Fri, 08/17/2012 - 09:55 | 2713926 Sofa King
Sofa King's picture

Is Geitner looking for a sevrence package before the shit really hits the fan?

Fri, 08/17/2012 - 10:07 | 2713957 insanelysane
insanelysane's picture

He is looking for a way to not get prosecuted if the Repubs end up winning in November.

Fri, 08/17/2012 - 09:56 | 2713930 fuu
fuu's picture

Fuck you TIMMAH!

Fri, 08/17/2012 - 09:56 | 2713931 LongSoupLine
LongSoupLine's picture

Hmmm, that would be admitting to financial treason against the United States of America.

 

Let me seeeee....hmmm, yup, here it is...punishable by death.  Ok then, well, sorry Timmy boy.  Bub-bye then.

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