Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return. "
``It's your money; it's not the Fed's money,'' said billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York. ``Of course there should be transparency.''
"The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program, or TARP, bailout plan -- without safeguards put into the TARP legislation by Congress. "
The worst part is this - everything Bernanke, Paulson and the White House has said about this matter has been untrue. Lending has not increased, it has gotten significantly tighter. Homeowners are being saddled with Federally authorized new debt, not realizing relief as they were promised. The banks are using the money to pay off losses on derivatives, and if, and I emphasize if, they have any left over, they are using it to buy crippled banks.
To give the banks money, they are printing new Treasury notes. Each new note dilutes all those that came before. Sooner or later, the global markets will begin to price in the flood of new dollars.
It is far from over. There are hundreds of trillions of dollars worth of derivatives that have lost 80-90% of their original value. Right now, the Fed is accepting those for exchange with US Treasury notes. You can trust this - they aren't buying the bad derivatives for 90% off. It would do the banks no good to only get 10% of a CDO's original value, the bank would still be insolvent. So, the Fed is setting the value far higher than the market would, and giving banks hundreds of times the real value on these bad derivatives. That money is lost forever.
"$2 Trillion "
"Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. The difference includes a $788 billion increase in loans to banks through the Fed and $474 billion in other lending, mostly through the central bank's purchase of Fannie Mae and Freddie Mac bonds."
That amount will grow, and keep growing until resets peak in the first quarter of 2011. Every dollar they give out in bailouts and swaps with the Federal Reserve goes into a blackhole to cover losses, never having a chance to be relent into the economy. Any government official in the past 6 months that has said the Fed is attempting to ease lending has outright lied.
Is it a coincidence that Goldman Sachs, where Henry Paulson came from, was AIG's biggest buyer of CDS, and when AIG was about to go bankrupt and swallow billions in Goldman profits, Paulson used taxpayer money to buy AIG? Now Goldman Sachs won't go bankrupt because the American taxpayer will give billions to them through AIG, or should I say the US Treasury.
So for now, the Federal Reserve and the Treasury Department does not want you to know where they are putting your money.
Nationalizing whole industries. With little explanation as to how or why. Past leaders have done the same things, and we ended up at war with them.
Update Nov. 13, 2008 - Forbes Magazine has reported the amount is now $5 trillion the government has sent into the black hole. This amount will keep going up. As long as failed businesses, and their failing CEO's, are allowed to use false accounting rules, and not forced to suffer bankruptcy as a failed business, the taxpayer is on the hook for every dime they lose. This includes losses on transactions as far back as 6 years ago. Keep in mind, these corporations that are at the taxpayer trough use their current stock price when evaluating how much is in their asset base. As their stock price goes lower, the losses increase. So, the taxpayer will cover the difference when the big players decide to sell a stock and it goes down.
Wow.
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