Most American Banks Are Paying More at the Discount Window Than EU Banks For Swaps

Swap lines for EU banks are now discounted to 0.58 percent. The European Central Bank gives us euros as collateral, and we give them dollars at that rate.

Most American banks are paying much more for dollar loans, either 0.75 percent or 1.25 percent, at our own discount window. Seasonally adverse conditions allow some US banks to borrow at 0.25 percent. 

The reason the EU gets such a break? Maybe because the EU is in big, big trouble, Trouble with a capital "T".

See the discount window data, here.

h/t Mish

Bank Bailouts Were a Comprehensive Assumption of Costly Downside Risks by the State

In other words, a form of fascism.

So says Steve Waldman at interfluidity.com, here:

Cash is not king in financial markets. Risk is. The government bailed out major banks by assuming the downside risk of major banks when those risks were very large, for minimal compensation. In particular, the government 1) offered regulatory forbearance and tolerated generous valuations; 2) lent to financial institutions at or near risk-free interest rates against sketchy collateral (directly or via guarantee); 3) purchased preferred shares at modest dividend rates under TARP; 4) publicly certified the banks with stress tests and stated “no new Lehmans”. By these actions, the state assumed substantially all of the downside risk of the banking system. The market value of this risk-assumption by the government was more than the entire value of the major banks to their “private shareholders”. On commercial terms, the government paid for and ought to have owned several large banks lock, stock, and barrel. Instead, officials carefully engineered deals to avoid ownership and control.

The New Global Fascist Order Slashes Dollar Borrowing Costs, But Not For You

It's not fascism when WE do it.

As reported here:

The U.S. Federal Reserve slashed the cost of emergency dollar loans to foreign banks as the world’s major central banks took coordinated action to prevent Europe’s debt crisis from triggering a global liquidity crunch.

The moves were announced in statements issued simultaneously by the U.S. Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan, the Bank of Canada and the Swiss National Bank. ...

“Global central banks are opening the spigots and the casualty has been the dollar,” said Kathleen Brooks, research director at Forex.com.

“The extension of the dollar swap lines essentially means that dollars will be available cheaply and on request for the next 15 months to Europe’s troubled financial sector, which will probably greedily eat them up after being starved of much-needed dollar funding since the summer.”

Meanwhile the US consumer's liquidity crisis continues apace:

hours worked remain flat year over year;

real wages have declined nearly 2 percent year over year;

housing values have declined $6.6 trillion since 2006;

owners' equity in real estate is down $6.9 trillion since 2005;

household net worth is down $5.55 trillion since 2006;

unprecedented unemployment above 8 percent has continued for 33 months straight;

the US dollar has declined 27 percent in value in ten years;

debt delinquency rates are running at 10 percent;

open credit accounts have declined by 23 percent since 2008;

the annual percentage rate on the average credit card is nearly 15 percent;

a three year new car loan will cost you nearly 4.5 percent;

a 30 year mortgage will cost you 4 percent, if you can get one;

and the bank pays you doodily squat on your savings.

But if you're a European bank, the US Federal Reserve is making a gift of loans at just 0.58 percent:

The new [dollar swap] pricing will be applied to operations starting on Dec. 5. Seven-day loans would carry an interest rate of about 0.58 percent, down from 1.08 percent, based on the current one- week OIS rate of 0.08 percent.


The bankers' bank has picked its winners again. And you aren't one of them.

Household Debt Declines One Half of One Percent, Headlines Scream "Consumers Deleverage"

What a crock!

Total household debt fell $60 billion quarter over quarter to $11.66 trillion. Big whoop!

Examples here and here.






Does this look like a dramatically improving picture to you?!

(source)

Newt Gingrich Supported Government Compulsion on Healthcare in 2005

The left is all over it, here.

Capt. Terrell: "Doin' right ain't got no end."

Newt: "[W]e have no room in this society to have a free rider approach if you’re well off economically to say we’ll cheat our neighbors."

Male Unemployment is 11.2 Million, Not 4.2 Million

So says Brett Arends, here:

Millions here are still out of work. The unemployment situation is far, far worse than the government is telling you. Forget the official jobless rate, 9%. It’s meaningless. Even the so-called “underemployment” rate doesn’t tell the full story. Consider this: According to the Labor Department, the number of men age 25 to 54 who are out of work is officially 4.2 million. The reality? Deep in the footnotes the Labor Department says there are 61.6 million men in America age 25 to 54, while just 46.7 million are in full-time work. That leaves 14.9 million left over. Another 3.7 million work part-time. Seven million aren’t accounted for at all.

President Obama is Headed for an Exclusive Form of Small Group Therapy, or a Psychotic Episode

As noted here in The New Republic by a psychoanalyst, who never once suggests Obama's cool demeanor, detachment from emotion, and passivity are also characteristic of psychosis and might have been compounded by his drug use:

As sensitive he is to group dynamics, as the President of the United States, he is now the sole member of an exclusive group of one.  And he's going to need to push through his fears in order to avoid joining the only other group available to him—that of the ex-presidents.

Englishman Ambrose Evans-Pritchard Proposes American Fascist Rescue of Europe

Ju-87D Stuka Dive-Bomber

Which is to say, he proposes that the Federal Reserve buy up toxic European bonds in a veritable Blitzkrieg, here:

The Fed could buy €2 trillion of EMU debt or more [!], intervening with crushing [!] power. The credible threat [!] of such action by the world’s paramount monetary force [!] might [!] alone bring Italian and Spanish yields back down below 5pc, before one bent nickel is even spent.

One presumes that the Fed would purchase both the triple AAA core and Club Med in a symmetric blast [!] of monetary stimulus [!] across the board, avoiding the (fiscal) error of targeting [!] semi-solvent states. In sense, the Fed would do quantitative easing for the Europeans, whether they liked it [!] or not [!].

An astute commenter named silqworm got this correct: "What you call necessary to prevent fascism is fascism."

Big Banks Got Rock Bottom Cheap Loans of $1.2 Trillion on Worst Day in Dec. 2008, and Limbaugh Denies They Were Bailed Out

TARP was meant as a diversion from the real action going on behind the scenes, and the diversion is still working on the dunderheads like Rush Limbaugh.

He continues to be fixated on TARP, but ignorantly so. TARP was at least 10 times smaller than the real bailout which put taxpayers at risk.

Just today we have learned that the biggest banks made $13 billion in profits from the Federal Reserve's emergency loans, profits which small, well-run banks all over America did not get to enjoy. In fact, contrary to Limbaugh, the well-run banks got the shaft, having to pay advance premiums for FDIC insurance to cover all the failures, which last time I checked have cost $80 billion, mostly on the backs of the customers of the banks, you and me, who will end up paying the bill as banks pass their cost of doing business on to us. Part of that cost of doing business has been subsidizing the bad behavior of the top five or six 800 lb. gorillas like Citi, Bank of America and Wells Fargo.

Our fascist government picked winners and losers both through TARP and the Fed's emergency lending programs. We do not have a free market in banking. And Rush Limbaugh aims to keep it that way.

What is more, TARP recipients continue to be delinquent in paying dividends under the TARP program, as reported here in The Chicago Tribune in October:

[M]ore than 170 U.S. banks ... have missed approximately $275 million in TARP dividend payments to the government through August.

It is a myth that TARP has been "successful" in the sense that everything has been "repaid". It has not. TARP funds alone still not repaid come to $93 billion as of right now. Add in $183 billion more for Fannie and Freddie.

I nominate these as Rush Limbaugh's most ignorant comments to date:

European banks are teetering on the edge. The Italians went out and they sold bonds and they can't pay them now as they're maturing. The euro might collapse. It is real trouble. And, meanwhile, US banks did not get bailed out. Not the big banks, not the Wall Street banks. They did not get bailed out. 

We have so many lies and myths being told that people believe. Most of the big banks were forced to take TARP money so as to avoid there being a stigma. The banks that needed TARP money were the local mom and pop banks all over the country that were in trouble. The big banks, Wells Fargo, these guys were forced to sign a paper agreeing to take X numbers of millions of dollars, billions, maybe, I forget the number, but whatever it was, just to make it look like everybody was in the same boat. But the big banks paid it all back. These Occupy people are protesting something that never happened. The big banks did not get bailed out. Taxpayers made a profit on the money they were forced to borrow. Other banks did get bailed out, the little mom and pops, but the big ones did not. 

Europe is teetering, Italy, Spain, you name it, and what do we get on the Sunday shows?

It is the ignorance of the Tea Party about state-sponsored banking and the bailouts which has allowed Occupy Wall Street to occupy the vacuum the Tea Party has left about this most important of unresolved attacks on American capitalism. Unfortunately the attack on American style capitalism is now a two-front attack. On the left are the socialists of the Democrat Party who want effectively to nationalize the banking system and outlaw risk. On the right we have the liberal consensus from the era of Franklin Roosevelt which is an ad hoc echo of European fascism which pretends that banking is free enterprise while making the taxpayer responsible for its many and frequent excesses.

Too bad for America that the demagogues of both the right and the left keep you from hearing the truth.   

Rush Limbaugh Again Claims US Banks Were NOT Bailed Out

About 45 minutes into today's broadcast.

I'll have the link to the transcript later.

The funniest part of Rush's defense of fascism is that Bloomberg just today had a huge article on the Federal Reserve's emergency lending program to US and foreign banks during the 2008 credit crisis, pointing out that banks took $7.7 trillion in loans at deeply discounted rates. These loans were deliberately kept secret while everyone obsessed on the paltry by comparison $700 billion TARP bailout.

The article is noteworthy for repeating the discredited notion that failure to pass TARP caused the stock market to tank. It never mentions how the market tanked in most spectacular fashion after TARP passed.

As long as the monies were paid back, to Rush this means it wasn't a bailout.

But the new Bloomberg article points out for the first time that the banks made a profit off these loans amounting to about $13 billion:

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Now repeat after me: The banks were NOT bailed out . . .  the banks were NOT bailed out . . . the banks were NOT bailed out . . ..

Consumers Increase Spending in 2011 From Savings and Social Security Tax Holiday

Net real retail spending looks set to come in up 2.9 percent in 2011 over 2010.

Per the data here from the Census.

Average monthly retail and food expenditures in 2010 came to $363 billion per month, or $4.4 trillion overall.

Through October 2011 average monthly retail and food expenditures are running at $389 billion per month, or $4.7 trillion annualized.

That's a 6.8 percent increase so far, or about $26 billion more per month.

Less inflation running at 3.9 percent, the net real increase appears to be 2.9 percent.

$billions monthly

Unfortunately, about $14 billion of the $26 billion nominal monthly increase could be attributed to a reprieve on Social Security taxation of 2 percentage points on employee compensation running at an annualized rate of $8.3 trillion as of October. That extra money in paychecks is simply being spent.

Where did the remaining $12 billion per month come from?

From savings.

The savings rate has plummeted since January, from a rate of 4.9 percent to 3.5 percent. In January we were saving nearly $47 billion per month, but now only $33 billion, a difference of $14 billion per month.

Add the pernicious work of inflation on top of all that, and the rosy scenario of increased consumer spending doesn't look so good after all, especially since incomes are stagnant to falling. Hours worked year over year are flat, and real average hourly earnings overall are down 1.6 percent, according to the BLS here.

When the Social Security tax holiday expires on December 31, there will be less money available to spend, automatically. Robbing from Social Security for such temporary gains is a gimmick, but don't underestimate the politicians' and the voters' eagerness to repeat it under these grim circumstances. They'll take the money, even if it means saving less, because they need it.

Dear Occupy Wall Street,

Sincerely,

The Taxpayers

No Banks Were Seized On Black Friday

April 2010

Per the list from the FDIC, here.

Wouldn't want to put a damper on the Holiday spirit now, would we?

Interest on Federal Debt Topped $454 Billion in Fiscal 2011

So says the US Department of the Treasury here.

With fiscal 2011 receipts running at $2.3 trillion according to Treasury here, interest payments now represent 20 percent of federal revenues. Since we're spending $1.5 trillion more than we presently took in, you could say that almost a third of this deficit spending is interest payments.

Total US government debt is running at approximately $15 trillion, so an interest payment of $450 billion per fiscal year implies an interest rate of about 3 percent.

Double that interest rate to 6 percent and interest payments balloon to $900 billion and 40 percent of current revenues.

Mark Steyn recently had some unhappy, pornographic thoughts about that, here:

R.I.P.

[W]ere interest rates to return to their 1990-2010 average (5.7%), debt service alone would consume about 40% of federal revenues by mid-decade. That's not paying down the debt, but just staying current on the interest payments.

And yet, when it comes to spending and stimulus and entitlements and agencies and regulations and bureaucrats, "more more more/how do you like it?" remains the way to bet. Will a Republican president make a difference to this grim trajectory? I would doubt it. Unless the public conversation shifts significantly, neither President Romney nor President Insert-Name-Of-This-Week's-UnRomney-Here will have a mandate for the measures necessary to save the republic.








(source)

The 2010s Will Be Grim, a Depression of Spectacular Severity

So says Martin Hutchinson (who blames the Federal Reserve for the Great Depression) for the Asia Times:

[T]he 2010s will be a grim decade, because the transitional and wealth effects of eliminating the government debt markets that have formed the centerpiece of the last three centuries will be enormous - a Reinhart/Rogoff depression of spectacular severity.

Bond market investors, take note.

Read the rest here.

Things You Do When Democrats Get Elected President

Lyndon Johnson: Keep an eye on your shoes.

Jimmy Carter: Change your religion.

Bill Clinton: Buy a pistol.

Barack Obama: Upgrade to Life Member in the NRA.

Remembering the $Trillions Withdrawn from the Housing ATM

Boy, don't we wish we had those back today.

Consider The Washington Post, May 30, 2007, here:

According to Fed data, homeowners' equity -- the value of their homes minus mortgage debt -- grew to nearly $11 trillion at the end of [2006], or double the value at the end of 1998. ...

[T]he housing boom ... fueled spending directly by turning homes into cash machines. As prices rose and interest rates fell, Americans extracted trillions of dollars in extra cash through home sales, mortgage refinancings and home equity loans.

Homeowners gained an average of nearly $1 trillion a year in extra spending money from 2001 through 2005 -- more than triple the rate in the previous decade -- according to a study by former Federal Reserve chairman Alan Greenspan and Fed economist James E. Kennedy. That's the "free cash," as the authors call it, left over after closing costs and other fees deducted from equity withdrawals.

Most of the money extracted during those boom years, nearly two-thirds, came from home sales, the authors found. Another 21 percent came from home equity lines of credit, while 15 percent came from mortgage refinancings.

About a third of the free cash gained during this period was used to buy other homes, they calculated. About 29 percent was used to acquire stocks and other assets. About 12 percent went to home improvements. And nearly a fourth, 23 percent, went to consumer spending, including paying credit card bills and reducing other non-mortgage debts.

Translated into dollars, a trillion dollars a year for five years over 2001 through 2005 is $5 trillion nominal in extra spending money, nearly a quarter of which, $1.15 trillion, was simply blown. Some people literally ate it, drank it, and danced the night away with it. If the study is correct, the extra spending money in the 1990s from our homes came to an additional $3 trillion. I can only guess about the 1980s, but even if only $1.5 trillion, this means Americans have easily extracted almost $10 trillion from home equity over the course of 30 years.

A review of the latest Federal Reserve data here shows that net worth of owners' equity in household real estate has fallen $7 trillion just since 2005. Falling from $13.2 trillion in 2005 to $6.2 trillion as of the end of Q2 2011, this is a decline of 53 percent. This metric pretty perfectly mirrors the bubble in housing which began in earnest in 1997, coincident with the change in the tax law permitting capital gains tax free every two years up to $500K with conditions. Except that the measure hasn't yet quite reached what it was in 1997. We're still about a trillion dollars shy of that mark in nominal terms.

Total real estate valuation over the same period has fallen less, from $22.1 trillion to $16.2 trillion, or 27 percent. But equity as a percentage of value has fallen more than valuation, 35 percent.

A longer term chart of the latter phenomenon found here shows that since 1980 home equity as a percentage of value has been under constant pressure, most probably from what is called portfolio shifting, debt expenditures from car loans and credit cards, college tuition, stock investing and second, third and fourth home investing piling into HELOCs, 2nds, refis and the like. The interest on all that stuff before 1986 was tax deductible in its own right, but after Reagan's famous tax reform, deductibility was restricted to interest from home equity loans and lines of credit only. That arrangement was formalized at levels up to $100K in 1987, precisely after which as shown in the chart the decline in owners' equity commenced with new vigor. So people who could financed everything they could through HELOCs, cash out refinancing and the like in order to continue to be able to deduct the interest expense on their tax returns.

As a result of this and the collapse in the real estate bubble, today we are faced with the dramatic all time low of 38 percent in owners' equity as a percentage of value, a decline of nearly 47 percent since 1982.

Just think how much better off we would be today if we hadn't tapped all that equity over those three decades, especially in inflation-adjusted terms. We truly have been the squanderers.

So present household real estate valuation at $16.2 trillion represents a level last seen in 2003 in nominal terms. But adjusted for inflation, that's $13.7 trillion, which was actually the total nominal value of household real estate last seen in 2001. To get to the pre-bubble valuations of 1996, today's number would have to fall yet further to $11.8 trillion.

In other words, to erase completely the effects of the bubble on valuations, adjusted for inflation, would imply that total real estate valuation would need to fall another 27 percent from here, or $4.4 trillion.

The American dream nightmare.

'Gridlock is the Most Constructive and Moral Form of Government'

Except "with entitlement programs on autopilot."

So says David Harsanyi here. The only truly sane thing I read today, or most days.

You've got to like a guy who starts off with an HL Mencken line like "every decent man is ashamed of his government." I'm feeling especially decent today.

What we really need to fear most is one party, it doesn't matter which one, in complete control of the government. And that we don't exactly have that today means I can be grateful with a straightface tomorrow, Thanksgiving 2011.

Failed Banks From Last Friday, 11/18/11

#89 was Polk County Bank, Johnston, Iowa, costing the FDIC $12 million.

#90 was Central Progressive Bank, Lacombe, Louisiana, costing the FDIC $58.1 million.

Second Estimate of Q3 2011 GDP Falls to 2.0 Percent from 2.5 Percent

Per the BEA today, here:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.0 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter) according to the "second" estimate released by the Bureau of Economic Analysis.  In the second quarter, real GDP increased 1.3 percent.

The GDP estimates released today are based on more complete source data than were available for the "advance" estimate issued last month.  In the advance estimate, the increase in real GDP was 2.5 percent . . ..


So .4 in the first, 1.3 in the second, and now 2.0, for an average of 1.2 so far in 2011. That's not even treading water. Obama doesn't have a clue. The guy should pack it in and just go golfing for the rest of his life.