Loan Sharkin is tough business. If you’re a central banker, you know that it’s a craft, it’s art and dodging. They have the extra problem of taking care of their buddies. For their friends IN the cartel here in America it’s pretty easy there are a dozen ways to send dollars as capital for loans out to the member banks. And if it can’t be done directly, then there is the low cost lending window (see chapter 2). But how do you help out your fellow cartels in Europe who are running their own central banking scam and had a rough weekend in Vegas (over there it’s called Monaco) and have gone bust and need a bailout. Well, since the central bank operates secretly and without audits (err well, they have a joke audit, when the auditor appeared before congress to answer questions she didn’t know anything), you’d think they could just slide a few billion overseas. But it turns out, it’s not that easy to wire 100 billion dollars across country boundaries. Bernake raked his brain. Deutsche Bank was in trouble, the entire European central banking system didn’t have the capital to withstand the week. What to do, he had told them countless times not to get drunk and run off to Monaco and gamble (the derivitives market)
“The Fed is using what is termed a “temporary U.S. dollar liquidity swap arrangement” with the European Central Bank (ECB). There are similar arrangements with the central banks of Canada, England, Switzerland and Japan. Simply put, the Fed trades or “swaps” dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate. The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made, then lends the dollars to European banks of its choosing.
Why are the Fed and the ECB doing this? The Fed could, after all, lend directly to U.S. branches of foreign banks. It did a great deal of lending to foreign banks under various special credit facilities in the aftermath of Lehman’s collapse in the fall of 2008. Or, the ECB could lend euros to banks and they could purchase dollars in foreign-exchange markets. The world is, after all, awash in dollars.
The two central banks are engaging in this roundabout procedure because each needs a fig leaf. The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan.” – Gerald P. O’Driscoll Jr., December 28, 2011, Wall Street Journal
Ahh it feels like lathering yourself with fine cocoa butter and smelling of chocolate all day long. The long slow slide is marvelous because, with all the money printing by the central banks, our true rate of inflation approaches ten percent. OK let’s break down how this works. Let’s take an easy number like 100 billion.
Step One: Do the long slow slide for two years of 100 billion dollars
Step Two: European banks party and go nuts with the money for two years
Step Three: European banks pay back 101 billion and 2.5 million
BUT, what is the value of that 100 million accounting for 10% inflation? Well that would be 121 billion. The Europeans have effectively walked off with 20 billion dollars. Even better, knowing they will have this “gain” on the long slow slide, they can actually borrow against it and get the cash immediately. game. set. match.
Wait, that’s ridiculous, there’s no way they could do a 100 billion swap and no one would notice. Well we did notice. It happened on December 14th, 2011. Barnacle Ben, the Fed Chairman, met with Republican senators to brief them on the long slow slide. Sen. Lindsey Graham explained after the meeting that Mr. Bernanke himself said the Fed did not have “the intention or the authority” to bail out Europe. However, after telling our senators with a straight face that there would be no bailout of Europe, a few astute observers noticed something odd. The size of the swap lines to the ECB increased. All the way up to 52 billion. And more! The long slow slide was afoot. And no one blinked or complained.
Chapter 4: Borrowing Against Moldy Bananas – “They’re Grade A We Swear”
March 16, 2008
in November 2008, the program’s ostensible justification was to spur more consumer lending, which had dried up in the midst of the financial crisis. But instead of lending directly to car buyers and credit-card holders and students — that would have been socialism! — the Fed handed out a trillion dollars to banks and hedge funds, almost interest-free. In other words, the government lent taxpayer money to the same assholes who caused the crisis, so that they could then lend that money back out on the market virtually risk-free, at an enormous profit.
Cue your Billy Mays voice, because wait, there’s more! A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don’t pay the Fed back, it’s no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.
This is the deal of a lifetime. Think about it: You borrow millions, buy a bunch of crap securities and stash them on the Fed’s books. If the securities lose money, you leave them on the Fed’s lap and the public eats the loss. But if they make money, you take them back, cash them in and repay the funds you borrowed from the Fed.
In the case of Waterfall TALF Opportunity, here’s what we know: The company was founded in June 2009 with $14.87 million of investment capital, money that likely came from Christy Mack and Susan Karches. The two Wall Street wives then used the $220 million they got from the Fed to buy up a bunch of securities, including a large pool of commercial mortgages managed by Credit Suisse, a company John Mack once headed. Those securities were valued at $253.6 million, though the Fed refuses to explain how it arrived at that estimate. And here’s the kicker: Of the $220 million the two wives got from the Fed, roughly $150 million had not been paid back as of last fall — meaning that you and I are still on the hook for most of whatever the Wall Street spouses bought on their government-funded shopping spree.
Read more: http://www.rollingstone.com/politics/news/the-real-housewives-of-wall-street-look-whos-cashing-in-on-the-bailout-20110411#ixzz3JY22TNEL
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Chapter 4: The Back Handed Bannana Loan & Capital Stock Purchase Programs – Two Nifty Swifty Ways to Swindle
January 16, 2009
January 30, 2009
February 6, 2009
February 13, 2009
February 24, 2009
February 27, 2009 | Treasury Department CPP Transaction Report
Chapter 5: Time for Tarp II (Wait, wasn’t Tarp I repaid?)
At the request of President-Elect Obama, President Bush submits a request to Congress for the remaining $350 billion in TARP funding for use by the incoming administration.
Chapter 6: Forget TARP Welcome to TALF
Federal Reserve’s Term Asset-Backed Securities Loan Facility
February 6, 2009 | Federal Reserve Press Release
The Federal Reserve Board releases additional terms and conditions of the Term Asset-Backed Securities Loan Facility (TALF). Under the TALF, the Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated asset-backed securities backed by newly and recently originated auto loans, credit card loans, student loans and SBA-guaranteed small business loans.
February 10, 2009 | Federal Reserve Press Release
The Federal Reserve Board announces that is prepared to expand the Term Asset-Backed Securities Loan Facility (TALF) to as much as $1 trillion and broaden the eligible collateral to include AAA-rated commercial mortgage-backed securities, private-label residential mortgage-backed securities, and other asset-backed securities. An expansion of the TALF would be supported by $100 billion from the Troubled Asset Relief Program (TARP
Chapter 5: Converting Preferred Shares To Common, It’s Just Common Sense!
February 27, 2009 | Treasury Department Press Release
The U.S. Treasury Department announces its willingness to convert up to $25 billion of Citigrouppreferred stock issued under the Capital Purchase Program into common equity. The conversion is contingent on the willingness of private investors to convert a similar amount of preferred shares into common equity. Remaining U.S. Treasury and FDIC preferred shares issued under the Targeted Investment Program and Asset Guarantee Program would be converted into a trust preferred security of greater structural seniority that would carry the same 8% cash dividend rate as the existing issue.
Chapter 6: What If You Auctioned Off Bananas and No One Came?
Chapter 7: How do we get out of this mess? Just Print Off the Debt!