There They Go Again

In an earlier blog, I pointed our that sixteen years prior to the time their financial shell game came crashing down around their heads, at least two large private investment houses realized they had no safety net to protect them in the event their reckless investment policies crumbled. Therefore, they created a system whereby the Federal Reserve System could be used to save them in the event of such a catastrophe. This safety procedure was completed in 1991.

This bill was passed basically without comment and sat for 16 years before it was used in September of 2008, when U.S. Treasurer Hank Paulson and
Federal Reserve Chairman Bernanke bailed out private lending institutions they deemed too big to fail with funds from the Federal Reserve which is funded by the U.S. taxpayer. So you and I, Mr.and Mrs. Average Taxpayer, are on the hook for the imprudent financial policies of the great private investment houses and private investment banks.


Well, seeing how well the theory of being to big to fail worked for the large private investment houses when their holdings were toxic real estate assets, credit default swaps, and bundled low rated mortgages resold as AAA rated securities, depository bands wondered why wouldn't this concept work with real estate loans and credit card debts held by large depository banks? Many depository banks were on the verge of bankruptcy in September of 2008. These depository banks had lent out far too much money for property and had retained far too little funds on hand to secure the loans. This applied not only to real property but also to commercial property. When the purchasers' could not complete their contract of sale, the banks could not simply write off the debts because they did not have the cash on hand to cover these write offs in order to balance their books; therefore, the banks continued to carry the loans at full value on their books. No private investor would purchase these properties because the banks had to sell them at full value. The private investors refused to pay full value for the properties at foreclosure sales. The properties became known as "Toxic Debts."


Believing the banks on the verge of failure, the Federal Reserve lent the
banks several billion dollars in September of 2008. The idea was for the banks to use the money to pay off their Toxic debts and free up their lending in order to spark the economy. The money given the banks was to be partially secured by preferred stock and warrants in the banks to protect the investor-the U.S. Government.


At this point the game began. The banks played the money like a big bass or trout plays an appetizing bait. They nibbled it, nudged it, mouthed it and after it was all gone spit it out. The banks used the money to pay corporate debts, pay bank officers bonus's, pay bank debts, and purchase other banks to increase their size. All in all the depository banks increased their size, eliminated competition and increased their debts. Have you ever wondered why, every time you turn around, some banks are trying to give you a credit card even when you know you have too much credit card debt now?


If a depository bank bank cannot be closed down because it has too many
outstanding home loans that are in default doesn't it stand to reason that it is equally arguable that the government cannot let a depository bank be closed down when it is holding millions of dollars of credit card debts that are in default? What about all of the businesses that are dependent upon being paid for goods purchased on credit cards to keep them afloat? Put the banks out of business and you put thousands of business's out of work and put additional thousands of workers in the unemployment lines. If the banks and investment houses were too big to fail in September of 2008, the depository banks are now bigger than ever and many times larger than before. Their Toxic Debts are still out there waiting to crash as they remain unpaid plus the banks now have billions of dollars of credit card debts that must be taken into consideration by the Federal Government. Instead of using the tax payers money loaned to them by the government to buy back their Toxic Debts and to free up their lending practices thus spurring the economy helping society raise itself out of this fiscal morass in which we find ourselves, the depository banks used the money to become even larger with the sole intent of making themselves "too big to fail."


The Federal Government tried to get a consortium of private investors purchase the current Toxic Debts in July of 09 with the intention of the buyers holding the debts for a period of time then selling them in the future when the real estate market recovered at a profit. A group of private investors showed an interest in the government plan and approached the banks. The plan fell apart as there was no agreement on the value of the debts as once again the banks wanted book value for these properties and the purchasers were willing to pay only actual value. So the Toxic Debt loom like a great star ship menacing our entire financial future and the
banks play on.

Not to worry, when the roof falls in on the banks, the banks will claim they are now clearly to big to fall plus there is less competition among them thus their failure would have an even more direct effect upon the average citizen. It doesn't matter the banks created the monopoly situation using government money, i.e. your money.


The fact is the banks are larger, their are fewer and their failure will have an even more direct effect upon the average American citizen than in September of 2008. All of this was done right under our noses. The bank executives were laughing, pardon the pun, all the way to the bank and the American taxpayer was left holding the bag. They don't care if they bankrupt us. You can bet your last dollar the bank executives were not left bankrupt. The bank executives money will be properly protected in a safe and secure account in all probability not in our country.


Feel like a fool? If you don't maybe you should. How many times do we have to be taken to the cleaners before we say enough is enough. This fleecing has taken place under both Republican and Democratic congresses and administrations. Its time to put in a new group of people in both Congress and the White House who actual want to represent the people of this country. Party affiliation doesn't cut it. Duty, Honor, Country. Those three words and and concepts have meaning. Its time to put in people who hold these words near and dear top them. Its time to "LET ER BUCK."