The Market Ticker

You get to lie straight to Congress and the people in Washington DC once.

Ben already got that "pass" back in September 2008, when he had been repeatedly claiming that he was providing "extraordinarily liquidity support" to the markets.

As I reported at the time, and which is proved by the data, in point of fact on September 24th Ben Bernanke's NY Fed desk intentionally drained over $100 billion in liquidity from the banking system:

Exactly three trading days later the market began its fall crash, losing some 30% of its value over the next two months, and the next day Washington Mutual collapsed.

Every Congressperson got a faxed "letter form" copy of that Ticker on the 24th warning them of what was being done and urging them to act and STOP IT.

Absolutely nothing was done, and Bernanke was NEVER called to account or asked under oath why he took that action or what his intention was.

The outcome, however, is a matter of historical fact.  Washington Mutual collapsed, the market imploded and Americans suffered trillions of dollars of lost wealth in their 401ks, Pension Funds and IRAs.

Now Bernanke appears to have been caught in a flat lie about coercing Bank America during the end of year merger finalization between Bank America and Merrill Lynch.  Watch this video:

Bernanke clearly stated that he exerted no "inappropriate" influence.

Really?  The WSJ says otherwise:

A Dec. 21 email from Federal Reserve Bank of Richmond President Jeffrey Lacker to Fed employees said that Mr. Bernanke "intends to make it even more clear" that if Bank of America kills the Merrill deal, and later needs government assistance, "management is gone."

Mr. Lacker added that he had had a "long talk with Ben" about the matter.

Is that extortion?  If you or I tried something like that as private citizens there'd be trouble.  So how is it that we have a Fed Chairman who is involved in this sort of sleazy BS, and more to the point, was he perjuring himself in front of Congress?

Tricky-Dick Nixon did not lose the Oval Office because some thugs broke into the Watergate Hotel.

He was threatened with impeachment and resigned because he lied about his knowledge and involvement in the matter.

Note that The Federal Reserve was asked for this documentation by Congress.  They tried to "stiff-arm" the Committee, resulting in a subpoena being issued.

Now we find out why they tried to stiff-arm Congress, and it is clear that they complied with the subpoena for one reason only: Mr. Lewis is going to testify tomorrow on this and related matters, under oath.

The gambit was that they'd get away with the apparent original lie and that Congress would not "call the bluff.

Bad guess.

This is twice that Bernanke has, in my opinion, intentionally misled both Congress and The American People.  It is my opinion that he has done so to further the crony banking interests that ultimately received billions of taxpayer dollars in assistance. 

It also appears to me that he both orchestrated the crash of the market in the fall of 2008 as a leverage tool to force the passage of the EESA/TARP and may have been responsible for Washington Mutual's collapse and forced dismemberment.

Let us remember that on September 20th, four days prior to Bernanke's action, Henry Paulson pitched TARP (along with Bernanke) to Congress.

Let us remember that the day after the liquidity was pulled Washington Mutual (formerly NYSE: WM) collapsed.

And let us remember that through all of this Ben Bernanke has both claimed his actions were pure as the overnight snowfall and that, in the case of Bank of America, that no improper influence was exerted by The Federal Reserve.

The evidence appears to say otherwise.

Finally, I will go further:

I directly question Bernanke's competence and charge that he is manifestly unfit to hold the office of DOGCATCHER, say much less Chairman of The Fed.

This is my evidence;

If this is not outrageous enough for you, I have a whole list of quotes both from Bernanke and Paulson over the previous two years in various Tickers and letters to Congress.

BEN BERNANKE MUST BE REMOVED FROM OFFICE, AND IF HE REFUSES, CONGRESS MUST REPEAL THE FEDERAL RESERVE ACT OF 1913 AND SET UP A NEW UNITED STATES BANK.

There is precedent for this action; former US Central banks have been dismantled by honest Congresses and Administrations.  Specifically, President Andrew Jackson shut down the Second Bank of The United States.  In fact, the charges President Jackson levelled were:

• It concentrated the nation's financial strength in a single institution.
• It exposed the government to control by foreign interests.
• It served mainly to make the rich richer.
• It exercised too much control over members of Congress.
• It favored northeastern states over southern and western states.

All but one seem to fit pretty well, no?

Do we have an honest Administration and Congress, or do we have 536 criminals: 100 in the Senate, 435 in the House, and 1 in the Oval Office, residing in Washington DC?

The people are owed both answers and actions, right here, right now, today.

I know, Obama wants his "big health plan"

You do realize that the recent "PayGo" flim-flam ignores (intentionally) up to $2.6 trillion in debt (new deficits) taken on to promote that plan, right?

Do you think we can afford it?

We ran a $189.7 billion deficit this last month folks.  Annualized this is a staggering $2.276 trillion dollars - for one year.

That's the difference between tax receipts and spending. 

$2.276 trillion dollars.

We cannot keep doing this.  Our lenders (the Chinese, Saudis and others) will not permit us to keep doing this. 

If we don't stop this stupidity, here and now, interest rates will start to move dramatically higher.

You have already seen mortgage rates rise by some 20% in less than two months. 

They could easily double from here.

A $200,000 house that was bought with a 5% mortgage is worth $104,984 if rates rise to 12%.

Let me put this in simple English so you understand what is being done to you with our incompetent, unsustainable and delinquent government policies:

Your home will have its current, depreciated due to the housing bust value, cut in half again if we don't cut this crap out right here and now.

That's right.

But it gets worse.

See, businesses have to borrow too.  And their interest costs will double as well, which means lots of job losses, as interest expense is money that can't go to payroll.  In fact, it means many millions of additional job losses, and an unemployment rate that will rise to 20% or more.

I realize that nobody is happy about the cost of health care, including me. 

But there are some very inconvenient facts related to health care in America that nobody wants to discuss, yet we must discuss them and come to some understanding in this country among all citizens.

As just one example you consume somewhere between 80 and 90% of all health care dollars that you will ever consume in your last year of life.  If you do not have the money to pay for this, currently society will pick up the tab.  It is in no small part due to this fact that we have the funding problem within Medicare today.

We provide "free" medical care to illegal immigrants.  There is, of course, no such thing as "free" medical care - what really happens is you get billed for it as a citizen, either directly in your health insurance costs or in your taxes, yet the illegal immigrant pays nothing and receives the same service you get.  Is this just?  Is this sustainable?

We have some $53 trillion in unfunded liabilities in the "social programs" in this country right now.  We cannot possibly come up with that much money.  If we were a bank, we would be shut down as insolvent.  Foreigners and others are realizing this and are diversifying out of the dollar, and out of our Treasuries.

This trend will continue until and unless we stop spending more than we make - both individually and as a nation.

At some point the revenue that the government can obtain by borrowing will dwindle and interest costs will rise to the point of being unaffordable. 

At that point a very disorderly shutdown of many services that Americans consider essential, such as Social Security and Medicare, will take place - not because the government wants to, but because it is literally out of money.

We can solve this problem, but pandering won't do it.  Nor will platitudes.  Simply put, that last year can't be yours if you are unable to personally afford it. 

Illegals cannot be funded in their health care by citizens.

There is more to a real solution, but these two facts are indeed facts, yet I do not expect our government to face them.

But if we do not, then your home will be destroyed, your job security will be destroyed, and ultimately, your nation may be destroyed.

This is real folks, and the mantra "never waste a crisis" is 180 degrees off from the correct approach.

Don't be suckered, and demand to see the math from all who claim to have an answer, because I can tell you this with certainty: without solving those two primary problems, the math will not work and the bad effects will come. 

Count on it.

I'm getting VERY TIRED of the misleading presentation in the media:

June 10 (Bloomberg) -- The Federal Reserve said the U.S. downturn may be slowing in almost half of its regions, with the outlook at some companies improving while “stringent” loan conditions and a “weak” labor market persist.

Yes, but what was the headline?

Fed Says Downturn May Be Moderating Amid Weakness

No they didn't.

5 out of 12 is less half of the districts that reported a slower deterioration, while the majority reported either faster or equivalent deterioration.

There is no evidence presented that the downturn "may be moderating."

In fact, the high-frequency data says that things are getting much worse in places like California.  What high-frequency data?  Try this:

The state's revenues from personal income taxes tumbled by 39.3 percent in May from a year earlier while revenues from corporate taxes fell by 52.1 percent and revenues from sales taxes sagged by 7.6 percent, according to a report released by Chiang's office.

The bold part is the important one.

See, sales taxes are (1) almost never gamed as there is little point, (2) they're paid by consumers but collected by businesses who have little incentive to cheat, (3) the penalties for cheating are draconian and the audits frequent, and (4) they apply to nearly all goods (except food in some states.)

Therefore, if sales tax revenue is down 7.9%, you can reasonably presume that economic activity at the consumer level is down somewhere around 7.9%.

Since the consumer is 70% of the economy, it is not hard to figure out that we are approaching the 10% "top-to-bottom" decline level that defines economic depression.

Second, look at income tax receipts.  Down 40% for individuals and half for businesses.  Businesses only pay taxes on profits, while individuals only pay taxes on incomes.  Since individual taxes are typically progressive, this points to a roughly 30% aggregate decline in personal income (!) and a nearly-half cut in corporate profits (!!!)

While California is not the entire country, of course, it is the largest economic block in the nation, and those numbers are frightening.

This sort of "reporting" is absolutely outrageous and irresponsible, and it is high time that the people demand that the media start telling the truth instead of planting false hopes and playing games.

Off the wire this morning:

White House Advisor Volcker:

• Prospects for a strong recovery are unlikely although there will be some growth in late 2009
• Does not expect any inflation pressure for "some time to come."
• There are no practical alternatives to the USD as a global reserve currency, none to come today or "for many tomorrows."
• It is unwarranted to allow firms that have deposit insurance to conduct proprietary trading.
• There is no need to supervise hedge & private equity funds as closely as banks.

Ding ding ding ding ding.

I suspect he's dead wrong on the dollar though.

But on banks conducting proprietary trading?  SPOT ON PAUL.

Now get The Obama Administration to LISTEN TO YOU and put a stop to the stupidity of Goldman, JP Morgan and others trading on a daily basis in the markets for their own accounts, including in the oil markets.

A breath of sanity is felt.  One small breath, but a breath nonetheless.