http://zerohedge.blogspot.com/2009/04/cuomo-letter-exposing-paulsons-and.html.
On or about Dec 21.09 Ken Lewis wished to invoke the MAC and thus not pursue the takeover of Merill Lynch, but was immediately blackmailed by Paulson who threatened to remove all the board of Bank of America if they did not complete the takeover. Ken Lewis writes back to the board explaining the days events much to his horror.
They had received TARP money and I guess government had that power to remove the board. Lewis then decided to save his job and all his board of directors and sacrifice shareholders. Lewis and his board hid from his shareholders the true state of affairs of Merrill Lynch. The shareholders voted for the takeover as knowledge of the deteriorating conditions within Merrill were not disclosed. Not only that but Merrill Lynch executives also decided to give themselves huge bonuses despite their massive losses.Such good sports!!
You will now see massive lawsuits against the company and Government and quite possibly fraud charges!. Paulson and Bernanke will get immunity from prosecution. These actions will bring down Bank of America and trigger derivative losses. There is one individual, a Mr Fingers, whose family has 1.5 million shares. This man is orchestrating class action and criminal suits against all directors of the firm.
On Lemetropolecafe cafe website, you will also see an article by John Crudele who writes for the NY Times. he writes that there are 20 criminal investigations underway due to the TARP money and its unknown destinations. Here is the link: (the most important section is the second to last paragraph)
JOHN CRUDELE NEW YORK POST April 23, 2009 PLEASE help me find the President's Working Group on Financial Markets. The Working Group, which is also affectionately known as the "Plunge Protection Team," was a favorite of former Treasury Secretary Hank Paulson. If you Google the name "President's Working Group" and "Paulson," you get no fewer than 145,000 citations. The Working Group was Paulson's go-to team. Last March 13, for instance, Paulson said the PWG wanted more regulatory oversight of mortgage lenders -- proving, I suppose, that it's never too late to close the barn door even after the last pig has exited. In October, the PWG issued a 28-page report about reforming the financial system. Around the same time, the PWG -- sounding awfully like Paulson -- issued a statement saying the Federal Reserve was "committed to using all tools necessary" to make sure the US banking system had enough liquidity. You get the idea: There wasn't a banking-system crisis last year that the PWG didn't have a hand in. Now? The group appears to be gone, seemingly missing in action. Send out the searchers! Tim Geithner never brings up the PWG, even though he was part of it last year as head of the New York Federal Reserve Bank. And nobody at Treasury, where the group is technically domiciled, seems to have a phone number for the PWG. Two numbers given to me by the Treasury operator were outside teleconferencing services. And a couple of times, I was transferred to something called the Office of Financial Stability. That could be the new name for the President's Working Group, but I couldn't tell because the press contacts -- President Barack Obama's people -- had never heard of it. Just for the record, the nickname Plunge Protection Team came about because the PWG is suspected of being the organization that was in charge of stepping in front of a cascading stock market. It was founded in the late 1980s under presidential order of Ronald Reaganwith a conveniently ambiguous purpose. My advice to the Obama administration: Get the keys to the PWG's office and learn some of the stealth intervention the group seems to have practiced. (A footnote: Several times I've asked for documents belonging to the PWG under the Freedom of Information Act. I guess the disappearance of this organization from the Treasury phone system means my odds of getting these secret papers just got reduced considerably.) * Another waste of taxpayers' bailout money? Here's a tip I got from an anonymous reader this week about a company I believe to be Citigroup. John: I thought you would like to know that a major bank with a one letter [ticker] symbol is offering traders a percentage increase on their profit/loss as people are trying to hire them away. Almost twice as much percent profit. But the worse part is they are offering to move traders from different countries and give them ex-pat packages paying for all rent up to $6,000 a month. Two business class [airline] tickets and $30,000 in moving costs. This is what they are doing with taxpayers money. Citigroup is the only bank whose stock trades under a one-let ter symbol. It's the let ter "C." A spokeswoman for Citi said it was a "totally false, baseless rumor." * In my March 31 column I mentioned that banks that received funds under the government's Troubled Asset Relief Program were getting nervous because the Treasury's special inspector general, Neil Barofsky, was asking them to give a "narrative" of where the money was going. I said in that column that the banks were starting to hire criminal defense lawyers because, ya know, their executives don't want to go to jail. This week Barofsky told Congress in a report that there were "almost 20" criminal investigations going on related to the $700 billion TARP program. * Back in February I had an expert look at the nation's financial system and I wrote in this column that three or four big banks were in serious financial trouble. So it wasn't a surprise when Geithner told Congress this week that the "vast majority" of US banks are in good shape. The government may -- or may not -- release the so-called stress tests it recently did on banks. But the problem is this: Banks are playing fast and loose with their accounting and investors are having a hard time believing anything that comes out of the financial sector of the economy. This can lead to horrible things. john.crudele@nypost.com
PLUNGE PROTECTION TEAM SEEMS TO BE MISSING
OK lets go to yesterdays events:
Gold closed up by 7.00 to 913.00. Silver rose to 12.92 up by 7 cents. The open interest on the gold comex rose significantly up by 8200 contracts. Even the silver OI continues to rise up by
1334 contracts to 97000. The bank shorters are now feeling the heat.
The big event of the day and a very significant one is the announcement that China has officially increased its reserves from 600 tonnes to 1054 tonnes as of April 24.09.
First, the announcement:
China gold reserves apparently doubled
HONG KONG (MarketWatch) -- China has added to its gold reserves and now holds 1,054 metric tons of the yellow metal, according to a Friday report by the Xinhua News Agency, which cited comment by Hu Xiaolian, head of the State Administration of Foreign Exchange.
Hu said that China's gold reserves had risen by 454 metric tons since 2003 and that the total was being reported to the International Monetary Fund as per the organization's rules.
A Dow Jones Newswire report said the figure cited was nearly double China's reported gold reserves as of the end of last month, but noted that it wasn't clear which gold reserves Hu was referring to.
She said China's gold reserves now rank fifth in the world among nations which publicly disclose their holdings.
Analysts said China bullion buying reflects efforts to diversify their nearly $2 trillion stockpile of foreign exchange reserves.
"Chinese officials have been increasingly vocal about their concern on the U.S. dollar and the U.S. bailout policies of late, and have actively been seeking to diversify into other assets, especially commodities," said Martin Hennecke, an associate director with Tyche Group in Hong Kong…
-END-
I have telling you all along that China has been accumulating gold. If China announced that they increased 454 tonnes in 6 years, it is my bet that they have accumulated over 800 tonnes to hold 1400-1600 tonnes of gold. It is not in China's interest to tell the truth of their gold holdings. They are on record that they wish to hold 5000 tonnes of official gold reserves!!
China's mining boom started slowly in 2003 where they mined 100 tonnes of gold. Almost all of this gold went to start China in their jewellry demand. From 2004 to 20007 China mined approximately 120 tonnes of gold each year which fed its fledging gold retail market. In 2008-2009, they increased their tonnage of gold to 280 tonnes. Probably 140 tonnes of that went to the jewellry business and 140 tonnes to reserves. China exports zero gold.
We can assume that China has bought at the very least, 454 tonnes minus 140 tonnes or 214 tonnes of gold on the open market or about 18 tonnes per month. We have seen Russia report purchases of 13 tonnes of gold per month. ( Ecuador and Venezuela central banks have also purchased large supplies of gold).
The world gold council now has a severe problem. They balanced demand and supply and now this 454 tonnes came out of nowhere. Since the newly minted gold is constant and known at around 2400-2600 tonnes per year, the added demand from China must be balanced with a supplier of that gold.
We see demand for gold rise as evidenced by the huge rise in the gold ETF GLD. They have increased their 'inventory' from zero in 2004 to 1127 tonnes now.(I am not convinced that they have this inventory) Yet the world gold council still lists all the countries with their gold. As of Thursday, the WGC lists all the world and the IMF with 29,600 tonnes of gold as reserves.
What country or what countries have supplied this tonnage of gold to the GLD, China, Ecuador , Venezuela and Russia? The supply/demand equation is now full of holes!!
The following is Bill Murphy's understatement as to the significance of the announcement:
To say that this revelation is a big deal is an understatement … for a number of reasons…
*It is more evidence that various central banks are increasing their gold holdings, in contrast to a number of western banks which have been selling for more than a decade.
*China’s move debunks Planet Wall Street and other western central bankers that gold is a barren asset and not worth owning.
*And it enhances the notion that gold is a valuable reserve which will encourage other central banks to follow China’s lead.
*It surely will spook some of the sheeple central bankers who have foolishly dumped their country’s gold reserves at bargain basement prices … especially at a time when the West is looking at one financial crisis after another and the world’s major currency reserve, the dollar, is looking very suspect. A number of them are unlikely to press for further bullion sales from their countries’ reduced reserves.
*The likelihood of China continuing to build its reserves is extremely high. They were secretly building their gold reserves BEFORE the latest financial crises. If this was the Chinese mindset then, what must it be now? As is, their percentage of gold reserves is still on the very low side.
*Because of what the US is doing with our bailouts and fiscal deficits, the US dollar is surely on a precipice, thus China must be looking to accumulate more gold. Therefore, this is not a sell the newsmarket announcement. It is just the opposite. It is a clarion call to buy physical gold.
*That clarion call will not go unheeded by the sophisticated big money in the world.
*This is a major new headache for The Gold Cartel.
end.
Please remember that the bullion banks are short somewhere around 16000-20,000 tonnes of gold. Now that China has gold on its shores this gold will never come back. These bullion banks have a big headache.
You now have countries not favourable to the usa gobbling up any gold offerings. It will now be very difficult for cartel members to bomb paper gold if they suspect that China and or other countries will buy all that they offer and convert that paper into real gold.
Yesterday, the dollar tanked but also the bonds fell badly. Usually that is a harbinger of trouble.
The long bond fell to 124.62. A drop to around 116 will break JPMorgan.
Lets go to other news of the day:
The usa released details on the stress tests. They indicated that the banks need around 1 trillion dollars of new capital.
I thought that the banks had good income in the lst quarter and they were on their way to recovery.
Here is the report:
Top U.S. banks must hold sizable capital buffer: Fed
WASHINGTON (Reuters) - The top 19 U.S. banks need to hold a "substantial" amount of capital above regulatory requirements to weather a potential worsening of the economic recession, the U.S. Federal Reserve said on Friday.
Supervisors said "stress tests" regulators conducted at major banks were aimed at ensuring the institutions have enough capital in reserve to continue to lend in potentially bleaker conditions, and are not to be considered a measure of banks' current solvency.
"It is important to recognize that the assessment is a 'what if?' exercise intended to help supervisors gauge the extent of capital needs across a range of potential economic outcomes," the Fed said in a white paper outlining the methodologies regulators employed.
-END-
Here is the opening paragraph of the white paper on the stress tests released by the Fed:
14:05 Fed releases white paper regarding stress tests
The following is the opening paragraph from the white paper, which is available via the Fed link attached:
"Most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized. However, losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks. Lower overall levels of capital—especially common equity—along with the uncertain economic environment have eroded public confidence in the amount and quality of capital held by some firms, which is impairing the ability of the banking system overall to perform its critical role of credit intermediation. Given the heightened uncertainty around the future course of the U.S. economy and potential losses in the banking system, supervisors believe it prudent for large bank holding companies (BHCs) to hold additional capital to provide a buffer against higher losses than generally expected, and still remain sufficiently capitalized at over the next two years and able to lend to creditworthy borrowers should such losses materialize."
Reference Link
end.
Home prices continue to fall. This is the security that banks hold and this security is dropping like a stone:
U.S. home sales drop in March
WASHINGTON (Reuters) - Sales of newly built U.S. single-family homes dropped 0.6 percent in March, but the stock of homes for sale at the end of the month still plummeted at a record pace, Commerce Department data showed on Friday.
The inventory of new homes shrank in March, to 311,000 from 328,000 in February. That left the supply of homes available for sale at 10.7 months' worth, compared to February's 11.2 months.
The Commerce Department said that the monthly change in inventories, of 5.2 percent, was the largest drop in more than 45 years and the year-on-year plunge of 33.7 percent was the largest on record.
February sales were much stronger than originally thought, with the report showing they rose 8.2 percent, compared to the 4.7 percent gain previously reported.
The March drop brought home sales to a 356,000 annual pace. Analysts polled by Reuters had forecast sales at 340,000.
The median sales price for a new home fell to $201,400 from $208,700 in February. The average price, however, rose slightly to $258,000 from $255,100.
end.
Ed Hadas writes:
The worst may be yet to come
Is the worst over? Investors seem to think it is. Confidence that the crisis is winding down has been mounting.But the right answer to the question depends on what "worst" is meant. Appropriate replies include: probably, yes but so what, not yet, probably not, and let's hope so.
By Edward Hadas, breakingviews.com
Last Updated: 3:28PM BST 22 Apr 2009
The worst of the credit squeeze is probably over. True, loan losses are still increasing. But the official aid is massive: minimal policy interest rates, ample liquidity supplies, capital injections and implicit loan guarantees.
The aid from above has helped push dollar interbank borrowing rates down in the last six weeks. The cost of insuring against corporate failure in the credit default swap market has also fallen by 0.5-0.7 percentage points to about 1.9 and 1.6 percent annually for the main US and European investment grade CDS indexes. Improving bank credit has contributed to this trend. Better credit all round means more loans will be refinanced, so fewer companies will go under than would otherwise be the case.
The big official liquidity push also gives investors more cash to put into the markets. The additional buying power may account for some of the sharp increase in oil and equity prices. There have also been tentative signs of revival in the junk bond and IPO markets. To some extent, the mood is following the money.
It may be due to government help or it may just be the passage of time, but another worst that has probably passed is in the pace of economic decline. The huge sudden drop in activity after the collapse of Lehman Brothers last September has already become something of a business legend. If the decline had continued at that pace, economies would be back to the Stone Age in a few decades.
It's not going to be that bad. Globally, exports are down 30pc since last July, according to Lombard Street Research. But the pace of decline is moderating. Similarly, US housing starts, which have declined by 75pc since the 2006 peak, may have reached their low.
The balance of indicators still suggests GDP is falling in most developed economies, but at a much less dramatic rate than a few months ago. When the economy is only declining at a moderate pace, some measures typically suggest that growth is returning - the much talked-about "green shoots" - but more show further decline. That seems to the case now.
Inventories complicate the picture. A sharp decline in global demand led to an even sharper reduction of inventories as retailers and manufacturers cut back. As the inventories are rebuilt, production will most likely pick up faster than consumption.
So yes, all in all the economy isn't shrinking as rapidly as it was. But so what? It's still shrinking. On that yardstick, therefore, the worst isn't yet over.
Now look at another measure of "worst": unemployment. Even when growth does return, recovery is likely to be anaemic. It will take time to absorb the excesses built up during the credit boom, from houses in the US to too many Chinese factories making cheap goods.
What's more, it's not as if all that private-sector debt has gone away.
The rise in savings rates in the US and elsewhere isn't going to be a one-quarter wonder. This means that the peak in unemployment could easily be two years away.
And will that then be the end of the pain? Probably not. The crisis will leave government balance sheets shot to pieces. The best case scenario is that the authorities manage to suck all their fiscal and monetary stimulus out of the economy safely once economic growth has bottomed out. Then all that the world will suffer is high taxes and slow growth.
But there is a risk that this outcome proves too unpopular and that the authorities instead take the current fad for "quantitative easing" to the extreme - and just print money to finance their deficits. The outcome would then be inflation.
An inflationary outburst might even lead to another sort of financial crisis - a loss of confidence in key currencies. That could be worse than anything seen up to now.
Can such a dire outcome be avoided? Let's hope so.
-END-
We have seen the Federal Debt remain at 11.19 trillion dollars despite the tax recenue receipts. This does not bode well by the government. They are in need of 3.8 billion dollars per day.
The usa budget originally called for spending of 3.6 trillion dollars. With the economy slumping and with the newly added expenditures of unemployment benefits, it looks like spending is heading for 3.9 trillion dollars.
Tax receipts etc are heading for a figure below 2 trillion dollars. Lets say it settles at 1.8 trillion. This will result in a deficit of 2.1 trillion dollars.
Then we must add the new stimulus bill of 1 trillion dollars.
China is cashing in their dollars to purchase gold and other commodities. Expect another 1 trillion of foreign debt to be cashed in. The usa must finance 4 trillion dollars of debt with nobody to buy this debt.
The only buyer is the government and yet with all this QE we see bond yields rising!!.
The usa is in serious trouble.
Have a great weekend
Harvey.
