The politicians spent trillions of dollars (in our name) on bailouts and "stimulus," providing record bonuses to Wall Street executives for their amazing earnings, while cash-strapped families are hurting more than ever and home foreclosures continue to rise. The bailouts and "stimulus" they passed, in spite of public dissent, were supposed to turn the economy around ... at least, that's what the politicians promised. But as we are all witnessing in our daily lives, the economy just keeps declining.
It's all been one big giant scam. How else can one explain it? Nobody actually believes in that Keynesian nonsense, do they? Even the record earnings and bonuses at the banks are a fraud. Well, the bonuses are real. But the earnings have been artificially inflated by new accounting tricks (just as their assets were inflated by the Federal Reserve counterfeiting money).
The US banking recovery is a sham
So is it safe to buy US bank shares again?No. Those bumper profits are nothing like as good as they appear on the surface. Nor will the figures set to be reported by other US lenders be as good as they first appear.
The arcane-sounding FASB 157 rule may seem deadly dull, but for bankers it's very important – and very controversial, too. Here's how it works. When banks want to borrow money, they often do so by selling bonds. These are in effect IOUs. FASB 157 lets these banks pretend they'll buy back their IOUs at current market rates, even though they may have no real intention of doing so.
Now let's say that a bank's IOUs drop in price – for example, because it's reckoned by the market to be dodgier than was previously thought, meaning that the risk of holding those IOUs rises.
Although the face value – the actual amount owed on the IOUs – stays the same, the bank is now allowed to assume that it owes less money to its creditors. So it can book the difference between the previous IOU value and the current, lower price as a profit.
Bank of America, the biggest US bank by assets, may record a $1bn second-quarter gain from writing down its debts to their market value, says Keith Horowitz at Citigroup. Morgan Stanley will also probably record $1bn in such debt valuation adjustments in the second quarter, he says, equal to 60% of his estimate for the firm's pre-tax income.
Then there's the recently passed 2,319-page "financial reform" bill which entitles Wall Street with bailouts forever, and ignores the shenanigans played at Fannie and Freddie while providing the GSE's with bailouts forever too. The icing on the cake though is, that the primary culprit in our economic mess, the Federal Reserve, has been granted more power instead of the audit "we the people" deserve.
So much for "sticking it to Wall Street." It's all a big charade (see Goldman Sachs and the Wall Street Witch Hunt), as Ann Coulter says:
Strangely enough -- for a bill that allegedly sticks it to Wall Street -- during the Senate Banking Committee hearing this week, Goldman Sachs chairman Lloyd Blankfein endorsed the Dodd bill. Someone should have asked him who from Goldman wrote it.
In 2008, Goldman employees gave a record-breaking $1,007,370 to the Obama campaign.
This year, the "securities and investment" industry has already given twice as much money to the Democrats as to the Republicans.
ABC News reports that "the five biggest hedge fund donors all gave almost all their donations to Democrats." Among the biggest recipients of hedge fund money were Senators Harry Reid (Democrat), Chris Dodd (Democrat) and Charles Schumer (Democrat).
But don't you worry your little head though, because everything is still alright in power elite land ... Like I said, more bank bailouts are on their way!
"Who is John Galt?"