As if TARP money wasn’t enough…7.7 trillion in loans to bail out the criminals that caused the problem? Really? Someone needs to go to Jail in my opinion! If you or I did such things it would be fraud or worse…
That these guys still can’t get it right, look at Europe and our Too Big To Fail Banks with tons of derivative risk guaranteeing all that debt prompting yet another round of free money!
Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
‘Change Their Votes’
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”
The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.
The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.
JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.
Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment.
The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.
“Supporting financial-market stability in times of extreme market stress is a core function of central banks,” says William B. English, director of the Fed’s Division of Monetary Affairs. “Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.”
The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland.
The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view.
The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.
The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment.
The six — JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley — accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.
While the emergency response prevented financial collapse, the Fed shouldn’t have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the “supervision of the banks prior to the crisis was far worse than we had imagined,” Rosner says.
Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.”
On Jan. 14, 2009, six days before the company’s central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup’s financial strength to be “superficial,” bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis.
Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup.
“I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,” says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee.
Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark.
“We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs.
“We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”
Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial-industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival.
It would have been “totally appropriate” to disclose the lending data by mid-2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank.
“The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we’re dealing with a democracy,” Jones says. “Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.”
The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag.
TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says.
“Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says.
Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.
Lawmakers knew none of this.
They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.
Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs.
Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.
Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard — the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.
If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks.
Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.
“Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.
Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.
Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.
For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.”
Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.
‘Wanted to Pretend’
“The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out,” says Anil Kashyap, a former Fed economist who’s now a professor of economics at the University of Chicago Booth School of Business. “They shouldn’t be surprised that a lot of people find some of the stuff that happened totally outrageous.”
Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America’s loans had reached $25 billion and Merrill Lynch’s had exceeded $60 billion, helping both firms keep the deal on track.
Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase.
“These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo.
JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms.
“Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,” says John Dearie, a former speechwriter at the New York Fed who’s now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world’s biggest financial firms. “The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.”
The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms.
“When a few banks have advantages, the little guys get squeezed,” Brown says. “That, to me, is not what capitalism should be.”
Kaufman says he’s passionate about curbing too-big-to-fail banks because he fears another crisis.
‘Can We Survive?’
“The amount of pain that people, through no fault of their own, had to endure — and the prospect of putting them through it again — is appalling,” Kaufman says. “The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?”
Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up — a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported.
Lobbyists argued the virtues of bigger banks. They’re more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause “long-term damage to the U.S. economy,” according to a Nov. 13, 2009, letter to members of Congress from the FSF.
The group’s website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies.
In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks.
“The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,” Williamson says. “The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”
Dearie says his group didn’t mean to imply that Williamson endorsed big banks.
Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.
On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission.
At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman.
Anthony Coley, a spokesman for Geithner, declined to comment.
Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says.
The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn’t take a position on whether large banks should be dismantled before they get into trouble.
Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner.
“Dodd-Frank does not solve the problem of too big to fail,” says Shelby, the Alabama Republican. “Moral hazard and taxpayer exposure still very much exist.”
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks “were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter — getting loans at below-market rates during a financial crisis — is quite a gift.”
The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg.
The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest.
Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans.
The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show.
The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion.
“The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” says Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia.
While the method isn’t perfect, it’s impossible to state the banks’ exact profits or savings from their Fed loans because the numbers aren’t disclosed and there isn’t enough publicly available data to figure it out.
Opinsky, the JPMorgan spokesman, says he doesn’t think the calculation is fair because “in all likelihood, such funds were likely invested in very short-term investments,” which typically bring lower returns.
Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank’s money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed.
“Banks don’t give lines of credit to corporations for free,” he says. “Why should all these government guarantees and liquidity facilities be for free?”
In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, “unemployment would rise — to 8 or 9 percent from the prevailing 6.1 percent,” Paulson wrote in “On the Brink” (Business Plus, 2010).
Occupy Wall Street
The U.S. jobless rate hasn’t dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California.
The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor.
“The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”
In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world’s largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries.
They take full effect in 2019.
Meanwhile, Kaufman says, “we’re absolutely, totally, 100 percent not prepared for another financial crisis.”
To contact the reporters on this story: Bob Ivry in New York at firstname.lastname@example.org; Bradley Keoun in New York at email@example.com; Phil Kuntz in New York at firstname.lastname@example.org.
This is very serious business folks and your ability to Survive and Thrive are on the line now!
In the great race to the finish line to see who loses the most value first, it is a very close race now between the U.S. dollar and the Euro. Today more weakness in the Euro due to the continuing debt issues in Greece, Ireland, Portugal and Spain is driving that currency even lower!
This fall is driving worldwide stock markets lower and some commodities withe Gold up and Silver down, a very mixed bag. I am looking for the opportunity to purchase more silver somewhere in here, it might be a good time who knows now?
Stocks Tumble, Euro Weakens on Debt Concern
Global stocks sank the most in two months, while the euro slid to a record low versus the Swiss franc and commodities plunged, amid signs Europe’s government- debt crisis is worsening and the economic recovery is slowing. Costs to protect Greek debt from default surged to a record.
The MSCI All-Country World Index sank 1.9 percent at 12:33 p.m. in New York, its worst loss since March 15 on a closing basis, after the Shanghai Composite Index plunged the most since January. The Standard & Poor’s 500 Index retreated 1.2 percent. Italy’s FTSE MIB Index slid 3.3 percent as bonds tumbled in Ireland, Portugal, Greece, Spain and Italy, while U.S. Treasuries increased to near their highest levels of the year. The euro dipped below $1.40 for the first time since March 18. Oil and copper declined at least 2.2 percent.
U.S. equities followed European shares lower after Italy’s credit-rating outlook was cut by S&P on May 20 and Spanish Prime Minister Jose Luis Rodriguez Zapatero’s Socialist party suffered losses in local elections amid a backlash over austerity measures. A Federal Reserve Bank of Chicago economic gauge unexpectedly dropped below zero, European services and manufacturing growth slowed more than forecast and a report showed China’s manufacturing may expand at a slower pace.
“There’s bad news out there,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion. “We’ve got doubts about European fiscal austerity and weaker economic data across the board. The thing that has driven the market higher — earnings season — just came to an end. People will be pulling money out of riskier assets.”
The S&P 500 extended losses after dropping for three straight weeks, its longest slump since August. Industrial companies and commodity producers led declines among the index’s 10 main industry groups, all of which fell. Caterpillar Inc., Alcoa Inc. and DuPont Co. fell at least 2.5 percent to lead declines all 30 stocks in the Dow Jones Industrial Average.
The Chicago Fed national index, which draws on 85 economic indicators, was minus 0.45 in April versus 0.32 in March. A reading below zero indicates below-trend-growth in the national economy and a sign of easing pressures on future inflation.
The S&P 500 climbed to an almost three-year high on the final trading day of April. It has slumped 3.6 percent since as economic data trailed forecasts and investors prepared for the Federal Reserve to complete its $600 billion bond-purchase program at the end of June.
Citigroup Inc.’s U.S. Economic Surprise Index, which gauges the rate at which data is exceeding or missing estimates and reached a record in March, turned negative in May and is at its lowest level since August. It has risen only one day this month.
The S&P 500 is still up about 4.5 percent in 2011 amid better-than-estimated profits. Per-share earnings topped analysts’ projections at 72 percent of the 455 companies in the index that released results since April 11, data compiled by Bloomberg show.
The yield on the 10-year U.S. Treasury declined five basis points to 3.10 percent today, while the two-year note yield slipped one basis point to 0.507 percent after touching 0.4950, the lowest this year.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, climbed 1.2 percent, the most since May 5. The U.S. currency strengthened versus all 16 major peers. The yen appreciated against all 16 of its most-traded counterparts except the dollar, strengthening 1.1 percent versus the euro. The Norwegian krone, Swedish krona and Australian dollar weakened against most of their peers.
The Stoxx Europe 600 Index slid 1.7 percent, the most since March 15 on a closing basis, as all 19 industry groups declined. Ryanair Holding Plc tumbled 5.3 percent after Europe’s biggest discount airline said it will cut capacity for the first time in its history amid higher fuel costs. International Consolidated Airlines Group, the parent of British Airways, sank 5.1 percent and Air France-KLM (AF) Group slid 4.5 percent as Iceland’s weather office said ash from a volcanic eruption may reach the U.K. this week, threatening trans-Atlantic traffic.
Italy’s 10-year bond yield climbed three basis points to 4.81 percent, sending the spread with benchmark German bunds eight points wider to 179 basis points, the most since January. The Spanish-bund spread increased seven basis points to 250. The yield on the 10-year Greek security climbed 46 basis points to 17.03 percent, with the Irish yield rising to as high as euro- era record of 10.88 percent.
The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose by 13 basis points to a midprice of 202.5 and the euro depreciated as much as 0.8 percent to a record 1.23235 Swiss francs. Credit-default swaps on Greece soared 124.2 basis points to a record 1,470.8, according to data provider CMA. Ireland jumped 28.8 to 669.3, Portugal gained 34.7 to 674.2, while Italy increased 7.1 to 167.9 and Spain climbed 6.3 to 268.2, CMA data show.
European Central Bank Governing Council member Ewald Nowotny said the bank will accept Greek government bonds as collateral in its refinancing operations as long as the country maintains its consolidation program. ECB Council member Jens Weidmann said May 20 that the central bank may no longer be able to accept Greek bonds as collateral for refinancing operations.
More than a year after European policy makers approved a 750 billion-euro ($1.1 trillion) bailout blueprint to stem the sovereign crisis, bond yields in debt-laden peripheral countries are at record highs and officials are floating plans to extend Greek repayments. Hours before the May 20 S&P warning about Italy, Fitch Ratings cut Greece three levels and said it would consider an extension of maturities as a default.
“The week is starting in a decidedly fearful mode,” Kit Juckes, head of foreign-exchange strategy at Societe Generale SA in London, wrote in a report today. The change of outlook on Italy also “amplifies the risk for contagion,” he said.
The yield on the 10-year German bund, the euro-region’s benchmark government security, fell four basis points to 3.01 percent.
Fitch Ratings revised Belgium’s rating outlook to negative from stable and affirmed its long- term foreign and local currency user default ratings at AA+.
The MSCI BRIC Index of the four biggest emerging markets lost 2.3 percent, extending its retreat from this year’s high on April 8 to more than 10 percent, the threshold that some analysts identify as a correction.
The Shanghai Composite tumbled the most four months after a preliminary purchasing managers’ index compiled by HSBC Holdings Plc and Markit Economics dropped to 51.1 in May from a final reading of 51.8 in April. India’s Bombay Stock Exchange Sensitive Index slid 1.8 percent after Finance Minister Pranab Mukherjee signaled concern about inflation. The Micex Index fell 1.9 percent after OAO Gazprom, Russia’s gas-export monopoly, was cut to “underperform” by Credit Suisse Group AG.
Copper dropped 3.4 percent to $3.98 a pound in New York and crude oil declined 2.2 percent to $97.34 a barrel. The S&P GSCI index of 24 commodities retreated 1.7 percent, the biggest slump since May 11.
To contact the reporters on this story: Stephen Kirkland in London at email@example.com; Rita Nazareth in New York at firstname.lastname@example.org.
Stay tuned to more exciting economic news this week as the deficits worldwide soar.
The latest article from Bloomberg news goes into some of the psychology around the AIG bailout and the new stock offering. It appears that the ‘new’ investors would be buying a ‘pig in the poke’ so to speak, as AIG effectively denies that it will ever be able to use it’s tax loss carry forwards to any measurable extent and has therefore been using some accounting tricks to make that look better.
I wouldn’t trust these guys as far as I could throw a bull by it’s horns, meaning not at all…ever, never. The money that we, the taxpayers, threw at this unbelievable sow was just good money after bad! Unfortunately we didn’t have any choice in the situation. Our illustrious Treasury secretary at the time made all of our decisions for us in a vacuum. Of course, Congress cooperated like a bunch of blinded sheep.
Now if we can get any of our dough out of this deal will be a miracle. I have no idea what the stock offering will net, but I don’t envy the buyers here!
Government Prays a Bigger Sucker Is Out There: Jonathan Weil
Look through the footnotes in American International Group Inc. (AIG)’s latest annual report, and you will see a long section analyzing the company’s ability to use past losses to offset future income-tax obligations.
The gist: AIG’s executives have gazed into their crystal ball and concluded that the company’s prospects don’t look good. That dim outlook may help explain why the U.S. Treasury Department seems so anxious to begin reducing its 92 percent stake in the bailed-out insurance company, after a 36 percent drop in AIG’s stock price this year.
The disclosures to watch here have to do with an item known as deferred-tax assets. Typically these consist of tax- deductible losses and expenses carried forward from prior periods. Companies can use these to lower future tax bills.
Under generally accepted accounting principles, such carry- forwards are valuable only to companies that are profitable and paying income taxes. If a company doesn’t expect to fully use these assets, it’s required to record what’s called a valuation allowance on its balance sheet to reduce their carrying amount.
In AIG’s case, the company has set up a full valuation allowance against its deferred-tax assets. AIG said it did so based on management’s conclusion that the assets “more likely than not” won’t be used. Forward-looking indicators don’t get much more bearish than this.
Here are the numbers: AIG said it had net deferred-tax assets of $24.5 billion as of Dec. 31, before factoring in the allowance. With the allowance, which was $25.8 billion, AIG finished last year with a $1.3 billion net deferred-tax liability — in effect, a future tax obligation.
In other words, the allowance more than wiped out the net assets. This wasn’t the case a year earlier. At the end of 2009, AIG showed net deferred-tax assets of $5.9 billion, including the allowance. AIG hasn’t disclosed what its tax assets were as of March 31, and a company spokesman, Mark Herr, wouldn’t say.
The footnotes also show a breakdown of the different types of AIG’s carry-forwards on a tax-return basis. For example, as of Dec. 31, AIG said it had $11.3 billion of net operating loss carry-forwards that expire from 2028 to 2030. It would need about $32.3 billion of taxable income from its operations over 20 years to fully reap those benefits, assuming a 35 percent tax rate. AIG concluded it likely won’t realize any of them.
“The implication is there are significant questions about future profitability,” says Charles Mulford, an accounting professor at Georgia Institute of Technology in Atlanta, who reviewed AIG’s disclosures at my request. “It should give investors pause.”
A full allowance is something you normally see only at companies in huge trouble. Over the past decade, Delta Air Lines, Bethlehem Steel and General Motors, among others, all took big charges to earnings to boost their deferred-tax allowances — before filing for bankruptcy. Other companies, such as Citigroup, have drawn criticism for taking the opposite approach: Even when they were on death’s door, they still hadn’t recorded any such allowance.
AIG executives lately have been spinning the company’s tax assets as a good thing. The company is trying to complete a big stock sale, after all.
During a May 6 conference call with investors, AIG Chief Executive Officer Robert Benmosche called the company’s deferred taxes a “source of funds” that the company could use to buy back stock someday. David Herzog, AIG’s chief financial officer, referred to the company’s tax assets as “very valuable.” In a slide-show presentation for investors this month, AIG said it has “substantial deferred tax assets that are available to offset future tax obligations.”
Yet for these assets to be valuable, AIG will need an opportunity to use them. Chances are it won’t be able to, if we’re to believe what the company said in its annual report. That position hasn’t changed. In the prospectus it filed May 11 for its stock offering, AIG said it still holds a full valuation allowance on its balance sheet.
It’s conceivable that AIG’s forecasts might prove too conservative, reflecting an overabundance of caution. In that case part of the allowance might be reversed later, boosting net income. Yet we probably should take management at its word that the full allowance is needed. This isn’t the kind of stance a company would adopt unless it had to.
This month AIG and the Treasury Department said they plan to offer 300 million common shares to the public, two-thirds of which would come from the government. Most companies that repaid their taxpayer-bailout funds, such as JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC), did so in cash. Not AIG.
AIG paid back the $47.5 billion that the Treasury injected into the company by converting its stake into common stock. Those shares were worth about $51 billion based on AIG’s $30.83 closing price yesterday.
It stands to reason that AIG would have repaid Treasury in cash if it could have afforded to do so. That its executives, at least for accounting purposes, hold such a gloomy view of the insurer’s prospects only reinforces the notion that AIG still is an unhealthy company. Anyone looking to buy the stock now had better hope they know something management doesn’t.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at email@example.com
To contact the editor responsible for this column: James Greiff at firstname.lastname@example.org
These are the kinds of things that we can come to expect from the too big to fail companies in collaboration with our government.
Is anyone surprised that existing home sales declined? It appears that someone on the ‘street’ was by the tone of the article below. I don’t think we are in a recovery that means anything to the vast majority of Americans. Yes, Wall Street has done some recovering, just look at the bonuses that have been paid-a true sign of progress eh?
Main Street on the other hand is doing quite badly it appears. Small businesses are not hiring, although some claim that these businesses are hoarding cash, which makes sense when you look at the structural indicators like housing, overall employment, manufacturing and such which are all down in general.
Housing won’t be coming back anytime soon I am afraid!
Existing-Home Sales in U.S. Unexpectedly Fall
By Bob Willis – May 19, 2011 8:25 AM MT Bloomberg
Sales of existing U.S. homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands.
Purchases of existing homes dropped 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said today in Washington. A 5.2 million rate was the median projection in a Bloomberg News survey and the April figure was less than the most pessimistic forecast. The median sales price declined from a year earlier and 37 percent of transactions were of distressed dwellings.
Falling prices and the prospect of more foreclosures entering the market signal more Americans may be hesitant to purchase homes. With unemployment at 9 percent and wages stagnant, any sustained recovery in residential real estate may take years to unfold.
“The housing market continues to grind along the bottom,” said Richard DeKaser, an economist at Parthenon Group in Boston. “The bad news is there’s no market recovery unfolding. The good news is we’re not taking a double-dip in sales.”
Estimates for home sales ranged from 5.09 million to 5.40 million, according to the median of 75 forecasts in the Bloomberg survey. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.
Stocks trimmed gains after the housing figures and another release showing manufacturing may be cooling. The Standard & Poor’s 500 Index rose 0.3 percent to 1,343.98 at 10:11 a.m. in New York.
The Federal Reserve Bank of Philadelphia’s general economic index fell to 3.9 in May from 18.5 a month earlier. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 59 economists surveyed by Bloomberg called for a gain to 20.
The Conference Board’s index of leading economic indicators fell in April after nine months of gains, depressed by a pickup in jobless claims that reflected temporary setbacks including auto-plant shutdowns. The gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.7 percent gain in March, the New York-based group said today. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg survey.
Another report today from the Labor Department showed fewer Americans than forecast filed first-time claims for unemployment benefits last week. Applications declined by 29,000 to 409,000. Economists projected 420,000, according to the median forecast in a Bloomberg survey.
Of all purchases, cash transactions accounted for 31 percent after a record 35 percent in March, NAR chief economist Lawrence Yun said in a press conference as the figures were released. The Realtors group began tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent, Yun has said.
Distressed sales, which comprise foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 37 percent of the total after 40 percent in March, Yun said.
“We still have a very large foreclosed, distressed inventory that needs to be worked through,” Yun said.
Existing-home sales decreased in three of four regions in April, led by a 7.5 percent drop in the Northeast. Purchases climbed in the Midwest.
The median sales price fell 5 percent last month from April 2010 to $163,700.
The number of previously owned homes on the market rose to 3.87 million in April from 3.52 million. At the current sales pace, it would take 9.2 months to sell those houses, the longest since November, compared with 8.3 months at the end of March. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.
CoreLogic Inc. in March estimated about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the unsold supply of existing houses already on the market.
More than half of U.S. homeowners and renters say housing won’t recover until at least 2014, according to a survey released yesterday by Trulia Inc. and RealtyTrac Inc., collectors of real-estate data.
View of Market
The survey, taken in April, found that 54 percent of respondents don’t expect a recovery for at least three years, up from 34 percent in November. Those who see a turnaround by the end of next year fell to 15 percent.
Homebuilders are seeing no gain in demand as they are forced to compete with cheaper, foreclosed properties. Builders began work on 523,000 houses at an annual rate in April, down 11 percent from the prior month, the Commerce Department reported this week. Housing starts dropped to a record low of 478,000 in April 2009.
Douglas Yearley Jr., chief executive officer at Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, last week said the spring home-selling season has been “disappointing” and that “people are still scared.”
Demand for new houses will remain weak into next year, said Bill Wheat, chief financial officer of D.R. Horton Inc., who last week also projected a housing recovery will take time to develop. “We feel it could still be a struggle in 2012.”
To contact the reporter on this story: Bob Willis in Washington at email@example.com
I would really like to sell my house up here in Colorado, in the mountains, beautiful setting and everything and very close to the ski slopes. Unfortunately, the housing foreclosures have also dampened prices up here also. Any buyers out there?
As some say the markets are front runners of trends, and I say this tongue in cheek since we have been trending to more and more economic trouble for years without any significant, sustained correction, we see several days of stock market sell off and Treasury prices rising with yields decreasing.
Now we have rising inflation, bond prices rising (strange since the value of the asset erodes with inflation), gold prices at highs as well as silver and a domestic and global economy mired in debt and no to slow growth.
What to do here? Stay focused and alert. Do what you think is best…my personal opinion is at the close of the article.
Dismal Data Boost Treasurys
By MIN ZENG
The steady drumbeat of dismal U.S. economic data continued Tuesday, driving investors into safe-haven Treasurys and pounding key yields down to five-month lows.
Disappointing U.S. housing and industrial-production figures are the latest underwhelming indicators in recent weeks as the market continues to focus on slowing growth. Inflation, the main threat to bond’s yields, remains the least of considerations.
Dimming growth prospects also undercut the appeal of riskier assets such as stocks and commodities, adding to the flight to safety.
“For now, the path of least resistance is lower yields,” said Mark MacQueen, partner and portfolio manager in Austin, Texas, at Sage Advisory Services Ltd., which oversees $9.5 billion in assets.
In late afternoon trading, the benchmark 10-year note was 9/32 higher to yield 3.118%. The yield earlier touched 3.096%, the lowest level since Dec. 7, when the yield last traded below 3%. Bond yields move inversely to their prices.
Chris Sullivan, who oversees $1.77 billion as chief investment officer in New York at the United Nations Federal Credit Union, said the 10-year note’s yield—which traded above 3.5% in early April—could test the 3% threshold in the short term. He said a break of that barrier could push the yield down to 2.92%.
Mr. MacQueen said 3% is possible in the near term, though he said the market is overbought and at risk of corrective selling. But, he added, a fall below 3% “will take an equity selloff, sovereign crisis or measurable deterioration of the economy.”
Many investors also have cut holdings in stocks and commodities in favor of Treasurys over fears that demand for risky assets could falter once the Federal Reserve completes its $600 billion Treasury bond buying program in June.
The Fed’s quantitative-easing measures to juice the economy, launched in November, have been a major driver pushing up prices of risk-based assets.
Investors now are worried about U.S. growth if monetary stimulus is pulled back at the same time fiscal stimulus is stymied by budget cutting in Washington D.C.
In addition, rallying Treasury prices on their own have created an updraft, as investors betting on price declines—or “shorting” the market—are forced to purchase securities, and increase demand, to unwind those bets.
Kevin Walter, head of Treasury trading at BNP Paribas, said Tuesday’s data forced some hedge funds to cover shorts, especially as the 10-year yield broke 3.14%, a level it has failed to close at in each of the past week’s sessions.
Brian Edmonds, head of interest rates at Cantor Fitzgerald LP in New York, said some investors were “caught off guard” by the continued decline in yields. He expects more unwinding of shorts as the 10-year yield moves closer to 3%.
Write to Min Zeng at firstname.lastname@example.org
I am planning on buying more silver sometime in the near future.
This article found on the economic collapse blog is very well done and pulls some info and vids on just how people are losing it all over the country. When you don’t have anything left to lose…well then you lose it!
It is time to continue to get prepared for an economic collapse, it is happening right now all around us. We have to stay focused here.
Americans Gone Wild
Gerald Celente is known to love to make the following statement: “When people lose everything and have nothing left to lose – they lose it.” Sadly, Celente is exactly right about this. As the U.S. economy continues to collapse, Americans are going to becoming increasingly frustrated, and this frustration will inevitably boil over into rioting and violence. Could we be starting to see the start of this already? The number of Americans that have “gone wild” seems to be escalating. Years ago, losing a job was not that big of a deal. Now a job loss is enough to cause some Americans to snap and go over the edge. We are seeing restaurant brawls and open violence in the streets that would have been unthinkable 50 years ago. All over the nation people are losing it and are literally going crazy. The news stories and the videos posted below of “Americans gone wild” are very graphic and very shocking. There is a reason for this. These examples are meant to show you that the very fabric of our civilized society is falling apart. It won’t matter who ends up leading us politically if this is the kind of people we become.
Sadly, it appears that we are not the same kind of people that we used to be. Something has changed in America. Something is different. We have forgotten many of the things that made us great as a nation. We no longer live by the same principles. We no longer value the same truths.
There are examples of “Americans gone wild” all over the nation. The things you are about to read about below are not just isolated incidents. The truth is that I could have easily included dozens more examples.
As the economy continues to crumble this trend is going to get even worse. The following are just a few examples of how Americans have been freaking out and losing it recently….
*One elementary school teacher in the town of Monroe, Georgia was arrested recently for something very unusual. One day he made the decision to walk around the halls of his school completely naked. So why was he naked? Well, it turns out that he learned that he was going to be fired and so he snapped.
*As I have written about previously, McDonald’s recently held a “National Hiring Day” and about a million Americans showed up to apply for jobs at McDonald’s restaurants all around the nation. Well, in Cleveland a horrible fight broke out between some girls and it ended up with three people being run over by a car. Do not watch this video if you are sensitive to graphic violence….
*In Sioux City, Iowa a 41 year old man recently walked into the office where his boss worked and beat the living daylights out of him. The boss suffered four chipped teeth and needed surgery to repair his nose. Apparently the boss was planning to fire the man.
*At a McDonald’s restaurant in the Baltimore, Maryland area two young girls recently beat and kicked another young girl so brutally that she started having seizures. The following video is very graphic and has some very strong language….
*Recently, one gold thief was so desperate to get into a jewelry store that he rammed his truck backwards through a wall of the store at very high speed. The thief got away with a bunch of gold and jewelry and the owner is scared to death that he is going to come back and do it again.
*In the following video from a Denny’s restaurant, young women are actually throwing plates and furniture at each other….
*In Brooklyn, New York a security camera recently captured chilling footage of a cold-blooded execution right in the middle of the street. One resident has named that particular street “body-a-week avenue”.
*In Atlanta, two dozen teens violently assaulted two Delta flight attendants on a train recently for no apparent reason. The following is how a local Atlanta newspaper described the attacks….
Their “Clockwork Orange” style blitz was over soon after it began. The teens boarded the train, headed to Hartsfield-Jackson International Airport, at the Garnett station a little after midnight seemingly intent on instilling fear. They succeeded.
“There was blood everywhere, people were hollering and screaming,” a witness told Channel 2 Action News. “We were intimidated. People were terrified. People were trying to run. But there was nowhere to run.”
Sadly, there are hundreds more examples like these. There are so many restaurant brawl videos up on YouTube that it would take an entire weekend to watch them all.
You don’t think America has changed?
What does it say about America when the murder rate in Flint, Michigan is worse than the murder rate in Baghdad?
There are some areas of the country where people simply do not go out of their homes at night.
We refused to discipline our young people and demand the best out of them so now we are reaping a bitter harvest.
According to one recent report, approximately half of all the people that live in the city of Detroit are illiterate.
Can you imagine that?
Half of the people that live in a major American city can’t even read?
Can that possibly be true?
What does that say about the way that we are educating our children?
Sadly, due to harsh economic conditions up in Detroit, about half of the schools in the city are being closed down for good.
That certainly isn’t going to make anything better.
But this is where we are at as a nation.
We borrowed and borrowed and borrowed and we never thought that we were going to pay the price.
Now the “credit card bills” are coming due, and state and local governments from coast to coast are completely broke.
There are signs of economic decline all over the United States. More than 33 percent of our men do not have a job. Over 44 million of our fellow citizens are on food stamps. Our country is literally falling apart.
So is there any hope for our nation or are we going to see even more “random acts of violence” as frustration comes to a boiling point for tens of millions of Americans?
Read this article and if you are undecided or unconvinced as to the state of our country you might just change your mind.
I hope you are keeping up with the currencies these days, your financial well being could be dependent upon it. The dollar is falling like a stone and the dollar index continues to follow suit of course. If the index breaks below 70, most experts say it will just free fall…nothing to stop it. On this one I tend to agree.
Why, you might ask? The Fed is continuing to print money. They feel that is the only way to ‘keep the recovery going’ and if you believe any of that you get the dunce hat. There is little if no recovery, and they are printing money to save the ‘too big to fail banks’ and as they say the entire economic system. Opposing view points come from across the world. Why do you think the Chinese are so upset with this policy? It is destroying the purchasing power of the dollar and they own trillions…as do the Japanese. So, logically speaking how can this policy be sound if everyone is suffering? Well of course with the exception of the banks and wall streeters.
Perhaps it is time for change? Sound monetary policy will never come from Wall Street or Washington (given that one controls the other seems like these days). There is just too many vested interests on both sides of this equation to ever expect anything different out of those two groups.
As the dollar falls your standard of living will also fall, at least if you are not one of the really rich in this country. The mega wealthy will see no decrease, they will just have to spend a bit more…so what when you have money to burn, literally. Burn they might have to do in the winter just to stay warm…
Most of the readers here will not have that problem as they are prepared for almost any eventuality…aren’t you?
I am buying more silver soon…and continuing to store some water and food. I am also watching the weather a bit more closely these days as not only is the radiation from Japan continuing to arrive, mostly unannounced, but we are seeing incredible storms and flooding now in this country. I have never seen so much suffering across the world…ever and I am not so young.
As we have been saying for some time now, the good ole U.S.of A. is technically busted financially! I guess we have been saying this for at least 2 years now if not longer (privately I have held this belief for a decade at least) and now Moody’s and Standard and Poor’s rating services have just now ‘almost’ agreed with me by putting the debt of these United States on CREDIT WATCH!
For those of us that cannot remember what this means think back to Greece, Ireland and Portugal…all countries that went on Credit Watch just before having their respective debt rating reduced, and in some cases to JUNK STATUS! So you might ask what might this mean for me? Well look at the Austerity programs introduced in these countries to control the debt and hopefully reduce it. While all the austerity measures were being put into place the cost to ‘roll over’ or ‘refinance’ debt coming due was, and in some cases remains, extremely high.
What does this look like? Well what you were paying for example for 10 years worth of money evidenced by a 10 year note might have been 3 or even 4% will now cost you maybe 8 or 9%…imagine the growth of debt at 2 times the interest rates! That is assuming you can attract enough buyers even at that price. And speaking of price what you paid 100 cents on the dollar for would now be worth a lot less, I mean a lot! This could cause such turmoil in the market that no one will be able to believe, as the holders of now almost worthless debt seek to sell at whatever price they can get driving down the prices even further and faster as the Central banks try to buy up everything that is offered just to keep the panic somewhat at bay!
Of course, when the Central banks buy anything they are using newly created currency…thus making whatever currency they are using more and more worthless! Imagine that a dollar that isn’t worth spit!
I expect gold and silver to continue to soar, the stock market to continue to trend lower and all hell to break loose very soon!
Imagine this situation exacerbated by some even larger natural disaster…massive evacuations of Japan as it becomes more and more uninhabitable…scenarios that are too hard for most to believe….but too hard not to consider, considering the nature of the natural events occurring with even more frequency throughout the world.
I have and continue to urge everyone to prepare or continue to prepare. Precious metals, especially silver and storable foods!
I can’t say that we have not warned you of the dangers of this crisis. More potent radiation appears to be headed our way. I hope that our listeners recall our very first show that covered this about a month ago where I had spoken to a friend and Nuclear Physicist in a very well know national lab and he went over how NO ONE, scientists included, knew how a nuclear reactor behaved in ‘extreme’ conditions…such as a meltdown or partial meltdown. It is, as we have all begun to know, and UNOBSERVABLE PHENOMENON, meaning if you get close enough to see it you are DEAD. Not only that but no equipment in our arsenal can function under these extreme conditions of high heat, hot enough to melt cement, and radiation, high enough to kill you in minutes or seconds…no one has offered to be the guinea pig.
All of this info was confirmed on TV in an interview with a renowned Nuclear scientist!!! I didn’t need the confirmation but perhaps many of you do.
Not only this but this scientist was urging the entire ‘recovery’ project to be handed over to a group/panel of nuclear scientists to manage and have the ARMY take over the project. By now it is obvious that the private operator and the government of Japan are both incapable of handling this catastrophe! It is now the WORST NUCLEAR DISASTER IN OUR HISTORY!
By comparison the Russian government was pouring cement to encapsulate Chernobyl within 10 days…we are over a month into this disaster and these idiots in Japan are still throwing teaspoons of water on a freakin bonfire hoping to quell the flames…Meanwhile the world is becoming increasingly more toxic…our food and water supplies are becoming increasingly more and more contaminated. When will the international community act and act decisively?
I am calling for all nations to stand up and DEMAND that the Japanese private operators relinquish control over this facility and hand it over to the military…maybe the Russians since they have quite a bit of experience here? This has got to stop!
All of our readers and listeners have had ample time to prepare, don’t stop now…! This is going to get worse.
The sun appears to be waking up and the scientists are saying that we can expect some major activity. Just last week we had the most powerful solar storm hit in many, many years. These storms have the capability of knocking out radio transmissions and disrupt electrical power.
This in from Jim Sinclair a respected source.
Jim Sinclair’s Commentary
From the Financial Times, it is a worthy read. You think Mother Nature is angry with us?
Scientists warn of $2,000bn solar ‘Katrina’
By Clive Cookson in Washington
Published: February 20 2011 17:50 | Last updated: February 20 2011 17:50
The sun is waking up from a long quiet spell. Last week it sent out the strongest flare for four years – and scientists are warning that earth should prepare for an intense electromagnetic storm that, in the worst case, could be a “global Katrina” costing the world economy $2,000bn.
Senior officials responsible for policy on solar storms – also known as space weather – in the US, UK and Sweden urged more preparedness at the annual meeting of the American Association for the Advancement of Science in Washington.
“We have to take the issue of space weather seriously,” said Sir John Beddington, UK chief scientist. “The sun is coming out of a quiet period, and our vulnerability has increased since the last solar maximum [around 2000].”
“Predict and prepare should be the watchwords,” agreed Jane Lubchenco, head of the US National Oceanic and Atmospheric Administration. “So much more of our technology is vulnerable than it was 10 years ago.”
A solar storm starts with an eruption of super-hot gas travelling out from the sun at speeds of up to 5m miles an hour. Electrically charged particles hit earth’s atmosphere 20 to 30 hours later, causing electromagnetic havoc.
Last week’s solar storm may have been the biggest since 2007, but it was relatively small in historical terms.
So what to do to prepare, how about solar flashlights with battery power as back ups? Stored food is also a big plus for those of us not existing on air and sun power alone.