Posted by: rotenochsen | March 14, 2009



Now that we have a trillion plus “stimulus”, aka spedulus package, strapped to the backs of taxpayers present and future generations. The President and Queen Pelosi are talking about a second stimulus package!
He has only been in office 55 days, and still has run the Federal deficit and tax payer liability into stratospheric levels never seen before in the USA!

I have been getting a large part of my financial impact news from web sites in London and Frankfurt,Germany. What it has shown me is the Germans expect and are receiving a great amount of the money in the so called “bailout” of our economy.
The main reason is that with the decision to allow Lehman Brothers to fail.The Federal Reserve and the Bush administration and Congress, in September of 2008, decided that they had to send a message to the profligate bankers on Wall Street that they should be aware that the reckless way they were running the investment business had to stop.
And for good reason. “In 2006, the financial sector accounted for a third of corporate profits in the US, although it only represents 2 or 3 percent of total gross domestic product. Goldman Sachs alone distributed $16.5 billion in bonuses to its 26,000 employees. I’m sorry, I think it’s unbelievable. You can’t just make money out of thin air like this, and underlaying this there were enormous risks being taken” .Source:Harvard academic and former International Monetary Fund chief economist Kenneth Rogoff

The resulting backlash in the financial markets on Wall Street produced two financial institutions where there previously had been five.
The Fed. allowed Bank of America to buy Merrill Lynch for 50 billion dollars after they let Lehman go bankrupt. A company with 26,000 employees and a total of $786 billion in debt on its balance sheets!
Then the FED.moved to take over mortgage giants Fannie Mae and Freddie Mac, thus protecting them from collapse, Republican political resistance mounted against bailing out yet another private bank at taxpayers’ cost. In the cases of Fanny and Freddie alone, the government is providing an estimated $1.5 trillion dollars. This does not count on the interest we taxpayers will have to pay on the loans that are backing this largess!If China does not buy the Bonds!
This government debacle has resulted in 11 small U.S. banks have been forced to close their doors since September 2007.

Christopher Whalen from Institutional Risk Analytics has even predicted that, “by July 2009, almost 110 of the 8,400 banks in the U.S. might have to call it quits”.
In fact, the crash of the Lehman stocks has threaten to cause other bank assets to slide as well. The reason for this lies in the fact that it continues to be unclear how many billions in losses are hidden in the balance books of other large financial institutions.
Citigroup is rumored to be keeping even steeper losses in the background. And it is easy to see that the bailout reaches into European affiliates of U.S. Financial institutions more than our Media and Government want us to know.

The web site Der Spigel reports that the skittishness on the stock market in Germany is being caused by the fact that the Lehman bankruptcy threatens to create fresh losses for German banks. “Lehman is the world’s biggest bonds trader,” said Schiereck. Because the bank isn’t being bailed out, it’s likely that the bonds from the bank’s holdings will be sold to pay back creditors.

In total, the market could be flooded with bonds valuing up to €50 or €60 billion. That will create a glut that will further depress prices internationally. “Ultimately, it’s the banks that will be affected,” Schiereck said.

Even without the latest episode in the global crisis, it is still unclear how many billions in losses are still hanging in the balance sheets of other large investment banks. Current speculation suggests losses at Citi Group will be even higher than previously reported. The Lehman bankruptcy could cause banks already hit by the crisis to collapse entirely.

And in Great Britain it is a repeat of the same misery as told by this story by Thomas Hüetlin
“Her mistake lay in believing what banks and politicians in Great Britain have been advising for years. Conventional wisdom was to get a “foot on the property ladder” as quickly as possible. In other words, buy property, and do it early in life. And it was okay, they said, to take out a large amount of credit, because property values would continue to rise, just as they had nearly tripled in the preceding decade”.

In the past year, however, the trend has reversed.. The decrease in property values began in the United States, and in the past few months the phenomenon has reached Spain, Ireland and Great Britain — countries where a building boom produced a housing bubble that is now bursting.

After that bubble bursts, the next sound is often a quiet whimper at the kitchen table. With interest rates rising and the value of houses declining, the first to go bankrupt are those who had little capital to begin with and could only receive dubious credit. In the United States it’s called “subprime”: credit that’s risky, second-rate and expensive”.

For years, banks bundled these credits together and then resold them, making first-rate profits. That bubble, too, has burst. Between March and June alone, 37,740 British homeowners had to turn their property back over to the banks. By the end of the year it’s likely to be 75,000.

And it all started when Barney Frank and Christopher Dodd and co-horts demanded that Fannie Mae and Freddie Mac regulations on home lending require lending institutions lend to people who had neither the means or the money to pay back their house loans. This is one more act of affirmative action! A reckless if noble effort to say the least!

As the richest nations prepare to meet in April for the G-20, the World Bank has warned of a $700 billion shortfall in developing countries and the IMF is asking for donations. Many Economic commentators wonder whether the two organizations(World Bank and IMF) are up to the task of dealing with the crisis.

The financial crisis may have originated in the investment banks of Wall Street and the City of London but it is now being felt by the world’s most vulnerable people, those living on the verge of poverty in the developing nations. As the G-20 group of world’s richest countries prepare to gather in London on April 3-4, the World Bank is pleading with them to continue supporting the poorer nations saying that international financial institutions cannot bear the burden alone. So you can see the burden on the taxpayers isn’t even started, if the Obama administration doesn’t stop spending money like drunken sailors!
With the way Congress and President Obama are spending money it’s very conceivable that the federal deficit will move from $11 trillion to $12 trillion or maybe more!


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