Our Enemy, the Fed

[Nictoe]

Watching The Fed Control the Economy

International Forecaster Weekly
July 31 2010

Summary: Debts devour nations, few viable options to move in the economy, no way to borrow to wealth, Fed keeps buying toxic instruments, unemployed long term, an economy in deep trouble, SEC exempts itself, California fiscal meltdown, empty homes in America.

While we wait, watch and listen, the Fed decides when the banks will be given the word to start lending to get the domestic economy back to neutral. Action is needed quickly because the world economy is quickly deteriorating, and their recovery is simply not happening, as the administration admits to a fiscal deficit of $1.4 trillion. That would be down from a deficit of $1.9 trillion in 2009. Our long-term estimate has been $1.6 to $2 trillion. Over the past 18 months and after joint expenditures by government and the Fed of $2.3 trillion, all the administration has to show for their efforts are five quarters of stimulus growth of about 3-1/2%, which is now ending. In addition, economies worldwide are slowing as well. At the same time the credit crisis continues as the Fed’s money machine funds banks and other financial institutions worldwide in a sea of perpetually degraded dollars. The only real mission for the Fed is to keep the financial sector afloat until the elitists are ready to finally pull the plug and bring about worldwide deflationary depression, as a trigger mechanism to force people’s of the world to accept world government. Most of the major banks of the world are insolvent and keeping them functioning is the Fed’s primary mission.

Debt is devouring sovereign nations, especially in Europe, the UK, Japan and the US. Over the past 20 years ideas and policies have been discussed on how to handle such debt. Austerity programs and cutbacks have begun in a number of countries, each using their own formulas. In the US on the table are Social Security, Medicare and Medicaid, all of which run at a substantial deficit. In fact, they come close to consuming all government revenue. This is causing difficult problems because off budget items cannot be funded. They have to be funded via deficits, which are shrouded in secrecy. That is understandable as America’s wars have already cost taxpayers well over $1 trillion. These dollar denominated assets, when in fact secretly, are being funded by the privately owned Federal Reserve. The big secret of the past seven years is not a secret anymore. These are policies that are secret. If you ask the Fed specific questions all you get is that the answer is a state secret, it is classified. Of course, this is done to hide the Fed’s activities. The same is true of commissions appointed by the president under the cloak of executive orders. These are the bureaucrats that will formulate how spending will be cut and revenues will be enhanced. Their conclusions are then rubber stamped by a purchased Congress and Senate. This procedure bypasses all debate and allows progress in semi-secrecy.

The deficit is being funded and monetized by the Fed, but they won’t tell you that. Yes, foreigners buy debt, but so does the Fed.

Behind all this lurking in the shadows is the administration’s decision to allow low tax rates to elapse, which will increase taxes by some 15%. This change should be reverified after the next election. Recently Treasury Secretary Geithner said tax increases should be pursued.

Then we also expect that moves will begin to expose the administration’s program to tax or offer an exchange for retirement plans with government. Government would offer guaranteed annuity plans. This would be a method of securing assets immediately to offset deficits.

Whatever the administration wants to do they’ll have to do it before November’s election because of anti-incumbent sentiment. That has been complicated by a federal court decision to strip an Arizona law of its most important elements regarding illegal aliens. Democrats are going to bear a great deal of blame regarding this issue. Two surveys showed 90% and 94% of Americans agreed with the Arizona law regarding immigration. In addition, many solons are realizing that the accelerating deficit impedes government. Some Democrats and many republicans are sophisticated enough to see higher taxes could subdue the economy even further. If the Fed were to raise interest rates that would further put downward pressure on the economy. All these things leave few viable options. There is no question that the Fed is going to accommodate the economy, as we explained earlier, by cutting interest on banks deposits at the Fed and forcing banks’ to lend, which would invigorate the economy and raise employment. This is why the market rallied from 9800 to 10,500. Remember since Fed Chairman Ben Bernanke took office the government’s short term debt rose from $8.2 trillion to $13.3 trillion. We are sure you remember his 2002 speech as he described the Fed’s printing press abilities. All monetary expansion has been done is buy time – it has not in any way solved the underlying problems.

We wonder what the Fed will do with the trillions of dollars in toxic waste bonds held on its balance sheets? They’ll sell them and you will get billed for it. Don’t forget foreign exchange of foreign nations in dollars fell from 64.5% of assets to 59.5% of assets in just 1-1/2 years. Our friends are sellers, including China.

What Washington, the Fed and Wall Street have to understand is that you cannot borrow your way to wealth. There is an eventual law of diminishing returns. Present prosperity cannot be paid for by future production and services. The public senses this and their confidence continues to dissipate. Seventy percent believe there will be no recovery. They are angry and want to purge congress and the Senate of the criminals they previously elected. This is a reflection in part of unemployment of 22-3/8%, falling hours and wages and perpetual loss of purchasing power.

As we pointed out previously Europe and the UK and the US have chosen different paths to solve their debt, finance and economic problems. Europe has raised taxes and implemented austerity. The US so far has done neither and continues to believe that quantitative easy (QE) is the best hope of success. Heretofore it has been unsuccessful, but they keep on doing it anyway for lack of an acceptable alternative. The US is in double dip recession already. The question is can the Fed act fast enough to stave off deflationary depression? This is what Europe has done and they are about to find out much to their chagrin that they have a deflationary depression on their hands, and they have lost control. That should eventually knock the euro for a loop. The solvent members of the euro zone are going to find they have thrown good money after bad. Europe heads for depression and the US will soon follow. It is the intention to create $5 trillion in QE over the next two years to carry the US economy through the next election. There is just three months to elections. The race is on to convince the US electorate that America is ok. We do not believe that will be successful.

The Fed continues to buy toxic debt instruments. They admit to having purchased $1.3 trillion worth, but we believe that the figure is more like $1.8 bullion worth. The difference is parked offshore. As Fed chairman Bernanke says unemployment is the most pressing challenge. The way to help that situation is to have banks lend to small- and middle-sized businesses that create 70% of the jobs.

As of now we have not emerged from our inflationary depression and we are not going too. We may have a period of grace due to QE but that will be transitory.

Housing is locked into a long-term depression. Can you imagine building 549,000 new homes with a 3-year overhang, when four months is normal? Eighty percent of the building industry is dead in spite of $8,000 credits and $1.25 trillion or $1.8 trillion in purchases of MBS and CDO bonds. Foreclosures hitting the market are endless with no relief in sight. Millions of homes are underwater and will probably stay that way for years to come.

46.2% of the unemployed have been out for 27 weeks or more. They cannot buy houses – that is double the worst ever recorded. The average worker has been out of work for 35.2 weeks. Real unemployment is 22-3/8%. The average workweek is 34.1 hours. You certainly cannot have recovery with these kind of numbers.

We ask how do you have a recovery under such circumstances? By the end of the year, in the absence of a quick QE injection we should see GDP growth in the minus column or close to it. All QE sights, except for more bank lending will focus again on banking and Wall Street making sure they do not collapse.

Economists tell us the opposite, but they are only correct 1/3rd of the time. It is obvious the economy is still in deep trouble. Payrolls have fallen, state and federal revenues are way off, state unemployment disbursements are up, as are the use of food stamps, welfare and Medicaid. All these problems and we have seen $2.3 to $2.5 trillion in stimulus and zero interest rates to boot. As the planning at the Fed figures out how the 3rd stimulus will be applied the Fed still won’t talk about an exit strategy, because they have none. Bernanke, like his predecessor Greenspan, doesn’t have any workable solutions. That is because he won’t purge the system and its malinvestment. That is why his only answer can be QE and monetary inflation. After the 2012 election it will be very obvious that the banking system will be unable to properly function. This has been a lonely vigil, but others are now coming to the same conclusion as we have. Mark Farber, Jim Willie, DavidRosenberg, Jim Grant and Ambrose Evans-Pritchard have all joined us in a chorus of warnings.

We have seen a continual fall in M3 at a 9.5% contraction rate. This reduction has been going on for over a year, as money stock declined by $300 billion. All we can say is this reduction allows the Fed lots of room to reincrease M3 again.

The Fed, Wall Street and the Treasury know current levels, which are receding, cannot be maintained without more massive infusion of money and credit. Problems are about to occur if quick action is not taken.

That is reflected in the statements of St. Louis Fed President James Bullard’s comments, or should we say trial balloons. The bottom line is monetize and inflate or die.

We cannot but help make comment on the SEC’s new position that “reform” legislation exempts the SEC from the Freedom of Information Act. This really is nothing new. The SEC has been blocking access to testimony for years. Government is supposed to be seeking transparency not acting like the CIA or FBI.

Stocks are again in the process of topping out. That should further cut into the savings rate and into spending as well. Higher income families are feeling the pinch. That is complicated by the fact that almost half of all mortgages have negative equity. Homeowners are staggered by the loss in equity, which in many cases is their total life savings. As a result FICO scores are plummeting. That means more consumers are being shut out of the credit markets. Take our advice, be long gold and silver related assets.

The commercial paper market rose $1.5 billion to $1.101 trillion last week. The California fiscal emergency is much worse than Greece. There is a $19 billion shortfall, as the state House and Senate refuse to fix the problem. There is big trouble in La La land. The deficit is 22% of the $85 billion general fund budget.

State workers will take three days off without pay per month beginning in August. The budget is five weeks overdue.

Schwarzenegger says its fiscal meltdown as the state hovers a few notches above junk state, IOU’s are on the way. We saw this coming 14 years ago, and we left never to return. The governor says he will only sign a budget if it includes an overhaul of the state’s public pension system. The overall economy is on the verge of tanking. It is like the summer of 2008 again. They still have real estate and bank problems, now sovereign debt problems mixed in. After two years and the injection of almost $5 trillion the economy has little to show for it. The stock market holds up as transnational conglomerates scoop up profits made from free trade and globalization that are parked offshore escaping taxes. That is $1.5 trillion, or $525 billion in taxes that could go a long way to reducing the fiscal deficit. It is very unfair when we have two sets of rules. How can anyone have any faith in the system?

The four quarters of inventory accumulation is over and it shows how ineffectual the stimulus combination of the administration and the Fed of $2.3 to $2.5 trillion really has been. Can you imagine a revision in the second quarter from 3.7% to 2.4%. Lies, lies and more lies.

The Reuters/Ipsos Poll showed only 34% approval of Obama’s handling of the economy and jobs versus 46% who deemed it unsatisfactory.

Imports in the second quarter surged by 28.8%, which is no surprise, as the US manufactures very little anymore. Exports rose 10.3%. That provided the largest subtraction since the 3rd quarter of 1982. Business inventories increased $75.5 billion, up from $44.1 billion in the 1st quarter. That added 1.05% to GDP. Excluding inventories the economy expanded at a 1.3% rate, up from 1.1% in the 1st quarter. Now who do they sell too?

The economy shrank 2.6% last year, the steepest drop since 1946. This as unemployment surged to 22-3/8%. These figures are the worst since the Great Depression.

Employment costs rose 0.5% in the 2nd quarter. Wages and salaries rose 0.4% and benefits 0.6%. The July Chicago PMI was 62.3, up from June’s 59.1. The employment index rose to 56.6 from 54.2 in June. New orders rose to 64.6 from 59.1.

The University of Michigan Sentiment Index was 67.8, up from 66.5.

The current conditions index was the weakest since November 2009, as consumer sentiment fell to 67.8 from 76.0.

Favorable attitudes for durable goods fell to 58% from 67% in June. Consumer expectations fell to 62.3, the lowest since March 2009 versus 60.6 in early July and 69.8 in June. The consumer 12-month outlook fell to 66 from 79.

The IMF says the US financial system needs $76 billion in capital immediately.

The great recession has been far worse than depicted.

China, Japan and oil exporting countries are dumping US treasuries. Everyone now knows the Fed is practicing financial fraud.

Fixed U.S. mortgage rates set record lows last week for the sixth straight week, home funding company Freddie Mac said on Thursday.

The average 30-year loan rate edged down to 4.54 percent in the week ended July 22 from 4.56 percent the prior week and 5.25 percent a year ago.

Fifteen-year mortgage rates averaged 4 percent, also a record, down from 4.03 percent a week ago and 4.69 percent a year ago.

Records from Freddie Mac, the second largest buyer of U.S. residential mortgages, date back to 1971 for 30-year mortgages and 1991 for 15-year loans.

Lenders charged an average 0.7 percentage point in added fees and points last week, the same as the previous week.

Thirty-year mortgage rates last averaged over 5 percent in April.

While refinancing has picked up steam, the pace remains well below highs of last year when rates were similarly low.

Many borrowers who had the financial incentive either have already refinanced or do not meet lender requirements.

Applications to refinance mortgages last week declined from a 14-month high, the Mortgage Bankers Association said on Wednesday. Home buying has been quelled by dour consumer confidence, fears of job loss and tight lending practices.

Ever wonder why according to the latest economic poll published by Reuters earlier the general public's satisfaction with Obama's handling of the economy is deteriorating faster than any other issue? (not to mention that 46% of Americans believe Obama is not focused enough on job creation, and that 72% of republicans say they are certain to vote at the November congressional elections versus 49% of democrats). A part of the answer comes courtesy of a new study produced by National League of Cities, the U.S. Conference of Mayors and the National Association of Counties titled simply enough: "Local Governments Cutting Jobs and Services: Job losses projected to approach 500,000", showed local governments moved to cut the equivalent of 8.6 percent of their workforces from 2009 to 2011. As a result of local government cutbacks, almost 500,000 people will lose their jobs, and the total will likely rise. The summary of the report attached below, is particularly grim: "Over the next two years, local tax bases will likely suffer from depressed property values, hard-hit household incomes and declining consumer spending. Further, reported state budget shortfalls for 2010 to 2012 exceeding $400 billion will pose a significant threat to funding for local government programs. In this current climate of fiscal distress, local governments are forced to eliminate both jobs and services." If Americans are dissatisfied with Obama's handling of the economy now, just until 2012.

Orders and shipments for non-military capital goods excluding aircraft climbed in June, signaling investment by U.S. businesses picked up heading into the second half of the year. Such bookings increased 0.6 percent after jumping 4.6 percent in May, more than previously reported, figures from the Commerce Department showed today in Washington. Total orders for durable goods, those meant to last at least three years, unexpectedly dropped 1 percent, depressed by a decrease in demand for aircraft which is often volatile.

Eaton Corp. is among manufacturers benefiting from a pickup in demand as companies in the U.S. and abroad update equipment that is helping to support the recovery. The gains will partially compensate for a slowdown in consumer spending that is causing the world’s largest economy to cool heading into the second half of the year.


One of the odder stories of the day comes from Dow Jones, which reports that the Chinese Sovereign Wealth Fund (China Investment Corp, or CIC), has sold $138.5 million worth of Morgan Stanley shares in the past week, after dumping 4.53 million shares at $27.17 on Wednesday and 575,000 shares at $27.13 on Thursday. CIC began accumulating a massive Morgan Stanley stake in 2007, when it purchased its initial shares in the then troubled investment bank, and followed up with a June 2009 $1.2 billion investment, The reason for the sale, DJ speculates, is for the fund to avoid "additional disclosure requirements." Yet as a filing as recently as June 18 disclosed, the fund's Morgan Stanley stake was openly disclosed to be 11.64%. Surely the CIC administrator, the PM and everyone else in the front and back office were all too aware of this number. Which is odd since per both initial and follow up purchase agreements, CIC had stated it would not own more than 9.9% of MS' shares, and would remain a passive investor. That the firm would blatantly purchase 16% more than this threshold in the open market by mistake in the past year seems somewhat ludicrous. Worth recalling is that in June CIC disclosed a 10% MTM loss for the month of May or roughly about the time it announced its above normal MS exposure. Are the two related? Has the CIC been covertly liquidating assets? It is unclear, as the one and only 13F for CIC is still the original one filed from February. One would imagine there would be at least some SEC requirement that a filer that has issued at least one 13F would be so kind to follow it up with at least a second one... eventually. In the meantime there is no official statement on the transaction: "A spokeswoman for CIC said she was unaware of the reason for the sales. A Beijing-based Morgan Stanley spokeswoman declined comment.


Moody's Investors Service on Tuesday lowered its outlooks to "negative" on certain ratings for Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., citing a new law that is expected to reduce the likelihood of government bailouts of banks.

The outlooks on the banks debt and deposit ratings were previously "stable."

In a note to investors, analyst Sean Jones wrote that Wall Street Reform and Consumer Protection Act should result in lower levels of taxpayer support for banks that run into trouble. The new law attempts to strengthen the ability of regulators to supervise and liquidate banks if need be, he wrote.

Jones said that in the near term regulators would continue facing significant obstacles in trying to liquidate global companies without causing economic upheavals, so the current ratings are still appropriate.

However, he said that as the new law is implemented over the next year or two, Moody's "support assumptions" for major banks will likely revert to pre-crisis levels, or even lower.

"Since early 2009, Bank of America, Citigroup, and Wells Fargo's ratings have benefited from an unusual amount of support," Jones noted.

That support resulted in debt and deposit ratings that range from three to five notches higher than that appropriate for the banks' intrinsic financial strength, without the support.

The banks' long-term and short-term ratings, which have not benefited from the assumption of government support, were affirmed and not affected.

US industrial titan General Electric has agreed to pay over 23 million dollars to settle allegations that it bribed Iraqi officials, a US financial watchdog said on Tuesday.

GE had been accused by the Securities and Exchange Commission of being part of "a 3.6 million dollar kickback scheme with Iraqi government agencies to win contracts to supply medical equipment and water purification equipment."

Four subsidiaries of the Connecticut-based company were accused of bribing officials at the Iraqi ministries of health and oil, trading cash, computer equipment and medical supplies to win lucrative contracts.

The SEC said the four GE units -- two of which were not part of the firm when the alleged bribery took place -- earned around 18.4 million dollars as a direct result of the kickbacks.

About 18.9 million homes in the U.S. stood empty during the second quarter as surging foreclosures helped push ownership to the lowest level in a decade.

The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.6 million in the year-earlier quarter, the U.S. Census Bureau said in a report today. The ownership rate, meaning households that own their own residence, was 66.9 percent, the lowest since 1999.
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Live Green, LIVE FREE

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[Nictoe]

"Fed will print and print and print until the final crisis," says Marc Faber

Author: BI-ME staff
Source: BI-ME
Published: Tue August 3, 2010

INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor said the US Federal Reserve will create a "final crisis" by continuing to print money because it is underestimating the strength of the economy which shows no signs of stenghtening but signs of weakening everywhere in the world.

Speaking to CNBC Worldwide Exchange Tuesday in a live interview from Zurich, Faber said: " They will print and print and print until the final crisis wipes out the entire system."

Investors should have listened to me already six months ago when I wrote that the Fed will continue to monetize. They will never let up", Faber said.

Asked if the Fed policy is driven by concerns about deflation above all, Faber said: " They are very bad forecasters of economic events".

That was the case with Mr Greenspan but "Mr Bernanke is in the same boat. He has no clues what the economy is doing," Faber added.

Explaining his argument, Faber went on:" They misread in 2007 the severity of the forthcoming economic crisis and then they misread in the last few months the strength of the economy, which shows no signs of strenghtening but signs of weakening everywhere in the world."

I would therefore argue that with the Fed and its policy, significantly more quantitative easing will be coming , he added.

Asked if recent moves in China could be interpreted as diversification away from US dollar assets, Faber said US Treasurys are likely to suffer because of the Fed's policy.

"Everyone in the world has somes concerns about the ultimate value of the Dollar and of the value of US bonds." If the fiscal deficits stay at these levels and in my opinion they are likely to increase, over time obviously you will have a credit problem in the US, he added.

While this will not happen in the next three years, the implications are that diversification out of Us Dollar Treasurys is a good thing, he noted. This is why he is "not all that negative" on stocks.

And investors who share his bearish view would be better off holding stocks instead of bonds in their portfolios, Faber said.

Equities, rather than bonds, "should be part of your porfolio if you are bearish about the long term," he said.
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Live Green, LIVE FREE

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[Nictoe]

[theLIBERTARIAN]

[Nictoe]

Why stimulus isn't working

Consumers, businesses lack confidence to take advantage of cheap interest rates

August 12, 2010
BY TERRY SAVAGE

'You can lead a horse to water, but you can't make him drink."

How true that old saying is. And here's another along those lines:

You can stuff the banks with money, but you can't make them lend. . . . And you can lower interest rates to zero, but you can't give people and businesses the confidence to borrow.

The Dow's 265 point drop Wednesday shows that the market has it figured out -- even if the Fed and Congress don't.

All the stimulus Congress can create -- including Wednesday's promise to send an additional $3 billion of TARP funds to struggling homeowners -- won't get consumers past the fear zone. In fact, it will just prolong the housing crisis as this failed program already has done. And it will further destroy the confidence of buyers and builders.

All the money the Fed can create won't get business going again without the critical ingredient called confidence. And confidence is just what the Fed undermined with its latest promise to keep creating new credit in the banking system and keep interest rates near zero -- all in an attempt to "stimulate" the economy.
The uncertainty factor

There's actually plenty of money around -- trillions of dollars held by banks in the form of Treasury securities, plus nearly $2 trillion in cash on the balance sheets of businesses.

But there's so much uncertainty about future growth that banks don't want to take the risk of lending to businesses. They know they can pay savers close to zero percent interest and then redeposit the cash in risk-free 10-year Treasuries earning 2.5 percent.

And there's so much uncertainty about consumer demand that businesses don't want to invest their cash in new plants or stores or products -- or even in new employees. The fact that health care and financial services reform bills are layering new and uncertain costs on business is just one more reason for companies that have cash to hoard it.

And there's so much uncertainty about the future that even potential homebuyers who have good credit, and could make a down payment on a new or existing home, are scared to do so because they don't know if they'll have jobs in the future. And they figure real estate prices will go lower, or stay low longer.

So the economy is grinding to a halt -- or at least to very slow growth.
Low rates: solution or problem?

But does the Fed have the right remedy -- or is it just making things worse?

Consider this possibility: Low interest rates may actually be slowing the economy down!

Seniors who have lived on the interest they earn on their savings have had to cut back their lifestyles -- cutting into consumer spending.

Workers trying to save for retirement realize they have to spend less and save more, slowing the economy.

Pension funds must project lower returns, so the trustees of state and business pension funds have to contribute more -- diverting resources from economic growth and expansion.
The only winner

About the only winner in this "game" is the U.S. Treasury. It gets to borrow money to fund its deficits at the lowest rates in history. With two-year Treasuries yielding only about half of 1 percent, and 10-year Treasuries yielding 2.75 percent, the government saves a fortune on interest -- for now.

In fact, if rates were only at the "normal" low levels of three years ago, according to economist Brian Wesbury, the Fed would have to spend an additional $230 billion this year to borrow -- adding to the deficit.

While these low rates aren't sparking consumer or business borrowing, they are serving as an incentive for the government to keep spending and borrowing.

Consumers and businesses have learned the lessons of frugality in uncertain times all too well. What a shame the government hasn't begun to learn that lesson. We'll all pay for its mistakes. And that's The Savage Truth.
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Live Green, LIVE FREE

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[theLIBERTARIAN]

We have a lack of confidence, IMO. If people spent their money and businesses took a chance and hired people, the economy would turn around, I bet. That would help more than stimulus.

I think there were some problems. I know this is an unpopular view, but the unemployment extensions didn't help. People took advantage of it. I know, many people said they couldn't find a job. They should have opened up shop themselves.

I agree with the author. We can pump tons of money into the banks and they still won't lend. They should never have been bailed out in the first place.

[Biscuit]

No matter what the stimulous does or does not do, people are still losing their jobs.
The only way to make the economy healthy, is by people spending money and supporting the system.....hard to do when there is no money because there are no jobs!!

[Nictoe]

Watchdog panel cites global impact of US bailout

Aug 12, 6:20 AM (ET)

By MARCY GORDON

WASHINGTON (AP) - The $700 billion U.S. bailout program launched in response to the global economic meltdown had a far greater impact overseas than other countries' financial rescue plans did on the U.S., according to a new report from a congressional watchdog.

Billions of dollars in U.S. rescue funds wound up in big banks in France, Germany and other nations. That was probably inevitable because of the structure of the Treasury Department's program, the Congressional Oversight Panel says in a new report issued Thursday.

The U.S. program aimed to stabilize the financial system by injecting money into as many banks as possible, including those with substantial operations overseas. Most other countries, by contrast, focused their efforts more narrowly on banks in their nations that usually lacked major U.S. operations.

But the report says that if the U.S. had gotten more data on which foreign banks would benefit the most, the government might have been able to ask those countries to share some of the cost.

"There were no data about where this money was going," panel chair Elizabeth Warren said in a conference call with reporters on Wednesday. "The American people have a right to know where the money went."

An example: Major French and German banks were among the biggest beneficiaries of the U.S. rescue of American International Group Inc., yet the American government shouldered the entire $70 billion risk of pumping capital into the crippled insurance titan. The report compares that with the $35 billion that France spent on its overall financial rescue program and the $133 billion that Germany spent.

Much of the $182 billion in federal aid to AIG - the biggest of the government rescues - went to meet the company's obligations to its Wall Street trading partners on credit default swaps, a form of insurance against default of securities. The partners included French banks Societe Generale, which received $11.9 billion in AIG money, and BNP Paribas, which got $4.9 billion, and Germany's Deutsche Bank, $11.8 billion.

Of the 87 banks and financial entities that indirectly benefited from the U.S. aid to AIG, 43 are foreign, according to the report. In addition to France and Germany, they include banks based in Canada, Britain and Switzerland.

In addition to AIG, many of the U.S. banks and automakers that received billions in bailout aid derive a large proportion of their revenue from operations outside the U.S., the report noted.

The watchdog panel was created by Congress to oversee the Treasury Department rescue program that came in at the peak of the financial crisis in the fall of 2008. It has said it's unclear whether U.S. taxpayers will ever fully recoup the cost of the AIG bailout. The Congressional Budget Office estimates that taxpayers will lose $36 billion.

Although the law creating the U.S. rescue program called for Treasury to coordinate its actions with similar efforts by foreign governments, "the global response to the financial crisis unfolded on an ... informal, country-by-country basis," the new report says. "Each individual government made its own decisions based on its evaluation of what was best for its own banking sector and for its own domestic economy."

The U.S. program wound up injecting capital into around 700 banks, while all other governments combined aided fewer than 50, according to the oversight panel.

At the same time, the report suggests that the Treasury program, known as the Troubled Asset Relief Program, or TARP, may have played a constructive role.

"It appears that the existence of the TARP might have served to enhance the negotiating position of the U.S. government (at least in a limited way), as it demonstrated the willingness of U.S. officials to be aggressive and forceful in committing a significant amount of resources to confront a deepening crisis," the report says.

Treasury Department spokesman Mark Paustenbach said the report "shows that Treasury worked effectively with its overseas partners in a number of ways to address the global financial crisis."

The report says the financial crisis revealed the need for an international plan "to handle the collapse of major, globally significant financial institutions."
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Live Green, LIVE FREE

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[Crispy]

[Biscuit]

[Nictoe]

[quote="Crispy"]

[theLIBERTARIAN]

Crispy, I think if people want to pay for unemployment insurance, they should do it. The government should not force employers to buy insurance. That is the biggest problem here in the people's republic of CA. I am sure liberals would disagree with me.

I have a nephew that will be unemployed soon. He is in his mid 20s and told us he will be unemployed on the 22nd and will have to start looking for a job? ????? What? He should have something going on the side RIGHT NOW! This would be an emergency to me. I would never depend on an employer to pay me. Everyone needs some other form of income. I know James has that spirit with his additive business. It is all about what people do with their spare time? Do they watch NASCAR or do they prepare for the future?

IMO, the banks should have failed along with nearly all of the insurance companies and nearly every business. The Fed AND government should not have bailed anyone out. I am sure the liberals disagree with me on that too.

[theLIBERTARIAN]

But with that said, many people are happy that Obama and the liberals extended unemployment benefits.

[Biscuit]

I wonder who they extended them to.....everyone I know without a job has not got an extension.....maybe its because they are white legal citizens!!

[theLIBERTARIAN]

Maybe the people you know got a job before they needed an extension?

The unemployment issue is a hot button one and I bet most people believe the government should do more.

During the Carter recession I went out and bought tools and went door to door to sell them.

It was a lot of work, but it was for myself. I was talking to my wife about this the other day. If for some reason our current business fails, I will go back to doing that. There is no way I will depend on someone else to pay me a paycheck. They will lay you off, lay off the shift, or go out of business. There is too much depending on us making it, and I will not depend on one person or company for a paycheck.