Economic meltdown Fall 2008: Fed and Treasury run “secret liquidity lifelines” to the big dogs of finance (Bloomberg)

As the banking crisis intensified in the Fall of 2008, with major banking institutions assuming (or on the verge of assuming) ‘underwater’ status, the Federal Reserve ran quickly to the rescue with secret liquidity lifelines” (Bloomberg 8-22-11).

The Fed substantially eased some important collateral rules for banks, “meaning that banks that could once borrow only against sound collateral, like Treasury bills or AAA-rated corporate bonds, could now borrow against pretty much anything – including some of the mortgage-backed sewage that got us into this mess in the first place….  ‘All of a sudden, banks were allowed to post absolute [expletive deleted] to the Fed’s balance sheet,’ [according to] the manager of the prominent hedge fund.” (Source: Bailout Hustle, Matt Taibbi).

The Federal Reserve invented various “facilities” to fire-hose liquidity out to the big banks and big brokerage firms, including these:                                                                            Primary Dealers’ Credit Facility                                                                                                Term Securities Lending Facility                                                                                   Temporary Liquidity Guarantee Program                                                                   Commercial Paper Funding Facility                                                                                       Term Auction Facility                                                                                                               Public Private Investment Program

And, here we go – from the top:

Top recipient – Morgan Stanley                                                                                       Morgan Stanley, facing a crisis of confidence after the fall of Lehman Brothers Holdings Inc., got a $9 billion injection from Japanese bank Mitsubishi UFJ Financial Group Inc. and agreed to take a $10 billion bailout from the U.S. Treasury to shore up capital. As hedge-fund customers pulled funds out of the New York-based firm, it plugged the hole with $107.3 billion of secret loans from the Federal Reserve’s Primary Dealer Credit Facility and Term Securities Lending Facility, set up earlier in the year to supply brokerage firms with emergency financing.”

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The Leviticus 25 Plan does not seek to ‘interrupt’ or reverse any of the special relationships that have developed in the Fed’s financial sphere.  It only seeks to level the playing field – by providing U.S. citizens the same access to direct liquidity flows that  the big banks enjoyed ‘in their time of need.’

The Leviticus 25 Plan proposes one additional upgrade to the Fed’s liquidity lines:   U.S. Citizens Credit Facility.

U.S. citizens should demand nothing less. We need it now.

 

 

 

 

Perpetual entitlement spending – and the day of reckoning

Both major political parties in the U.S., over the past 20-30 years, have cooperated in constructing and growing the welfare state into a colossal, out-of-control, unsustainable mess.  Nearly every program is riddled with fraud and waste.  And perhaps worst of all, these programs have thoroughly destroyed the incentive to work and take responsibility for making wise choices in managing one’s daily affairs.

There is no legitimate proposal on the table, by either party, for any type of ‘a way out.’

Means Tested Welfare spending currently stands at about $1 trillion per year.  It is projected to continue growing, unabated, for many years to come.

One political party favors plowing ahead with continued massive entitlement spending. This same party actually supports ‘recruitment’ and continued growth in the “welfare roles.”  They are enabling a permanent dependency class in America fed by higher taxes and wealth confiscation – for political gain.

The U.S. national debt / GDP ratio is over 100%, and the Net Present Value of unfunded liabilities (NPV) is “beyond containment.”  The U.S. is headed toward a major currency crisis in the coming years.  Continuing on with ‘status quo’ welfare policies will hasten our advance to that crisis time.

In the end, the poor will get hit the hardest – and there will be no answers left.

The other political party favors a certain level of ‘cold turkey’ cuts to entitlement programs like SNAP (food stamps). One recent proposal called for $40 billion in cuts over a 10 year period.  This food stamp trimming would amount to $4 billion per year – for 10 years.  In the face of $700-800 billion annual deficits, a $4 billion cut to food stamps would be practically meaningless.

That is not to say that the food stamp program doesn’t have it’s share of graft and abuse.  It certainly does: Food Stamps exchanged for drugs, weapons, contraband – Judicial Watch March 2012;  Food Stamp fraud – CAGW February 2012:

Cutting food stamps, any way you slice it, would be politically ‘messy.’  Very messy.  Inevitably, there would be families going hungry.  And that  would, over time, end up being a political ticking time bomb. It would be almost impossible to defend – when no one in Congress would lose so much as a single meal.

Furthermore, with deflationary winds still blowing strong in the U.S., liquidity is essential for the economy.  Welfare spending cuts would dampen economic growth and negatively impact tax revenues.

Neither political party has a plan to get America out of this mess.  Dark clouds are on the horizon.  A time of reckoning awaits us.

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The Leviticus 25 Plan is a non-political solution for America’s ongoing economic crisis.  It would deliver significant, real-time benefits to American families – and provide equal opportunities for all.  No one would need to go hungry.

It would advance the cause of economic liberty and reinvigorate the economy.  And it would pay for itself over a 10-15 year period.

The Leviticus 25 Plan.

Boomer retirement savings: “No possible scenario where this ends well.”

Baby boomer retirement savings are abysmally low…. pointing to a major liquidity squeeze in coming years.

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Jim Quinn of The Burning Platform blog, accessed from ZeroHedge 8-21-13:      “Luckily, the average American is so bad at math they can’t read this chart and understand the implications. They remain willfully ignorant of their plight. After a lifetime of working, the median Boomer household has managed to accumulate $12,000 of retirement savings.                 

That means that 50% have even less than $12,000 for their retirement. These 55 to 64 year olds are up [the] creek without a paddle. No wonder the percentage of over 55 people working is at an all-time high. Every age bracket has been living in a land of delusion.

The entire country has bought into the ”live for today” mantra.

We have trillions in unfunded Social Security obligations that won’t be paid. Cities and States have trillions in unfunded pension and health benefits that won’t be paid. The government and its citizens have lived above their means for decades and haven’t saved for a rainy day or their futures. Wait until the 40% stock market crash does a number on these figures in the next year.

There is no possible scenario where this ends well or can be solved by another government solution. It’s too late.”

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It is not too late for a fresh, bold, powerful ‘non-government program’ solution:            The Leviticus 25 Plan.

 

U.S. healthcare – there is nothing in the world like a cash-paying customer.… to clean things up: The Leviticus 25 Plan

The Leviticus 25 Plan would put a substantial initial deposit into a participating family’s Medical Savings Account (MSA).  This fully-funded MSA would make it possible for families to pay cash for their day-to-day healthcare spending over the course of the immediate 5-year recapture period.  A low-cost major medical insurance policy would then only be needed to provide catastrophic coverage.

Individual family members covered under Medicaid, Medicare, VA, Tricare, FEHB would pay cash for the first $2500 of health care spending (a $2500 annual deductable) for each of the initial 5 years following enrollment.

Cash payments for day-to-day health care needs would give patients the freedom of choice in choosing their providers, taking greater ownership in their healthcare decisions, and avoiding unnecessary red tape and delays in treatment.  It would avoid penalties families might otherwise pay — for not doing things, precisely, according to government mandates.

The Leviticus 25 Plan would eliminate massive amounts of administrative costs and bureaucratic overhead.  It would allow American families to tailor their spending according to their individual needs, rather than requiring costly coverage in areas that are irrelevant to their needs.

It would provide millions of Americans (those left “uncovered” by the current health law) with access to primary care – without expanding Medicaid.

Cash-paying customers would open the door for countless new efficiencies to be woven back into the system.

It would be a welcome development for nearly all providers.  Instead of turning patients away, due to unacceptable reimbursement rates, they would find ways to appropriately accommodate patients in this newly energized system.

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And here is what happens when instead run things through a big government program…                                                                                                                 Columnist Holoman Jenkins, Jr., WSJ  9-25-13:                                                      “Our point is that when Washington legislates on a grand scale, it sets in motion a game whose long-run outcome nobody can predict.  

ObamaCare, to be sure, was not reform—it was a piling on of subsidies that can only throw fuel on the fire of health-care inflation. Not even the usual mouthpieces pretend otherwise anymore.

But a society can’t give a subsidy to everybody for the same reason you can’t give a subsidy to yourself—you end up paying for your own subsidy and aren’t better off.  In fact, you are worse off thanks to the administrative overhead involved in taking money away from you and giving it back to you.      

You are also worse off because of the perverse incentives engendered by diverting yours and everyone’s health-care spending through a common pot. 

These pathologies have undermined U.S. health care for two generations, and nothing has been solved, nothing has been fixed…”

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It is time for a change.                                                                                                   The Leviticus 25 Plan.

The big U.S. debt shadow

The Shutdown is A Sideshow.  Debt is the Threat                                                                                    By Nial Ferguson  WSJ 10-4-13                                                                                        Excerpts:

 A very striking feature of the latest CBO report is how much worse it is than last year’s. A year ago, the CBO’s extended baseline series for the federal debt in public hands projected a figure of 52% of GDP by 2038. That figure has very nearly doubled to 100%. A year ago the debt was supposed to glide down to zero by the 2070s. This year’s long-run projection for 2076 is above 200%. In this devastating reassessment, a crucial role is played here by the more realistic growth assumptions used this year.”
 
“Just how negative becomes clear when one considers the full range of scenarios offered by CBO for the period from now until 2038. Only in three of 13 scenarios—two of which imagine politically highly unlikely spending cuts or tax hikes—does the debt shrink from its current level of 73% of GDP. In all the others it increases to between 77% and 190% of GDP. It should be noted that this last figure can reasonably be considered among the more likely of the scenarios, since it combines the alternative fiscal scenario, in which politicians in Washington behave as they have done in the past, raising spending more than taxation.”
 
“Only a fantasist can seriously believe “this is not a crisis.” The fiscal arithmetic of excessive federal borrowing is nasty even when relatively optimistic assumptions are made about growth and interest rates. Currently, net interest payments on the federal debt are around 8% of revenues. But under the CBO’s extended baseline scenario, that share could rise to 20% by 2026, 30% by 2049, and 40% by 2072. By 2088, the last date for which the CBO now offers projections, interest payments would—absent any changes in current policy—absorb just under half of all tax revenues. That is another way of saying that policy is unsustainable.”
 
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America needs an economic plan that will reinvigorate economic growth. 
In order to do that the plan must provide direct liquidity infusions to U.S. citizens, eliminate debt at the family level, re-establish meaningful work incentives, reduce the scope of government, and restore economic liberty to the people.                            There is one plan that accomplishes these imperatives.
 
 America’s Economic Plan for the Future – The Leviticus 25 Plan
 
$64,000 per U.S. citizen – credit extension at 0% interest. 75% goes into a Family Account (FA) and 25% goes into a Medical Savings Account (MSA). As an example: A family of four would receive $256,000: $192,000 deposited into the Family Account, $64,000 into the family’s Medical Savings Account.
 
Recapture provision overview:  Participants agree to give up income tax refunds each year for 5 years. Participants also agree to give up Means Tested Welfare benefits, Income Security benefits, unemployment insurance benefits, SSI, and SSDI benefits for a 5 years period.
 
Medicaid, Medicare, VA, Tricare, and FEBH healthcare benefits remain in place, but the deductible goes up to $2500 / person / year for 5 years.
 
The Recapture Provisions return over 50% during the first 5 years. Dynamic inertia and positive feedback generate sufficient ‘follow-on’ return to fully fund the plan over a 10-15 year period.
 
The Leviticus 25 Plan would restore economic liberty, reduce the scope of government, re-ignite real economic growth, generate real tax revenue growth (federal, state, local), and make a real difference in peoples’ lives.
 
The Leviticus 25 Plan is the only plan in America that would deliver meaningful real-time benefits –  and pay for itself over a 10-15 year period.
 
The Leviticus 25 Plan. 
The $64,000 Solution October 2013:
 
 

Firings and foreclosures…

These are not positive signs for the U.S. economy

Job Cuts (Excerpts from ZeroHedge 10-11-13):

Challenger Gray & Christmas provided 24/7 Wall   St. with all job cut announcements affecting at least 500 positions this year…. We only considered publicly traded, American companies, or divisions of publicly traded companies. Job cuts did not need to be entirely within the United   States.”

These are the 10 companies cutting the most jobs.

1. JPMorgan Chase & Co. > Job cuts: 19,000 > Number of employees: 254,063

2. J.C. Penney Company, Inc. > Job cuts: 15,020 > Number of employees: 116,000

3. International Business Machines Corp. > Job cuts: 9,400 > Number of employees: 434,246

4. Boeing Co. > Job cuts: 5,800 > Number of employees: 174,400

5. American Express Company > Job cuts: 5,400 > Number of employees: 63,500

6. Wells Fargo & Co. > Job cuts: 5,236 > Number of employees: 274,300

7. Cisco Systems, Inc. > Job cuts: 4,500 > Number of employees: 75,049

8. MetLife Inc. > Job cuts: 3,150 > Number of employees: 64,000

9. Blockbuster (Dish Network Corp.) > Job cuts: 3,000 > Number of employees: 35,000

10. United Technologies, Inc. > Job cuts: 3,000 > Number of employees: 218,000

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Foreclosure filings (Excerpts from RealtyTrac report 10-10-13)

”Foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 131,232 U.S. properties in September, a 2 percent increase from the previous month but a 27 percent decrease from a year ago.

There were a total of 376,931 U.S. properties with foreclosure filings in the third quarter of 2013, down 7 percent from the previous quarter and down 29 percent from the third quarter of 2012 — the biggest annual decrease since the second quarter of 2011. One in every 348 housing units had a foreclosure filing during the quarter.

Third quarter bank repossessions (REO) decreased 24 percent from a year ago but were up 7 percent from the previous quarter. A total of 119,485 U.S. properties were repossessed by lenders in the third quarter, putting the nation on pace for close to half a million total bank repossessions for the year.

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Note:  The U.S. is on track for 500,000 REOs this year.  And REOs (Real Estate Owned) are a subcategory of repossessions in which minimum bids are not generated at foreclosure auctions, and the banks take possession of the property.

America’s economy is still bleeding.  We need a real economic growth plan.  One that delivers real benefits to real people.

The Leviticus 25 Plan.

 

 

Big government – ‘spinning’ the debt wheel…

The U.S. government borrows money at its Treasury auctions each month for the anticipated shortfall in funding operations.  We are about $16.9 trillion in the (cash) hole right now… and counting.  And on a Net Present Value (NPV) basis, the U.S. is somewhere between $88 – $200 trillion in the hole (that’s another story altogether).

In recent years the shifted its borrowing to the shorter end of the curve – where rates are more favorable.  Unfortunately, that debt also matures (comes ‘due’) earlier, too.  And the action is starting to heat up a bit.

As ZeroHedge recently reported (10-7-13),  “When a Treasury security matures, Treasury must pay back the principal plus interest due. Under normal circumstances, Treasury would simply “roll over” the security.

And… “As one security matures, the principal and interest for that security would be paid for with cash from the issuance of a new security.”

And now things are, temporarily at least, heating up a bit – with a lot of that debt now ‘coming due’ (this on top of whatever the ‘new issuance’ might be).

“The chart below lays out the amount of Bill, Note and Bond maturities between October 18 and November 15: it totals a whopping $441 billion.”

Now… what’s interesting is that a good share of that $441 billion debt coming up for ‘rollover’ may actually be ‘held’ by the Federal Reserve, itself.

And that would mean that the U.S. government will simply make that portion of the ‘pay out’ to itself (instead of a full $441 billion to outside parties), so it may not be quite that significant at a ‘heart-pounding’ issue.

But what is also interesting about this scenario is that the government will most certainly then turn right around and spend that ‘principle plus interest’ payout.  And that’s how ‘easy money’ flows around…

And here’s the upshot.  The U.S. government is debasing the currency, and middle-income and low-income families in America are going to get ‘skinned’ in the long run.

We need to shift gears and extend credit direct to American families, so they can reduce and eliminate debt, massively, before things get ugly.

The Leviticus 25 Plan.

There is no other plan on the table.  Anywhere.

SSDI growth is threatening to ‘bust’ the Social Security System…

14 million Americans are presently rolled in the Social Security Disability Insurance program  –  each receiving an average of $1,111 per month.

Total cost of SSDI:  $15.554 billion per month, or $186.6 billion per year.

The Leviticus 25 Plan assumes 80% participation by U.S. citizens.  Participants would give up Means Tested Welfare, Income Security program benefits, SSI, SSDI, among other social program adjustments (see below).

The SSDI savings alone would result in ($186.6 billion X 80%,) $149.3 billion annually.

And this would amount to total ‘recapture’ savings of at least $746.4 billion (assuming no growth in recipient numbers or payouts) over the initial 5 year period.

Reports:                                                                                                                         Fox News Sep 2013 SSDI report                                                                                 Widespread Fraud reported in Soc Security Administration’s Disability Program – Oct 2013

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America’s Economic Plan for the Future – The Leviticus 25 Plan

$64,000 per U.S. citizen – credit extension at 0% interest. 75% goes into a Family Account (FA) and 25% goes into a Medical Savings Account (MSA). As an example: A family of four would receive $256,000: $192,000 deposited into the Family Account, $64,000 into the family’s Medical Savings Account.

Recapture provision overview:  Participants agree to give up income tax refunds each year for 5 years. Participants also agree to give up Means Tested Welfare benefits, Income Security benefits, unemployment insurance benefits, SSI, and SSDI benefits for a 5 years period.

Medicaid, Medicare, VA, Tricare, and FEBH healthcare benefits remain in place, but the deductible goes up to $2500 / person / year for 5 years.

The Recapture Provisions return over 50% during the first 5 years. Dynamic inertia and positive feedback generate sufficient ‘follow-on’ return to fully fund the plan over a 10-15 year period.

The Leviticus 25 Plan would restore economic liberty, reduce the scope of government, re-ignite genuine economic growth, generate legitimate tax revenue growth (federal, state, local), and make a real difference in peoples’ lives.

The Leviticus 25 Plan is the only plan in America that would deliver meaningful real-time benefits –  and pay for itself over a 10-15 year period.

The Leviticus 25 Plan. Full document – September 2013 revision

 

 

Former chairman of Kansas City Federal Reserve Bank: Fed is “boxed” in…

After 5 years of “TARP to ZIRP to QE one, two and three,” the Fed is “in a box that is going to be difficult to unwind and get out of…” according to Bob Funk, former chairman of the Kansas City Fed.  (Yahoo Finance 10-4-13)

“The wind-down of QE3 is only one part of the extraordinary measures currently in place, and Funk says when the time comes to actually increase, or normalize, interest rates, it is going to be much harder.”

“It is a large challenge…. to get [rates] back to what we used to call neutral, which is 3.5% to 4.5%,” Funk judged.

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And why will it be a “hard” process…?

If the Fed were to actually allow rates to ‘normalize,’ then the financing costs (interest expense) for the U.S. Government’s ongoing deficit spending would begin to sharply accelerate.

In addition, much of the U.S. national debt ($16.9 trillion) is financed on the short end of the curve with a ‘healthy amount of that ‘rolling over’ each and every month.  And the financing costs (‘carrying charges’) on that debt would also begin accelerating upward.

An old-fashioned ‘snowball’ effect kick in …. and things would get ugly … very fast.

Higher rates would likely choke off a certain percentage of economic activity in the private sector. Already ‘debt-laden’ consumers would be further squeezed by the higher rates.  Economic growth would suffer, and negative feedback effects and ‘disorder’  would begin kicking in all over.

To say that allowing rates to “normalize” would be “challenging” is to grossly understate the matter.

The Leviticus 25 Plan, on the other hand would allow a much more orderly transition to normalized rates in the credit markets.

Substantial liquidity injections, direct to American families, would:                          Provide for massive debt reduction at the family level,                                               Reincentivize work and improve productivity on a broad scale,                           Revitalize economic growth – generating robust tax revenue,                                  Reduce the cost of government,                                                                              Breathe new free-market efficiencies into the economic system,                                   and Restore the foundation for economic liberty in America.

There is no other plan in America that come anywhere close to providing the benefits that would be realized with The Leviticus 25 Plan.

Ask your members of Congress to show you their plan…

Big government central-planning and the strange case of REOs… And why America needs a new plan. The Leviticus 25 Plan.

Millions of home loans have fallen into “distressed status” over the past 5 years, as the economy began shriveling up and American families began losing income and falling behind on their mortgage payments.

At a certain point in time lenders (banks, government agencies / loan insurers) file  foreclosure notices on these distressed properties.  A significant number of days may then pass before the process moves on to the next step. The delinquent homeowner may request a short-sale – which the lender may or may not allow.  Or the lender may proceed on to a foreclosure auction.

The “foreclosing beneficiary” (the ‘lender) will set the opening bid for the amount owed on the loan (or the ‘outstanding loan amount’).  And if there are no interested parties willing to bid at that ‘set’ price, then the foreclosing beneficiary comes to legally repossess the property.

These lender-owned properties are known as Real Estate Owned (REO) properties, and are listed on their books as non-performing assets.

RealtyTrac forecasts 500,000 REOs for 2013.  That’s an average of over 1360 “lender repossessions” per day, for each and every day of the year.  That’s over 1360 families daily – losing their homes to banks and government agencies.

And now some big firms like the hedgefund, Blackstone, have been stepping in to buy up these ‘lender-owned’ properties, in mass, in certain markets like Phoenix and Tampa, with support from an “ongoing government-subsidized, GSE/FHFA endorsed REO-to-Rent initiative.”  (ZeroHedge 3-14-13)

Blackstone’s plan is to get the properties fixed up and rented out — with rent-paying tenants in place.

And then they plan to securitize these tranches – similar to the good old mortgage securitizations (MBSs) that were so popular during the housing bubble (the one that ‘popped’ in the Fall of 2008 and pushed the banks underwater and sent the U.S. economy into a tailspin).

So… here is a quick summary.  Homeowners in America (500,000 this year alone) will ‘exit’ their homes as those homes are legally repossessed by lenders (the ‘foreclosing beneficiary’) – banks and government agencies.  The U.S. government then enters the scene to subsidize (yes, SUBSIDIZE) the sale of these homes from the repossessing lender to a hedgefund to turn into rentals for eventual securitization and sale as an  income-producing investment vehicle.

This scheme is a “government-subsidized, GSE/FHFA endorsed REO-to-Rent initiative, through which large asset managers have been encouraged to take advantage of government funded, risk-free financing and purchase foreclosed properties in bulk, with the intention of converting them into rental properties. The REO-To-Rent has traditionally been open to the biggest of financial companies, or at least those who don’t have the stigma of legacy mortgage origination resulting in billions in litigation reserves, which means mostly hedge funds and PE firms.” (ZeroHedge 3-14-13)

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The Leviticus 25 Plan offers a preferred alternative.

Instead of the U.S. government again bailing out the banks by subsidizing the sale of these non-performing assets to investment companies, The Leviticus 25 Plan keeps American families in their homes, so the problem doesn’t develop in the first place.

It is unconscionable that the U.S. government offers no mechanism to provide liquidity to financially distressed American families, but it will provide liquidity to distressed banks to move distressed properties off their books – and into the hands of hedgefunds for ‘grooming’ as securitized investments.

There is only one plan in America that will re-ignite real economic growth, pay for itself over a 10-15 year period, and deliver substantial ‘ground-level’ benefits to Americans.

The Leviticus 25 Plan.