Corporate Finance Institute: The 2008 Financial Crisis

Before the financial crisis of 2008, there was more money invested in credit default swaps than in other pools. The value of credit default swaps stood at $45 trillion compared to $22 trillion invested in the stock market, $7.1 trillion in mortgages and $4.4 trillion in U.S. Treasuries. In mid-2010, the value of outstanding CDS was $26.3 trillion.

Many investment banks were involved, but the biggest casualty was Lehman Brothers investment bank, which owed $600 billion in debt, out of which $400 billion was covered by CDS. The bank’s insurer, American Insurance Group, lacked sufficient funds to clear the debt, and the Federal Reserve of the United States needed to intervene to bail it out.

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The “Many investment banks” noted above received hundreds of billions of dollars through the Fed’s ‘Secret Security Lifelines,’ to include: Morgan Stanley, Citi, Goldman Sachs, JP Morgan, Bank of America, Merrill Lynch, Credit Suisse, Deutsche Bank, HSBC, Société Générale, RBS, Barclays, BNP Paribas, UBS, and many others.

An important review…

As the banking crisis intensified in the Fall of 2008, with major banking institutions assuming, or on the verge of assuming, the classical ‘snorkel’ position (‘underwater’ status), the Federal Reserve ran quickly to the rescue with ‘secret liquidity lifelines” (Bloomberg Uncovers the Fed’s Secret Liquidity Lifelines … 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 the following credit “facilities” to fire-hose liquidity out to major banks and brokerage firms:

Primary Dealer’s 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: Bloomberg – November 2011

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.”

Peak amount of Debt on 9/29/2008: $107B

And now ‘Round 2’, another CDS default bonanza, is looking increasingly likely…

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The Daily Shot, October 27, 2020 – Credit: CDS auction recoveries (defaulted debt) have been extremely low this year, dominated by leveraged retailers with broken business models. Cov-lite debt structures exacerbated the losses.

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America needs a plan that re-targets Fed liquidity infusions to flow directly to U.S. citizens.

NOT the global banking confederation and Wall Street’s Financial Sector.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2021 (3858 downloads)

US Budget Deficit Triples To Record $3.1 Trillion In 2020 As US Spends 90% More Than It Collects

ZeroHedge, Oct 16, 2020 – Excerpts:

Those who have been following the record surge in US public debt (excluding the roughly $100 trillion in off-balance sheet obligations), which exploded by $3 trillion in the three months following the covid shutdowns and which just hit an all time high $27.1 trillion this week, will be all too aware that the US budget deficit this year – and every year after – will be staggering.

What all this means, is that for the full 2020 which ended on Sept 30, the US spent $6.552 trillion and collected just $3.420 trillion, which also means that outlays were a record $3.1 trillion, 91% higher than receipts, which also includes the $9.7BN received last month and $81.9BN YTD in deposits of earnings by the Fed.

And since outlays equal receipts plus the deficit, this means that for the fiscal 2020, the US budget deficit more than tripled to a record $3.1 trillion (compared to “just” $984 billion in 2019), higher than at any other time in US history and unfortunately due to “helicopter money” it is unlikely that the exploding deficit will ever shrink again until the monetary system is overhauled… or collapses.

At some point the market will realize that this insanity is simply unsustainable, something which the CBO pointed out in its latest long-term debt forecast.

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There is a simple, yet astoundingly powerful economic acceleration plan that can solve our debt-plagued dilemma.

It is centered upon eliminating a massive expanse of ground level debt, reducing dependence on government by citizens and businesses, generating massive new flows of tax revenue (with out raising taxes), reestablishing a citizen-centered health care system, and restoring free-market dynamics and economic liberty in America.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2021 (3852 downloads)

America will benefit principally from a ‘Powerful Economic Recovery.’ Much less from an ‘Equitable Post-Covid Recovery.’

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An Equitable Post-Covid Recovery – WSJ

Oct 7, 2020 – Excerpts:

How to help women and minorities, who have been suffering most in the downturn.

Meanwhile, the number of workers unemployed for 27 weeks or longer rose by 781,000 in September, to 2.4 million. Unless job creation speeds up, this number will continue to rise. A lesson from the 2007-09 recession: The longer workers remain jobless, the more likely they are to stop looking and drop out of the labor force altogether.

[snip]

The Bureau of Labor Statistics predicts that the U.S. labor force will grow over the next decade by only 0.5% a year. The workforce is aging, which means employment is likely to grow more slowly. This is why the BLS and the Congressional Budget Office are predicting annual economic growth of less than 2% between now and 2030. If the pandemic dropouts aren’t brought back into the labor force, this gloomy picture will darken.

Because low-wage workers are disproportionately racial and ethnic minorities, the uneven recovery is bound to exacerbate inequality. Black employment has declined by more than 11% since February, versus about 6% for whites, 7.2% for Asians, and 9.5% for Hispanics. Blacks have recovered only 35% of the jobs they lost during the pandemic, compared with 47% for Asians, 51% for Hispanics and 58% for whites.

Then there’s inequality of the sexes. Since February, employment has declined more for black women than black men and for white women than for white men. The labor-force participation rate for women has declined by 3.6 points since the start of the pandemic, double the decline for men. Of the nearly 1.1 million people who stopped working or looking for work in September, the Washington Post reports, almost 80% were women.

The next president will face this daunting set of problems, which the pandemic exacerbated but didn’t create. Absent a coordinated and vigorous policy response, these issues will outlive the pandemic. Here’s what the next president should do:

• Keep the economic recovery on track.  

• Reabsorb displaced workers and the long-term unemployed into the labor force as quickly as possible.  

• Reduce employment gaps between white Americans and minorities.  

• Acknowledge that help for working women is a necessity if the U.S. is to have an adequate labor force in coming decades.  

These steps should be the starting point in January—no matter who is president.

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No. The ‘starting point’ is….

America needs a powerful round of ‘ground level’ liquidity infusion – to effect a massive ‘debt elimination’ event.

THIS will benefit U.S. citizens across the board – and set America on course for long-tern economic growth, federal debt reduction, and economic liberty.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2021 (3834 downloads)