A look back…

2008: Secret Fed Loans – Largest Bailout in U.S. History                                             Nov. 28 (Bloomberg) — Bloomberg Markets magazine’s January issue examines how the Federal Reserve and big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. And how bankers failed to mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. (Source: Bloomberg)

Nov. 28 (Bloomberg) — 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. 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.  Betty Liu reports on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

Kenneth D. Lewis Former CEO of Bank of America Corp.                                            On Nov. 26, 2008, then-Bank of America 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 firm owed the central bank $86 billion that day. 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.

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.

$7.77 Trillion – 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.”

Bloomberg.com:  http://164.67.163.139/Documents/areas/adm/loeb/12_177.pdf

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It is time to take action and get America back on track for economic growth and economic liberty.

It is now time for the Federal Reserve re-target liquidity flows – to grant U.S. citizens the same access to liquidity that was provided to global financial markets during the last Great Financial Crisis.

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

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A look back …

Bloomberg excerpts:
“As an insurer, American International Group Inc. didn’t qualify for the Federal Reserve’s crisis-lending programs for banks. So when trading partners squeezed AIG for liquidity in 2008, the Fed gave the New York-based company two credit lines all its own, with a combined borrowing capacity of $122.8 billion.

AIG’s balance under the credit lines reached about $90 billion in October 2008, data show. By then, the U.S. Treasury Department had taken over AIG, making about $70 billion of separate capital injections during the crisis.

In January 2009, the company borrowed $16.2 billion from the Fed’s Commercial Paper Funding Facility. Bloomberg didn’t include the credit lines in its Fed-loan ranking because they weren’t available to a range of institutions and the borrower was never kept secret.

Peak amount of debt on 1/27/2009: $16.2B
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AIG FP (AIG Financial Products) raked in billions of dollars selling credit default swaps (CDS) during the housing boom. And they did not set aside adequate “reserves” to cover the potential of a hard down-turn in the market.

That hard down turn arrived when the housing bubble popped in 2007. And when the storm hit, AIG FP was sitting on $450 billion in CDS contracts. They could not ‘cover’ their counterparty obligations – to major fiduciary institutions like Goldman Sachs, Societe Generale, and many others.  And those counterparties did not adequately verify that AIG had the unwalled reserves necessary to cover their massive exposure.

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The Fed then stepped right up to cover those obligations – 100 cents on the dollar.
Note: The Fed “gave the New York-based company [AIG] two credit lines all its own, with a combined borrowing capacity of $122.8 billion.”

It is now time for the Fed to step up and provide one new credit line, a Citizens Credit Facility, to American families (who, by the way, did not ‘roll the dice’ with leverage speculation like AIG and other major Wall Street players).

It is time for U.S. citizens to be granted the same direct access to liquidity extensions.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

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‘Huge, Missing and Growing:’ $65 Trillion in Dollar Debt Sparks Concern

Greg Ritchie – Bloomberg | Mon, December 5, 2022

(Bloomberg) — Institutions outside the US are holding an estimated $65 trillion in “missing” dollar debt off their balance sheets through currency derivatives, making it harder for global policymakers to anticipate the next financial crisis.

According to a paper from the Bank for International Settlements, this very short-term hidden borrowing forms part of a “huge, missing and growing” debt that the likes of pension funds owe through foreign-exchange swaps and other derivatives transactions.

This is a problem, the BIS noted, because FX swaps were flash-points during both the global financial crisis and the early days of the pandemic, when dollar funding stress forced central banks to step in to help struggling borrowers.

“It is not even clear how many analysts are aware of the existence of the large off-balance sheet obligations,” said researchers Claudio Borio, Robert McCauley and Patrick McGuire, noting that the lack of information into this form of dollar borrowing puts policymakers on the back foot.

“Thus in times of crises, policies to restore the smooth flow of short-term dollars in the financial system — for instance, central bank swap lines — are set in a fog,” the report said.

The $65 Trillion Hidden Global Debt Bomb: Paul J. Davies

The findings, based on data from a triennial survey of global currency markets earlier this year, offer a rare insight into the scale of hidden leverage. The total amount of dollar debt from the derivatives stands at more than $80 trillion, exceeding the combined value of dollar Treasury bills, repurchase agreements and commercial paper, BIS said.

Banks headquartered outside the US carry $39 trillion of this debt — more than double their on-balance sheet obligations and ten times their capital, the paper said.

In an FX swap, a Dutch pension fund might borrow dollars and lend euros, and then later repays the dollars and receive euros. This is conceptually similar to a repo agreement except currencies are exchanged instead of collateral such as bonds, the BIS paper noted. Much of the dollar debt is very short-term and can create dollar funding squeezes, the researchers said.

Separately, another BIS paper found an estimated $2.2 trillion of daily FX turnover was subject to settlement risk. That refers to the possibility that one party to a trade fails to deliver the currency owed, which can “result in significant losses for market participants, sometimes with systemic consequences.”

This infamously happened when Germany’s Bankhaus Herstatt failed in 1974 leading regulators to set up the Basel Committee. The risk remains because payment-versus-payment arrangements — where transfers are co-ordinated so that neither party in a trade is left holding a claim after it has discharged its obligations — are unavailable, unsuitable or too expensive for certain trades, the BIS paper said.

“There is a staggering volume of off-balance sheet dollar debt that is partly hidden, and FX risk settlement remains stubbornly high,” said Borio, head of the monetary and economic department at the BIS.

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Again… “Banks headquartered outside the US carry $39 trillion of this debt — more than double their on-balance sheet obligations and ten times their capital…”

A look back to the 2008-2010 Great Financial Crisis (Investopedia):

“The 2008 financial crisis was primarily caused by derivatives in the mortgage market. The issues with derivatives arise when investors hold too many, being overleveraged, and are not able to meet margin calls if the value of the derivative moves against them.”

“A number of banks went under, others had to be bailed out by governments and still others were forced into mergers with stronger partners. The common stocks of banks got crushed, their preferred stocks were also crushed, dividends were slashed and lots of investors lost part or all of their money.”

As the Fed bailed out the Wall Street financial sector through various credit facilities, graciously preserving the financial health and creature comforts of the principals managing and directing those too-big-to-fail financial institutions, the over 6 million Americans lost their homes through foreclosure. Over 9 millions Americans lost their jobs.

It is now time for preemptive action to prevent another catastrophic fall-out that would again be certain to hit millions of hard-working, tax-paying U.S. citizens.

It is time to grant U.S. citizens the same direct access to liquidity extensions that were provided to the likes of Morgan Stanley, Citigroup, Bank of America, JP Morgan, Goldman Sachs, Wells Fargo, Deutsche Bank, UBS, Royal Bank of Scotland, Barclays and scores of other major financial institutions.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

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Certainly one of the primary reasons the Fed has been in full scale ‘rate-hike mode’ in recent months has been to jack rates up to a high enough, attractive enough level, to create strong demand for government debt at the monthly Treasury auctions.

The Fed has stopped buying Treasuries (through back door Primary Dealer channels) and is now actually selling Treasuries from their portfolio – to shrink their balance sheet (announced months ago with their QT initiative). So, somebody (indirect bidders) would be needed to pick up the slack and ‘buy government paper.’

Robust private sector demand would therein be critical for allowing Treasury auctions to proceed in an orderly fashion, ‘allowing’ big government, specifically the Executive branch and its various agencies and the U.S. Congress, to continue happily digging America ever deeper into debt.

So far, so good:

ZeroHedge: Staggering Demand For 7Y Paper Delivers Third Monster Treasury Auction In A Row

A stellar 3Y auction on Tuesday, a record-breaking 5Y auction yesterday and moments ago: a blowout 7Y auction completes a sequence of three monster auctions which have seen an absolute flood of demand mostly by foreign buyers.  JAN 26, 2023

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The looming problem: higher net interest costs are now getting ‘baked in’ to our ever-ballooning federal budget deficits, which will inevitably lead into a period of U.S. Dollar instability, chaos in the foreign exchange markets and complete disorder in the credit markets.

There is a solution, a powerhouse economic initiative, to solve America’s debt crisis and keep America’s financial affairs in good order. Re-targeting liquidity flows key to a dynamic resolution of this crisis.

It is now time to grant U.S. citizens with the same direct access to liquidity extensions that was so generously extended, through various credit facilities, to scores of ‘too big to fail’ financial institutions during the great financial crisis of 2007-2010, including the likes of: Morgan Stanley, JP Morgan, Goldman Sachs, Citigroup, Bank of America, Wells Fargo, State Street, Deutsche Bank, RBS, Barclays, UBS AG, BNP Paribas, and multiple others…

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Pandemic Fraud Gone Wild

Latest estimate of theft from jobless insurance programs: $60 billion.

By The Editorial Board

Updated Jan. 25, 2023 6:35 pm ET

Government spending and fraud are regular dance partners, but rarely as cheek to cheek as they were with unemployment payments during the pandemic. A new report adds more evidence about the failure to protect taxpayers.

The Government Accountability Office this week released a review of the Labor Department’s handling of $878 billion in unemployment insurance handouts from April 2020 to September 2022. Labor estimates that fraud in its normal unemployment program hit $8.5 billion from July 2020 through June 2021. That’s 8.6% of outlays.

GAO extrapolated the lower bound of this fraud rate (7.6%) across the three additional unemployment programs Congress created for the pandemic, and it estimates taxpayers overall underwrote some $60 billion in fraudulent payments. This buttresses last year’s Labor Department Inspector General estimate of at least $45 billion in fraud. As GAO notes, Congress’s “unprecedented infusion of federal Covid-19 relief funds into UI programs during the pandemic

gave individuals and organized crime groups a high value target to exploit.”

Take the Pandemic Unemployment Assistance program, designed to help self-employed workers and independent contractors. Congress was so eager to hand out cash that for most of 2020 it allowed applicants to “self certify” their eligibility—requiring no documentation of self-employment.

The program predictably ballooned, comprising over 40% of the more than 3.2 million unemployment claims submitted the week ending May 23, 2020. GAO reports that “the increased amount of benefits awarded and the PUA program’s initial reliance on self-certification” inspired a rash of swindlers.

Thousands cheated the system by falsifying information on income or employment. GAO relates one case in which a former state workforce agency employee used pilfered information to submit at least 197 fraudulent applications. Another individual collaborated with prison inmates to bilk $180,000, and one thief stole identities to submit at least 300 claims in 17 states and territories.

The government excuse is that it was erring on the side of getting people aid quickly. Yet any Member of Congress who has read a government watchdog report knows the Labor Department has struggled with chronic unemployment fraud, reporting billions annually in improper payments before Covid. The structure of these pandemic-era programs was an invitation for hoaxers to descend.

GAO reports that while Labor has recently handed out nearly $900 million in grants to state agencies to address fraud, the department itself still hasn’t adopted practices recommended by GAO as long ago as 2015. This follows numerous IG reports that have scored Labor’s refusal to get tougher with states that are lax on fraud.

Democrats in the last Congress covered for these failures and blocked legislation designed to track funds and fix certain practices. House Oversight Chairman James Comer is now getting serious, and next week he’ll hold his first hearing into the waste and fraud in Covid relief programs. Americans deserve to know what went wrong and what Congress is doing to prevent a repeat.

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Again: “GAO reports that while Labor has recently handed out nearly $900 million in grants to state agencies to address fraud, the department itself still hasn’t adopted practices recommended by GAO as long ago as 2015. This follows numerous IG reports that have scored Labor’s refusal to get tougher with states that are lax on fraud.”

America needs a comprehensive economic initiative that delivers direct, tangible benefits to America’s honest, hard-working, tax-paying U.S. citizens – rather than continuing with their grossly mismanaged, fraud-ridden big government social assistance boondoggles.

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.

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$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (5688 downloads)

Social Security, Medicare Cuts Sidelined in Debt-Ceiling Talks – WSJ

Programs face future funding shortfalls but remain politically perilous to both parties

The Wall Street Journal, Feb 2, 2023 – Excerpts:

WASHINGTON—Republicans are backing away from proposals to reduce spending on Social Security and Medicare as they enter talks with Democrats over raising the nation’s borrowing limit, sidelining for now a politically perilous fight over how to best firm up the finances of the popular benefit programs.

The partisan wrangling underscores the difficulty of finding a legislative solution to the stark long-term financial challenges facing both programs, which provide retirement and healthcare benefits to seniors. Overhauling Social Security and Medicare carries such risk—for Democrats who favor raising taxes and for Republicans eyeing cuts to future benefits—that it has become known as the third rail of American politics, threatening to zap any politician who tries to touch it.

One notorious 2012 TV commercial showed a man who looked like then-Vice Presidential candidate Paul Ryan pushing grandma off a cliff in a wheelchair—after the Wisconsin Republican proposed Medicare changes….

Some Republicans say they would shrink deficits by giving priority to cuts to discretionary military and nonmilitary spending. But such an approach could limit Republicans’ ability to make the deep reductions many seek. As much as 92% of projected nominal spending growth is driven by Social Security, federal healthcare programs and interest payments on the national debt, according to the nonpartisan Committee for a Responsible Federal Budget.

Trustees for the Social Security Trust Funds projected last year that the program’s combined reserves would be depleted in 2035. Once Social Security’s reserves run out, revenue would pay for roughly 80% of scheduled benefits, unless Congress steps in.

Reserves for Medicare’s hospital-insurance fund are forecast to run out in 2028, at which point the program would only be able to pay about 90% of hospital coverage.

Rep. Byron Donalds (R., Fla.) said that while Social Security and Medicare are off the table for the debt-ceiling talks, that doesn’t mean that Republicans won’t propose changes down the road.

“When it comes to the debt ceiling, nobody is talking about Social Security and Medicare, nobody. Full stop,” Mr. Donalds said. “Now, for the longer-term fiscal outlook of the country, there are reforms that are going to have to be made in those programs,” he said.

Currently, Social Security taxes aren’t collected on an individual’s wages over $160,200. 

To address Medicare insolvency, some Senate Democrats have considered a tax increase on high earners.

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Washington Democrats are spinning America ever deeper into the great debt void and eventual collapse of the Dollar.

Washington Republicans have no politically feasible, economically credible counter-plan to reverse this slide and get America back on track. They have the opportunity of a lifetime to advance a powerful, citizen-centered economic acceleration plan, and they are ‘dead in the water’….

The Leviticus 25 Plan will produce enormous reductions outlays in Medicare, Medicaid/CHIP/ and discretionary spending, all the while generating $500 billion – $600 billion annual budget surpluses. 

All without any need to “reform” Social Security and Medicare. It will in fact bolster the long-term strength and viability of both trust funds.

The Leviticus 25 Plan will eliminate massive amounts of public/private debt, rejuvenate free-market economics, reduce dependence on government, restore citizen-centered healthcare, restore economic liberty.

Its popular appeal will win millions of new votes – and landslide election victories.

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America needs a powerful new, outside-the-box economic strategy – or we will descend into long-term economic stagnation and ever greater big government control over the daily affairs of citizens.

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How to Play ‘Debt-Ceiling Chicken’ – WSJ

Republicans will be emboldened to push past deadline, but history shows politics are against them

The Wall Street Journal, Feb. 1, 2023 – Excerpts:

The fight over the debt ceiling is usually described as a game of chicken. In the current version, congressional Republicans and the Biden administration each want the other to blink first and avoid a convulsive default on federal government debt.

Actually, it is two separate games of chicken with very different dynamics. The first runs until the “X-date,” when debt hits the $31.4 trillion limit, and the Treasury Department has no more room to borrow and thus pay all the government’s bills. In this game, Republicans have the upper hand. The second game begins after the X-date, and then the advantage switches decisively to the White House.

…..

Mr. Biden is adopting much the same stance then-President Barack Obama did in 2011, when the U.S. came close to, but didn’t pass, the X-date. The Biden administration says raising the debt ceiling simply allows Treasury to pay obligations Congress has already agreed to, and should be done without conditions. Biden officials say they cannot “prioritize” debt payments—use incoming revenue to pay interest on the national debt, thereby avoiding a debt default, while defaulting on other obligations, from Social Security and Medicare payments to military salaries and supplies.

…..

In this game of chicken, Mr. Biden and Republicans will try to pin the blame on each other. History is solidly on Mr. Biden’s side. In the government shutdowns of 1995-96, 2013 and 2019, and the debt ceiling impasse of 2011, polls showed the public always blamed Republicans more than Democrats. This has had real-world repercussions: it helped re-elect President Bill Clinton in 1996 and cost the GOP the Virginia governor’s race in 2013.

Former and current Republican officials I spoke to for this column all said their party will lose this political game of chicken, like they lost the others. “The media and Biden will do a better job of blaming us.…

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Republicans will lose this game of chicken… and America will be all the worse for it.

The Leviticus 25 Plan will eliminate massive amounts of public/private debt, rejuvenate free-market economics, reduce dependence on government, restore economic liberty.

Its popular appeal will win millions of new votes.  And produce landslide election wins.

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 2023 (5684 downloads)