Printing Money to Ease Their Pain.
News that the Federal Reserve Bank turned an $82 billion profit by investing money it prints – and then claiming pure profit on such investments – made Wall Street giddy. To be accurate, the Fed doesn’t physically print the money. The Federal Reserve Act of 1913 authorizes the Fed to direct the Treasury to print money. The Treasury charges the Fed 2.3 cents for each note it prints. The Fed then lends their $100 unit Federal Reserve Notes (FRN) back to the government at face value plus interest.
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According to a long-standing petition to dissolve the Fed, the tax payment checks you send to the IRS are endorsed on the back as “Pay Any F.R.B. Branch or Gen. Depository for Credit U.S. Treas. This is in Payment of U.S. Oblig.” The petition contends that every dime we pay in income taxes is given to the private banking families that own the FED, tax free.
The Federal Reserve Act of 1913 created a private, for profit, central Banking Corporation owned by a cartel of private banks, including the former Lehman Brothers, Goldman, Sachs and the Rockefeller families of New York. The Federal Reserve is not a federal agency, has no reserves and doesn’t pay taxes.
In fact, the FED is the only for-profit corporation that is exempt from both federal and state taxes. The FED takes in about one trillion dollars per year tax free. According to the petition, banking families that own the Fed above receive all that money. “To add insult to injury, the government has to create a bond for $1 million as security for the loan. And the rich get richer. The above was just an example, because in reality the FED does not even print the money; it’s just a computer entry in their accounting system. To put this on a more personal level, let’s use another example.”
The US Government is on the verge of insolvency – Dallas Federal Reserve President Richard Fisher.
Despite the money printing machine – or because of it – one candid Fed president admitted on March 22, 2011 that the US Government is on the verge of insolvency. What does insolvency mean? “If nobody will take your checks any more, you’re insolvent.”
The United States is on a fiscal path towards insolvency and policymakers are at a “tipping point,” a Federal Reserve official said on Tuesday. “If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when,” Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt. “The short-term negotiations are very important, I look at this as a tipping point.” But he added he was confident in the Americans’ ability to take the right decisions and said the country would avoid insolvency.”I think we are at the beginning of the process and it’s going to be very painful,” he added. ~ NYT
Talk about double-speak. Fisher also said the US economic recovery is gathering momentum. Tell that to struggling homeowners.
A trillion dollars of mortgage debt is under water, but homeowners can’t print money to erase their pain – and they’re definitely not giddy.
All 50 state attorneys general are pushing for a foreclosure abuse settlement that could cost mortgage servicing banks $20 billion or more, (the Fed will probably “re-fund” their money). A substantial amount will be earmarked to reduce principal owed by homeowners facing foreclosure. The question is: Which category of borrowers?
What about underwater borrowers who have a job, paid on time and honored their obligations? Tough luck. The criteria for proving that you deserve a reduction in principle is nearly impossible to meet. One married couple that applied has a combined income of roughly $60k, both have stable jobs, have no other debt to speak of, but are underwater on their mortgage. Their bank has subjected them to paper submission torture several times over. Depending on the submission, either they earned too much or too little, owed too much or not enough. They’ve given up and hope for a short sale.
Your chances for a principle or interest reduction are relatively bleak if you continue to pay the mortgage you can’t afford. However, if you jumped at a Bank of America or Wells Fargo offer to stop paying your mortgage in order to qualify for the reduction – and then they reject you – you’ll lose your home even faster.
Bank of America states that more than 800,000 mortgages were modified in the last three years. And what about the millions of underwater mortgages that were not modified?
The modification program created by the Obama administration (HAMP), helped far fewer borrowers than planned. Republicans in the House of Representatives voted to kill the program in mid-March.
Meanwhile – Back at the Bank: Bank of America is getting richer by billions. “As the huge volume of loan losses recedes and the economy improves, Mr. Moynihan (Bank of America) said his company had the power to earn $35 billion to $40 billion a year. Bank of America lost $2.2 billion in 2010, weighed down by special charges and the lingering effects of the housing bust and the recession on consumers.”
What a surprise. The NYT revealed on March 31, 2011 that:
The Federal Reserve recently gave the all-clear for several banks to increase dividends and expand share buybacks, among them JPMorgan Chase, Wells Fargo, Citigroup and Goldman Sachs. That’s good news, at least in the short run for bank investors, but it is a dubious development for everyone else.
The dividend-boosting banks that were too big to fail before the crisis are even bigger now, while reforms to rein them in are under political attack even before they have been implemented. Sheer size and inadequate regulation — the combination that led to the crisis — argue for banks to use their earnings to build bigger capital cushions, not to pay dividends and repurchase shares.
Yet Fed officials have concluded that many banks are safe and sound enough to pay out cash and still withstand a severe shock should one occur again. It’s hard to share their confidence. Before it approved new dividends, the Fed required banks to test their crisis-readiness against several criteria, like elevated unemployment, but it did not release detailed results of the tests. Public data do not inspire confidence either. There is much debate over whether banks are valuing their mortgage assets correctly, and, by extension, whether they are adequately capitalized.
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