insolvent – The Burning Platform

IT’S NOT THE BREXIT STUPID

Just over a week ago the world was coming unglued, as enough British citizens grew a pair and spit in the face of the EU establishment and global elite by voting to exit the EU. The fear mongering by central bankers and their puppet political hacks failed to deter people who have become sick and tired of being abused and pillaged by bureaucrats working on behalf of bankers and billionaires.

Stock markets around the world plummeted on Thursday and Friday. The world braced for another Black Monday. The phone lines were buzzing between central bankers around the world over the weekend as their banker constituents demanded relief. If one thing has been proven over the last seven years, its a coordinated effort between central bankers and Wall Street banks to rig the stock market higher can work over a short time period.

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The titans of finance were able to once again confound short-sellers and the prophets of doom with a 5% surge from the Friday lows over the next week. It was surely a coincidence the Fed declared all Wall Street banks, safe, sound, and capable of buying back their stocks to the tune of billions early in the week.

These insolvent zombies were now free to borrow billions to buy back their overvalued stocks, destroying shareholder value, while boosting executive compensation. Poor Jamie Dimon is struggling to get by on his $27 million per year. The Wall Street banks obliged by immediately announcing multi-billion dollar buyback schemes to capitalize on the short-term trading mentality of the 30 year old MBA trading geniuses who bought the news without worrying about the actual value of the stocks they were buying.

Continue reading “IT’S NOT THE BREXIT STUPID”

BAILOUT NATION

If the economy is growing and corporate profits are at all time highs, why did the cumulative deficit of the PBGC double in the last year? This fake corporation (aka Fannie & Freddie) is bleeding cash to the tune of $62 billion. You are on the hook. Even though Obama and his minions report declining deficits, these numbers are nowhere to be found in the deficit numbers, even though they will need to be bailed out by the Federal government. Imagine the losses when the financial system cracks again.

So the company that bails out defunct pension plans needs a bailout. Of course, as you can see by the truly shocking charts below, the entity bailing them out is also insolvent. Who bails out the entity that bails out the pension bailout entity?

Do you see what a farce this has become?

I think it is time to bailout on this fucked up system.

US Pension Insurer Needs a Bailout

By Pater Tenebrarum

A Growing Shortfall

The Pension Benefit Guaranty Corporation is insuring the pensions of more than 40 million Americans employed in the private sector that have defined benefit pensions. We hadn’t been aware that it has run deficits for 12 years running, but it apparently has – and it is adding up. At the moment, the fund has a cumulative deficit of $62 billion. It has reportedly doubled just over the past year:

“The deficit run up by the federal agency that insures pensions for about 41 million Americans has nearly doubled, to $62 billion. And the agency says that without changes, its program for pension plans covering 10 million of those workers will be insolvent within 10 to 15 years. It was the widest deficit in the 40-year history of the Pension Benefit Guaranty Corp., which has now run shortfalls for 12 straight years. The gap grew wider in recent years because the weak economy triggered more corporate bankruptcies and failed pension plans.

If the trend continues, the agency could need an infusion of taxpayer funds to pay retirees, who are guaranteed their pensions by law. The PBGC said Monday that the increased deficit was due to worsening finances of some multi-employer pension plans, which are pension agreements between labor unions and a group of companies, usually in the same industry. The $62 billion deficit reported for the year ended Sept. 30 compared with $36 billion in the previous fiscal year. Labor Secretary Thomas Perez said fixing the problem is vital to the retirement security of the nation’s middle-class. Agency officials called for Congress to enact legislation submitted by President Barack Obama designed to shore up the program’s finances. The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans, which have become much less common in recent decades as most employers turn to retirement accounts such as 401(k)s.

The traditional plans are most prevalent in industries such as auto manufacturing, steel and airlines. If an employer can no longer support its pension plan, the PBGC takes over the assets and liabilities, and pays promised benefits to retirees up to certain limits. The agency didn’t name the multi-employer plans that it expects to run out of money or how many are involved. It said they represent a minority of the total 1,400 or so multi-employer pension plans, which cover about 10 million workers. “Plans covering over 1 million participants are substantially underfunded, and without legislative changes, many of these plans are likely to fail,” PBGC Acting Director Alice Maroni said in a statement. The agency said in its annual report that it has “sufficient liquidity to meet its obligations for a number of years.”

The agency said the deficit in its multi-employer insurance program jumped to $42.4 billion in the budget year that ended on Sept. 30, from $8.3 billion in 2013. By contrast, the deficit in the single-employer program shrank to $19.3 billion from $27.4 billion as the economy strengthened. The PBGC reported that its pension obligations grew by $30.9 billion in fiscal 2014, to $151.5 billion. Assets used to cover those obligations increased by only $4.9 billion, to $89.8 billion. Rep. John Kline, R-Minn., chairman of the House Education and Workforce Committee, called the multi-employer insurance program “a ticking time bomb that will inflict a lot of pain on workers, employers, taxpayers and retirees if Congress fails to act.”

(emphasis added) To summarize: in spite of its $62 billion deficit, the insurance fund will only be insolvent in another 10 to 15 years, ceteris paribus. Although this qualification is not mentioned above, it is an important one. What if the economy suffers another severe downturn, which seems a nigh certain outcome of the many years of bubble blowing by assorted central banks? Even in the muddle through scenario currently assumed to continue, the fund will require a tax payer bailout (this is what “Congress needs to act” means). We wonder how the fund invests its assets, given the rather paltry growth of same (after all, it also receives fees from the companies the pension plans of which it insures).

Conclusion:

We actually come across stories bemoaning the underfunding of pension plans on a regular basis. This is a problem that not only concerns defined benefit plans. Now we learn that the insurer of these pension plans is actually busy going down the drain as well. However, the government, which is supposed to bail the insurer out, has also begun to bleed red ink in its social security fund – and that deficit is going to grow and grow for many years to come.

Social security: from a surplus that was spent, to a deficit that is growing inexorably year after year – click to enlarge.

If one adds the projected medicare deficits to this, things look a lot worse still:

Social security and medicaid deficits combined – click to enlarge.

And now there is yet another hole that needs to be plugged. Charts by: Heritage Foundation, Wikipedia

FOURTH TURNING: THE PEOPLE vs BIG BROTHER

“The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort – in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.” – Strauss & Howe – The Fourth Turning

“In the need to develop a capacity to know what potential enemies are doing, the United States government has perfected a technological capability that enables us to monitor the messages that go through the air. Now, that is necessary and important to the United States as we look abroad at enemies or potential enemies. We must know, at the same time, that capability at any time could be turned around on the American people, and no American would have any privacy left such is the capability to monitor everything—telephone conversations, telegrams, it doesn’t matter. There would be no place to hide.

If this government ever became a tyrant, if a dictator ever took charge in this country, the technological capacity that the intelligence community has given the government could enable it to impose total tyranny, and there would be no way to fight back because the most careful effort to combine together in resistance to the government, no matter how privately it was done, is within the reach of the government to know. Such is the capability of this technology.

I don’t want to see this country ever go across the bridge. I know the capacity that is there to make tyranny total in America, and we must see to it that this agency and all agencies that possess this technology operate within the law and under proper supervision so that we never cross over that abyss. That is the abyss from which there is no return.” – Frank Church on Meet the Press regarding the NSA – 1975

Ever since Edward Snowden burst onto the worldwide stage in June 2013, I’ve been wondering how he fits into the fabric of this ongoing Fourth Turning. This period of Crisis that arrives like clockwork, 60 to 70 years after the end of the previous Fourth Turning (Civil War – 66 years after American Revolution, Great Depression/World War II – 64 years after Civil War, Global Financial Crisis – 62 years after World War II), arrived in September 2008 with the Federal Reserve created collapse of the global financial system. We are now five and a half years into this Fourth Turning, with its climax not likely until the late-2020’s. At this point in previous Fourth Turnings a regeneracy had unified sides in their cause and a grey champion or champions (Ben Franklin/Samuel Adams, Lincoln/Davis, FDR) had stepped forward to lead. Thus far, no one from the Prophet generation has been able to unify the nation and create a sense of common civic purpose. Societal trust continues to implode, as faith in political, financial, corporate, and religious institutions spirals downward. There is no sign of a unifying regeneracy on the horizon.

The core elements of this Fourth Turning continue to propel this Crisis: debt, civic decay, global disorder. Central bankers, politicians, and government bureaucrats have been able to fashion the illusion of recovery and return to normalcy, but their “solutions” are nothing more than smoke and mirrors exacerbating the next bloodier violent stage of this Fourth Turning. The emergencies will become increasingly dire, triggering unforeseen reactions and unintended consequences. The civic fabric of our society will be torn asunder.

In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning – Strauss & Howe

Debt

The core crisis element of debt is far worse than it was at the outset of this Crisis in September 2008. The National Debt has risen from $9.7 trillion to $17.5 trillion, an 80% increase in five and half years. It took 215 years for the country to accumulate as much debt as it has accumulated since the start of this Crisis. We continue to add $2.8 billion a day to the National debt, and the president declares it is time for this austerity to end. The total unfunded liabilities of the Federal government for Social Security, Medicare, Medicaid, government pensions and now Obamacare exceeds $200 trillion and is mathematically impossible to honor. Corporate debt stands at an all-time high. Margin debt is at record levels, as faith in the Federal Reserve’s ability to levitate the stock market borders on delusional. Consumer debt has reached new heights, as the government doles out subprime auto loans to deadbeats and subprime student loans to future University of Phoenix Einsteins. Global debt has surged by 40% since 2008 to over $100 trillion, as central bankers have attempted to cure a disease caused by debt with more debt.

All of this debt accumulation is compliments of Bernanke/Yellen and the Federal Reserve, who have produced this new debt bubble with their zero interest rate policy and quantitative easing that has driven their balance sheet from $935 billion of mostly Treasury bonds in September 2008 to $4.2 trillion of toxic mortgage garbage acquired from their owners – the insolvent Too Big To Trust Wall Street banks. This entire house of cards is reliant upon permanently low interest rates, the faith of foreigners in our lies, and trust in Ivy League educated economists captured by Wall Street. This debt laden house of cards sits atop hundreds of trillions of derivatives of mass destruction used by the Wall Street casinos to generate “riskless” profits. When, not if, a trigger ignites this explosive concoction of debt, the collapse will be epic and the violent phase of this Fourth Turning will commence.

Civic Decay

The core crisis element of civic decay is evident everywhere you turn. Our failed public educational system is responsible for much of the civic decay, as a highly educated critical thinking populace is our only defense against a small cabal of bankers and billionaires acquiring unwarranted influence and control over our country. Our children have been taught how to feel and to believe government propaganda. The atrocious educational system is not a mistake. It has been designed and manipulated by your owners to produce the results they desire, as explained bluntly by George Carlin.

“There’s a reason that education sucks, and it’s the same reason it will never ever ever be fixed. It’s never going to get any better, don’t look for it. Be happy with what you’ve got. Because the owners of this country don’t want that. I’m talking about the real owners now, the big, wealthy, business interests that control all things and make the big decisions. They spend billions of dollars every year lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else. But I’ll tell you what they don’t want—they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interest.”

The urban ghettos become more dangerous and uninhabitable by the day. The inner cities are crumbling under the weight of welfare spending and declining tax revenues. The very welfare policies begun fifty years ago to alleviate poverty have hopelessly enslaved the poor and ignorant in permanent squalor and destitution. The four decade old drug war has done nothing to reduce the use of drugs. It has benefited the corporate prison industry, as millions have been thrown into prison for minor drug offenses. Meanwhile, millions more have been legally addicted to drugs peddled by the corporate healthcare complex. The culture warriors and advocates of new rights for every special interest group continue their never ending battles which receive an inordinate amount of publicity from the corporate media. Class warfare is simmering and being inflamed by politicians pushing their particular agendas. Violence provoked by race and religion is growing by the day. The fault lines are visible and the imminent financial earthquake will push distress levels beyond the breaking point. Once the EBT cards stop working, all hell will break loose. Three days of panic will empty grocery store shelves and the National Guard will be called out to try and restore control.

Global Disorder

The core crisis element of global disorder is evident everywhere you turn. The false flag revolution in the Ukraine, initiated by the U.S. and EU in order to blunt Russia’s control of natural gas to Europe, has the potential to erupt into a full blown shooting war at any moment. The attempt by Saudi Arabia, Israel and the U.S. to overthrow the Syrian dictator in order to run a natural gas pipeline across their land into Europe was blunted by Russia. Iraq is roiled in a civil war, after the U.S. invaded, occupied and destabilized the country. After 12 years of occupation, Afghanistan is more dysfunctional and dangerous than it was before the U.S. saved them from the evil Taliban. Unrest, violent protests, and brutal measures by rulers continue in Egypt, Turkey, Thailand, Venezuela, Bahrain, Brazil, and throughout Africa. American predator drones roam the skies of the world murdering suspected terrorists. The European Union is insolvent, with Greece, Spain, Italy and Portugal propped up with newly created debt. Austerity for the people and prosperity for the bankers is creating tremendous distress and tension across the continent. A global volcanic eruption is in the offing.

It is clear to me the American Empire is in terminal decline. Hubris, delusion, corruption, foolish disregard for future generations and endless foreign follies have set in motion a chain of events that will lead to a cascading sequence of debt defaults, mass poverty, collapsing financial markets, and hyperinflation or deflation, depending on the actions of feckless bankers and politicians. There is no avoiding the tragic outcome brought on by decades of bad choices and a century of allowing private banking interests to control our currency. The “emergency” QE and ZIRP responses by the Federal Reserve to the Federal Reserve created 2008 financial collapse continue, even though the propaganda peddled by the Deep State tries to convince the public we have fully recovered. This grand fraud cannot go on forever. Ponzi schemes no longer work once you run out of dupes. With societal trust levels approaching all-time lows and foreign countries beginning to understand they are the dupes, another global financial crisis is a lock.

The Snowden Factor

With ten to fifteen years likely remaining in this Fourth Turning Crisis, people familiar with generational turnings can’t help but ponder what will happen next. Linear thinkers, who constitute the majority, mistakenly believe things will magically return to normal and we’ll continue our never ending forward human progress. Their ignorance of history and generational turnings that recur like the four seasons will bite them in the ass. We are being flung forward across the vast chaos of time and our existing social order will be transformed beyond recognition into something far better or far worse. The actual events over the coming decade are unknowable in advance, but the mood and reactions of the generational archetypes to these events are predictable. The actions of individuals will matter during this Fourth Turning. The majority are trapped in their propaganda induced, techno distracted stupor of willful ignorance. It will take a minority of liberty minded individuals, who honor the principles of the U.S. Constitution and are willing to sacrifice their lives, to prevail in the coming struggle.

Despite fog engulfing the path of future events, we know they will be propelled by debt, civic decay, and global disorder. Finding a unifying grey champion figure seems unlikely at this point. I believe the revelations by Edward Snowden have set the course for future events during this Fourth Turning. The choices of private citizens, like Snowden, Assange, and Manning, have made a difference. The choices we all make over the next ten years will make a difference. A battle for the soul of this country is underway. The Deep State is firmly ingrained, controlling the financial, political and educational systems, while using their vast wealth to perpetuate endless war, and domination of the media to manipulate the masses with propaganda and triviality. They are powerful and malevolent. They will not relinquish their supremacy and wealth willingly.

Snowden has revealed the evil intent of the ruling class and their willingness to trash the Constitution in their psychopathic pursuit of mammon. The mass surveillance of the entire population, locking down of an entire city in pursuit of two teenagers, military training exercises in major metropolitan areas, militarization of local police forces by DHS, crushing peaceful demonstrations with brute force, attempting to restrict and confiscate guns, molesting innocent airline passengers, executive orders utilized on a regular basis by the president, and treating all citizens like suspects has set the stage for the coming conflict. Strauss & Howe warned that history has shown armed conflict is always a major ingredient during a Fourth Turning.

“History offers even more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken, and leaders captured.” – The Fourth Turning – Strauss & Howe -1997

It appears to me the Deep State is preparing for armed conflict with the people. Why else would they be utilizing Big Brother methods of surveillance, militarization of police forces and Gestapo like tactics of intimidation to control the masses? This doesn’t happen in a democratic republic where private individuals are supposed to know everything done by public government servants, not vice versa. They know the cheap, easy to access energy resources are essentially depleted. They know the system they have built upon a foundation of cheap energy and cheap debt is unsustainable and will crash in the near future. They know their fiat currency scheme is failing.They know it is going to come crashing down.

They know America and the world will plunge into an era of depression, violence, and war. They also know they want to retain their wealth, power and control. There is no possibility the existing establishment can be purged through the ballot box. It’s a one party Big Brother system that provides the illusion of choice to the Proles. Like it or not, the only way this country can cast off the shackles of the banking, corporate, fascist elites, and the government surveillance state is through an armed revolution. The alternative is to allow an authoritarian regime, on par with Hitler, Stalin and Mao, to rise from the ashes of our financial collapse. This is a distinct possibility, given the ignorance and helplessness of most Americans after decades of government education and propaganda.

The average mentally asleep American cannot conceive of armed conflict within the borders of the U.S. War, violence and dead bodies are something they see on their 52 inch HDTVs while gobbling chicken wings and cheetos in their Barcalounger. We’ve allowed a banking cartel and their central bank puppets to warp and deform our financial system into a hideous façade, sold to the masses as free market capitalism. We’ve allowed corporate interests to capture our political system through bribery and corruption.

We’ve allowed the rise of a surveillance state that has stripped us of our privacy, freedom, liberty and individuality in a futile pursuit of safety and security. We’ve allowed a military industrial complex to exercise undue influence in Washington DC, leading to endless undeclared wars designed to enrich the arms makers. We’ve allowed the corporate media and the government education complex to use propaganda, misinformation and social engineering techniques to dumb down the masses and make them compliant consumers. These delusions will be shattered when our financial and economic system no longer functions. The end is approaching rapidly and very few see it coming.

Glory or Ruin?

The scenario I envision is a collapse of our debt saturated financial system, with a domino effect of corporate, personal, and governmental defaults, exacerbated by the trillions of currency, interest rate, and stock derivatives. Global stock markets will crash. Trillions in paper wealth will evaporate into thin air. The Greater Depression will gain a choke-hold around the world. Mass bankruptcies, unemployment and poverty will sweep across the land. The social safety net will tear under the weight of un-payable entitlements. Riots and unrest will breakout in urban areas. Armed citizens in rural areas will begin to assemble in small units. The police and National Guard will be unable to regain control. The military will be called on to suppress any and all resistance to the Federal government. This act of war will spur further resistance from liberty minded armed patriots. The new American Revolution will have begun. Leaders will arise in the name of freedom. Regional and local bands of fighters will use guerilla tactics to defeat a slow top heavy military dependent upon technology and vast quantities of oil. A dictatorial regime may assume power on a Federal level. A breakup of the nation into regional states is a distinct possibility.

With the American Empire crumbling from within, our international influence will wane. With China also in the midst of a Fourth Turning, their debt bubble will burst and social unrest will explode into civil war. Global disorder, wars, terrorism, and financial collapse will lead to a dramatic decrease in oil production, further sinking the world into depression. The tensions caused by worldwide recession will lead to the rise of authoritarian regimes and global warfare. With “advances” in technological warfare and the proliferation of nuclear warheads, this scenario has the potential to end life on earth as we know it. The modern world could be set back into the stone-age with the push of a button. There are no guarantees of a happy ending for humanity.

The outcome of this Fourth Turning is dependent upon the actions of a minority of critical thinking Americans who decide to act. No one can avoid the trials and tribulations that lie ahead. We will be faced with immense challenges. Courage and sacrifice will be required in large doses. Elders will need to lead and millennials will need to carry a heavy load, doing most of the dying. The very survival of our society hangs in the balance. Edward Snowden has provided an example of the sacrifice required during this Fourth Turning. How we respond and the choices we make over the next decade will determine whether this Fourth Turning will result in glory or ruin for our nation.

“Eventually, all of America’s lesser problems will combine into one giant problem. The very survival of the society will feel at stake, as leaders lead and people follow. The emergent society may be something better, a nation that sustains its Framers’ visions with a robust new pride. Or it may be something unspeakably worse. The Fourth Turning will be a time of glory or ruin.” – Strauss & Howe – The Fourth Turning

Click these links to read the first two parts of this three part series:

Do No Evil Google – Censor & Snitch for the State

Google, China, the NSA and the Fourth Turning

WHERE THE F$#K IS OBAMA GETTING $1 BILLION TO GIVE TO THE NAZI UKRAINIANS?

Don’t you love bipartisanship when it comes to spending money we don’t fucking have? How can the American people be so lazy and willfully ignorant about what their corrupt politician leaders do on a daily basis. This Ukrainian episode again proves we are ruled by one PARTY. The Ukraine is a bankrupt, insolvent nation. Not our problem. If a country can’t pay its debts, tough shit. They were bankrupt and insolvent before their little CIA instigated revolution. They owe the Russians $20 billion for gas they have already used.

So Obama and the snakes in Congress on both sides of the aisle are singing kumbaya and acting like old pals as they fuck you again. Where the fuck are they getting $1 billion to give to Ukraine? And don’t be fooled by the bullshit about this being a loan. They are fucking insolvent and will never ever repay the loan. This is $1 billion pissed down the toilet.

In case you haven’t fucking noticed, this country adds $2.8 billion PER DAY to the National Debt. If we have to borrow $2.8 billion per day more than the previous day, how the fuck can Congress pretend we have ONE BILLION fucking dollars to give to these Nazis? In case you hadn’t noticed, the National debt now stands at $17.5 TRILLION. The “cooperation” between Obama and Congress has resulted in the debt rising by $200 Billion in the last month alone.

Obama and the Congressional scum are going to borrow $1 billion from future unborn generations and give it to Nazis in the Ukraine so they can pay Putin for his gas. Does that make sense to you? Is this how an empire in decline operates during its death rattle? Make no mistake about it, deficit spending is a tax on future generations, either through direct taxation or through indirect inflation. And the iGadget distracted masses don’t give a shit.

Anyone who thinks voting for some new corrupt scumbag will fix this, just observe the actions of Republicans and Democrats. Obama, Boehner, Kerry, McCain, Schumer, Feinstein, King and the rest of the traitors in Congress all agree to spend money they don’t have to prove we are still an Empire. There is no hope to change this shit at the ballot box.

I can’t wait until this fetid pustule of a nation has to eat at a banquet of consequences.

U.S. lawmakers say to vote on Ukraine aid package soon

WASHINGTON (Reuters) – In a rare show of support for President Barack Obama, Republican leaders in the U.S. House of Representatives said on Wednesday they would work with the White House to address the crisis in Ukraine and vote on legislation offering financial aid soon.

House Majority Leader Eric Cantor said the Republican-led House will consider a $1 billion loan guarantee package for Ukraine and look at measures to “put significant pressure on Russia to stop the flagrant aggression to its neighbor in Ukraine.”

“The world community should stand united against this invasion, America should be leading and we’ll vote soon on legislation to aid the Ukrainian people,” Cantor told reporters.

House Speaker John Boehner also said that the House will work in a bipartisan way with Obama, a Democrat.

A bill to assist Ukraine, backed by both Republicans and Democrats, is also making its way through the U.S. Senate.

That legislation could be introduced as soon as this week, with a vote in the Senate Foreign Relations Committee as early as March 11, said an aide to Senator Bob Corker, the top Republican on the committee.

Senators have been discussing ways to aid Ukraine’s new government and isolate Russia. Among other things, the Senate legislation would also authorize funds to provide at least $1 billion in loan guarantees to support Ukraine’s economy.

But the Republican leadership also had some harsh criticism of Obama’s foreign policy.

“With regard to Ukraine, the steps that have not been taken over the last three or four years, (by Obama) frankly, allowed Putin to believe that he could do what he’s doing without any reaction from us. But given where we are, we’re here, in a bipartisan way, trying to work with the president, to strengthen his hand,” Boehner said.

He said this includes the loan guarantee bill as well as consideration of a “toolbox” of sanctions authority that is similar to those used against Iran in recent years to persuade it to rein in its nuclear ambitions.

Boehner also criticized Obama for failing to approve liquefied natural gas exports, which could help lessen the dependence of European allies on Russian gas.

But since 2011, the U.S. Department of Energy has approved six proposals to export liquid natural gas, most recently on February 11. Supporters of U.S. energy exports have pounced on the crisis in Ukraine to pressure the Obama approval to speed approvals of LNG.

Cantor said it was important that the costs of the Ukraine loan guarantee be offset with other savings, but the House will proceed to a vote on the measure without a cost estimate from the Congressional Budget Office to move it quickly.

Any dispute in Congress over how to pay for the measure could slow its progress.

FANNIE & FREDDIE “PROFITS” ARE A FRAUD

Chris Whalen is one of the best bank analysts on the planet. He sees right through the Wall Street/K Street lies and obfuscation. He has analyzed the numbers and concluded that Fannie and Freddie have not generated billions of profits in the last two years. They are losing billions. Accounting fraud does not create profits. These two bloated pigs are insolvent. That is why their stock prices are at $1.50 when they are supposedly generating the highest profits in their history.

Now that Chris has proven they are losing billions rather than making billions, you need to understand the other piece. The $100 billion they have supposedly “paid back” to the Treasury has supposedly “reduced” the Obama deficits. It is untrue. No money was paid. It was an accounting entry based on fraudulent assumptions. The current year deficit is really $100 billion higher than the lies provided by Obama and his minions.

Are Fannie Mae and Freddie Mac Really Profitable? Really?

Submitted by rcwhalen on 08/22/2013 06:06 -0400

“As force is always on the side of the governed, the governors have nothing to support them but opinion. It is, therefore, on opinion that government is founded; and this maxim extends to the most despotic and the most military governments as well as to the most free and popular.”

— David Hume

Update 1 | So are Fannie Mae and Freddie Mac really profitable? For months now, the GSEs have reported rising current profits, an amazing rebound that has caused the hopes of many members of Congress to likewise elevate. The financial press has been filled with hopeful stories to the effect that the zombie dance queens may actually dig their way out of a several hundred billion dollar hole they created during the subprime crisis.

But now a report released earlier this week by the Federal Housing Finance Agency’s Inspector General raises new concerns. Specifically, the IG asks why Fannie Mae, Freddie Mac and the Federal Home Loan Banks have been dragging their feet implementing 2012 accounting changes that would accelerate the timing of tens of billions of dollars of unrealized losses on bad loans from the uber toxic 2004-2008 period. The IG report states:

“The advisory bulletin directed the enterprises and the Federal Home Loan Banks (FHLBanks) to classify any outstanding loan balance in excess of the fair value of the property, less cost to sell, as “Loss” when the loan is no more than 180 days delinquent. The issue was identified by FHF A examination staff during the course of a credit examination of Freddie Mac completed in January 2012. The advisory bulletin’s background section provided the following rationale: The purpose of this guidance is to establish a standard and uniform methodology for classifying assets of the Enterprises and the FHLBanks based on the credit quality of the assets. The classification of assets is a critical element in evaluating the risk profile and the adequacy of capital, loan loss reserves, and earnings.”

Thus the question: Have the GSEs really set aside proper reserves given that they do not have to charge-off loans that are 180 days or more delinquent until January 2015? Well, sort of – at least based on the bad loans shown on the respective balance sheets. I have asked various officials of that world class regulator, the Federal Housing Finance Administration, this precise question for years now. The answer has always been yes, we are adequately reserved. Here’s the official view from FNM:

“The guidance FHFA has issued would change our methodology for charging off loans, but would not materially change our results.”

Is this really true? After years, no, really decades of obfuscation and outright mendacity, are the folks at Fannie Mae and Freddie Mac really telling us the truth now about their financial condition? Washington is a city of lies, let us remember, with a good part of the population paid to disseminate falsities as part of their job description. But the biggest lie of all was allowing the GSEs to avoid marking their impaired assets down to fair value as commercial banks are required to do. Had this been done, the losses reported by the enterprises would have been far larger.

Let’s walk through the accounting first and then draw some conclusions. We’ll focus on Fannie Mae (FNM) to make the narrative easier to follow. Let’s refer to the form 10-Q filed by Fannie Mae for Q2 2013. And, by the way, the “material” test is with what information investors need to know to make an informed investment decision, not what is material in terms of the company’s operations or investor relations objectives.

First we start with Page 96 in the notes to the consolidated financial statements. As of June 30, 2013, FNM had about $140 billion in total delinquent loans on its balance sheet, including about $80 billion in the “seriously delinquent” category. Good guess for loss given default on this subset of bad paper is well north of the high 20% rates that FNM is reporting on current disposals and the 40% loss severity rates we hear discussed in polite society. One particular RMBS veteran thinks the severity on the 04-08 vintage is more like 60-70% because so much of the underlying collateral remains under water. The remaining delinquent loans total about $60 billion. FNM has about $50 billion in reserves set aside to cover losses on these bad loans and other assets.

To put these numbers in context, FNM reported $10 billion in income in Q2 2013 before paying more than that amount to the US Treasury in a dividend, leaving the enterprise with a GAAP loss. If you ignore the effect of tax assets, which pushed income up by $40 billion in 1Q 2013, $10 billion per quarter is a reasonable run rate for FNM income. The fact that FNM has not needed to expend loss reserves, which are an off balance sheet item, to clean up its balance sheet is very significant and explains part of the GSE’s current profitability.

Unlike a commercial bank which must generally charge off a bad loan (either entirely or at least down to recovery or “fair value”) once it goes beyond 90 days past due, the GSEs actually book bad loans at “cost,” plus accrued interest. So, for example, when a GSE repurchases a bad loan from an RMBS trust, at par plus accrued interest, the loan is then booked and carried at “cost” until the loan is liquidated.

Once you understand the bizarre accounting for loan and real estate owned (REO) losses used by the GSEs you can see why the effect of the advisory bulletin has some investors a bit concerned. As with Jesse Jones in the 1930s, time is our friend. But now just imagine you are one of those generous souls led by that Wall Street titan and philanthropist John Paulson who are suing the GSEs based on the assumption that they are truly profitable. But I digress.

Footnote one on Page 96 the 10-Q illustrates the idiocy of GSE accounting, defining the “recorded investment” of some $95 billion in non-accrual loans as consisting “of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, and accrued interest receivable.” Or put another way, of the $140 billion in total delinquent loans at June 30, 2013 — loans which are carried at 100% of their original value, plus accrued interest — FNM is essentially pretending that 60% of that amount represents an “investment.” Hold that thought.

So if FNM was to immediately implement the new accounting rules put in place in 2012, the question is what losses would be applied to the $140 billion? Looking at the loss severities for FNM loans bandied about by analysts, a haircut of about 40% would seem like a good point of departure. But let’s instead go back to the figures as the top of this piece. If we put a 60-70% loss severity on that $80 billion in seriously delinquent loans, we are talking ~ $50 billion right there. Take half that rate – 30-35% loss given default — on the remaining delinquent loans and we get another ~ $20 billion or $70 billion or so in total charge offs against reserves.

Why the divergence from current FNM loss severities in the estimates? Because, as is axiomatic, the better loans and REO assets with lower losses tend to get sold first. To be conservative, in keeping with the FHFA guidance, a more severe haircut is appropriate. If the loss severities turn out to be lower, then the enterprise can book a recovery to loss reserves, which will positively affect income.

So if we were to implement the guidance from FHFA today, it is pretty clear that the profits of the GSEs would have been largely offset by the allocations needed to replenish the reserves. If we use the income figures from the FNM 10-Q, all of the “profits” from 2012 and the first half of 2013 would disappear, and then some. Reserves of $54 billion would be consumed and another $10-20 billion would need to be immediately allocated from income to cover the balance. Treasury would need to replace this deficit to avoid seeing FNM operating insolvent. Just for giggles, compare this adjustment to the $1.6 billion in charge-offs taken by FNM in Q2 2013 under the current rules.

FNM would then need to retain income to replenish reserves for future losses, but fortunately loss rates on new production are far lower than during the awful 2004-2008 period. Arguably a reserve buffer of $25-30 billion or half of current reserves would be a reasonable starting point for the “new,” post crisis FNM. Some may differ with my view on loss severities, but for an investor in FNM, a $60-70 billion unrealized loan loss certainly seems material to me.

But this is not the end of the analysis. In addition to loans, FNM and Freddie Mac have significant amounts of single family and multifamily real estate – 96,000 REO assets in the industry parlance – that was taken over from a debt previously contracted. Losses from foreclosed properties, for example, totaled over $300 million in Q2 2013 under existing rules. FNM currently shows about $10 billion in REO on balance sheet under “acquired property” or an average of about $96,000 per property. On Page 24 of the FNM 10-Q, the enterprise discusses recent experience disposing of REO:

“Sales prices on dispositions of our REO properties improved in the second quarter and first half of 2013 as a result of strong demand compared with the prior year. We received net proceeds from our REO sales equal to 68% of the loans’ unpaid principal balance in the second quarter of 2013 compared with 59% in the second quarter of 2012 and 66% in the first half of 2013 compared with 58% in the first half of 2012. The increase in sales prices contributed to a reduction in the single-family initial charge-off severity rate to 24.93% for the second quarter of 2013 from 30.59% for the second quarter of 2012, and to 26.09% for the first half of 2013 from 32.07% for the first half of 2012. The decrease in our charge-off severity rate indicates a lower amount of credit loss at foreclosure and, accordingly, a lower provision for credit losses.”

The sales discounts from the unpaid principal balance or “UPB” described above are pretty low compared to what has been going on in the real estate market generally. In many parts of the US, the spread differential between REO and voluntary sales has disappeared, yet the fact remains that there are many home owners in the US that are still underwater. Remembering the high preponderance of 2004-2008 exposure in the FNM book, that 25% loss experience on REO liquidations in 2Q 2013 seems miraculous.

Going back to the loss severities seen in whole loans, the experience with REO sales certainly shows improvement but we must remember that the homes are carried at “cost” as with whole loans. If we take 25-30% discounts to UPB as a point of departure, we probably ought to think of a 40-50% discount on the entire portfolio of REO properties in the FNM portfolio to comply with the FHFA guidance. Call it $4-5 billion on the REO book. Again, this mark may be conservative, but FNM can take any future gains above the new “fair value” marks as recoveries to reduce future reserve contributions and enhance income. The charge-off should be sufficient to ensure that any future adjustment is in favor of FNM and the US Treasury.

Not only does FNM seem to be unprofitable under the new FHFA guidance, but payments made to Treasury might need to be reversed. Tens of billions in capital injections would be required in order to fund the write-down of FNM’s bad loans and replenish reserves for future loss, creating yet another twist for both markets and investors to consider. Since under the second preferred stock agreement between Treasury and FNM the US government confiscates the net income of the enterprise, there is nothing left to buffer FNM against future loss.

Ultimately neither the Obama Treasury nor members of Congress want to get into this mess before the 2014 election, but suffice to say that it is incorrect to claim that either FNM or Freddie Mac are profitable. The final twist comes from the big question, IMHO, namely how much further loss will be uncovered if Congress ever summons the courage to wind down the zombie dance queens.

Given the above analysis, a strong case can still be made that FNM and Freddie Mac ought to be moved to receivership and liquidated. This process would extinguish the supposed claims by “investors” like John Paulson and move the assets of the GSEs into private hands as quickly as possible. But that would be the good news. A prompt resolution of both enterprises would generate growth, income and jobs – something nobody in Washington understands. But we ought to ask, perhaps in a future rant, just why the FHFA IG office decided to make a fuss now, no doubt at the instigation of the US Treasury and Obama White House.