Tag Archives: Bailouts

David Stockman on Washington’s Panicked Bailout of Bank Deposits… Here’s What Comes Next

Posted on March 17, 2023 | Leave a comment

To his credit, David Stockman was one of the few who had a clue in the 2008-2009 crisis. No surprise, he’s demonstrating that he’s up to speed on this one as well. From Stockman at internationalman.com:

Bailout of Bank Deposits

Why would you throw-in the towel now? We are referring to the Fed’s belated battle against inflation, which evidences few signs of having been successful.

Yet that’s what the entitled herd on Wall Street is loudly demanding. As usual, they want the stock indexes to start going back up after an extended drought and are using the purported “financial crisis” among smaller banks as the pretext.

Well, no, there isn’t any preventable crisis in the small banking sector. As we have demonstrated with respect to SVB and Signature Bank, and these are only the tip of the iceberg, the reckless cowboys who were running these institutions put their uninsured depositors at risk, and both should now be getting their just deserts.

To wit, executive stock options in the sector have plunged or become worthless, and that’s exactly the way capitalism is supposed to work. Likewise, on an honest free market their negligent large depositors should be losing their shirts, too.

After all, who ever told the latter that they were guaranteed 100 cents on the dollar by Uncle Sam? So it was their job, not the responsibility of the state, to look out for the safety of their money.

If the American people actually wanted the big boys bailed out, the Congress has had decades since at least the savings and loan crisis back in the 1980s to legislate a safety net for all depositors. But it didn’t for the good reason that 100% deposit guarantees would be a sure-fire recipe for reckless speculation by bankers on the asset-side of their balance sheets; and also because there was no consensus to put taxpayers in harms’ way in behalf of the working cash of Fortune 500 companies, smaller businesses, hedge funds, affluent depositors and an assortment of Silicon Valley VCs, founders, start-ups and billionaires, among countless others of the undeserving.

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Money Troubles, by James Howard Kunster

Posted on March 13, 2023 | Leave a comment

Two from James Howard Kunstler tonight. From Kunstler at kunstler.com:

“As for the evil: It lurks in the interstices of our bureaucratic institutions, which, as they have grown in size and complexity since the nineteenth century, behave in ways that are increasingly impossible to understand and contrary to human flourishing.” — Eugyppius on Substack

       Money is all theoretical… until it’s not. Paper money is bad enough, as France learned under the tutelage of the rascal John Law in the early 1700s. The nation was broke, exhausted by foolish wars, and heaped under unbearable debt. Monsieur Law, a Scottish genius-wizard (the Jerry Lewis of political economy), landed in Paris, cast a spell on the regent Duc d’Orléans, set up a magic credit engine fueled by dreams of untold riches-to-come burgeoning out of the vast, new-found lands called Louisiana up the Mississippi River, and modern finance was born!

       The stock-and-money schemes known as the Mississippi Bubble soon ruined France and put finance in such a bad odor that the word “banque” could not be used in polite society there for a century to come. Monetary inflation became a thing for the first time since Roman days — a much easier trick with printed paper banknotes than with silver coins — but the effect was the same: the evaporation of “wealth” (which is what money supposedly represents). At the height of the crisis, trading in gold was criminalized, though that was so easily worked-around due to sheer custom and habit that the Crown had to re-legalize it. The frenzy from start to finish lasted only a few years, but the nation was set on the path that would eventually lead to revolution. Law ended his days dolefully running card games in Venice.

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Yellen Says Government Will Help SVB Depositors But “No Bailout” As Fed, FDIC “Hope” Talk Of Special Vehicle Prevents More Bank Runs, by Tyler Durden

Posted on March 12, 2023 | Leave a comment

On Sunday, at 10:10 pm MDT, the DJIA future is plus 398, which is an indication that the market doesn’t believe Yellen. Given the last 35 years, since the institution of the Greenspan “put” in response to the 1987 stock market crash, you can’t blame the market for believing bailouts are coming, regardless of rhetoric to the contrary. From Tyler Durden at zerohedge.com:

With just hours left until futures open for trading late on Sunday afternoon, the situation remains extremely fluid and for now it appears that regulators, central bankers and treasury officials (we won’t mention the White House where the most competent financial advisor is Hunter Biden) still don’t have a clear idea of how they will coordinate or respond.

Take Janet Yellen, who said on Sunday morning that the US government was working closely with banking regulators to help depositors at Silicon Valley Bank but dismissed the idea of a bailout.

Speaking with CBS on Sunday, the treasury secretary sought to assure US customers of the failed tech lender that policies were being discussed to stem the fallout from the sudden collapse this week. The Federal Deposit Insurance Corporate (FDIC) took control of the bank on Friday morning.

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again,” Yellen said (oh but you will, you just don’t know it yet).

“But we are concerned about depositors, and we’re focused on trying to meet their needs.”

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America Just Bailed Out A Bunch Of Pensions At The Taxpayers’ Expense, by Bruce Wilds

Posted on July 19, 2022 | Leave a comment

This is a preview of things to come, until the government runs out of money. From Bruce Wilds at brucewilds.blogspot.com:

Unnoticed by most taxpayers and touted as good news was the fact we the taxpayers of America have stepped up to the plate and bailed out hundreds of failing pensions. Much of this took place without the average citizen even knowing it occurred. Buried deep in the American Rescue Plan signed into law by President Biden in March 2021 was a provision mandating the government to bail out ailing multiemployer pension plans.

The American Rescue Plan Act of 2021 was the $1.9 trillion economic stimulus package proposed by President Joe Biden to speed up the United States’ recovery from COVID-19. The huge bill was passed with little time for debate or even to be read, all under the idea congress needed to take  action to address the economic and health effects of the pandemic and the ongoing recession. While how this provision to assist troubled pensions has been addressed did not get a great deal of air time it may prove to be far more costly than predicted.

People are often led to believe pensions are a promise carved in stone, however, when the money is not there pensions and promises will be broken so pensioners should prepare for the pain. This is especially true in the public sector which has a history of granting pensions that are unheard of in the private sector. The 25 largest U.S. public pensions face trillions in unfunded liabilities. If Americans took the time to stand back and look at the bigger picture they will see the Pension Benefit Guaranty Corporation (PBGC) an independent agency of the United States government responsible for acting as the nation’s “safety net” for failed pensions is also in trouble. When a pension fails this agency is expected to take control of its assets and dole them out to its pensioners in the coming years. The ugly truth is the PBGC is not a rock but is in need of its own bailout. 

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How to Fight the Investment Enemies Now Mobilizing, by MN Gordon

Posted on October 8, 2021 | Leave a comment

As an investor, what do you do if the Federal Reserve can’t bail markets out? From MN Gordon at economicprism.com:

Default averted!

That was the dispatch made by the popular press on Thursday following word there would be a short-term debt limit extension.  But was a default really averted?

Was a default averted when Nixon closed the gold window and put the world on an irredeemable paper standard?

Naturally, Wall Street didn’t bother considering the long-term effects of Washington’s policies of infinite debt – or the soft inflationary default Congress is engineering.  Instead, Wall Street did what it loves to do most; it bid up the major stock market indexes.

What a difference a week makes.  September may have been painful for stocks.  But the first week of October has been all pleasure.

Once again, Washington has a plan to keep the money spigots flowing.  It’s roughly the same plan that’s been in operation for the last 50 years.  The playbook is real simple: kick the can down the road.

Wall Street generally favors this plan.  More debt, both public and private, has loosely translated to higher stock market indexes.  And higher stock prices make everyone believe they’re getting rich.

There have been several notable episodic exceptions.  But, by and large, the rampant influx of debt based money has brought forth higher stock market indexes.

Still, this relationship is not set in stone.  What if things don’t go according to plan?  What if the recent past turns out to be much different than the near future?

What would then happen to investors?

We’ll have more on this in just a moment.  But first, some perspective is needed…

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What You Will Find When You Follow the Money, by MN Gordon

Posted on August 15, 2020 | 1 comment

Funny money delays but will not prevent a grand reckoning of the debt that’s been piling up for decades. From MN Gordon at economicprism.com:

It has been a rough go for California Governor Gavin Newsom.  Late last week it was revealed that the state Department of Public Health had tickled the poodle on its COVID-19 record keeping.  Somehow the bureaucrats in Sacramento undercounted new coronavirus cases by as many as 300,000.

Perhaps this oversight prompted Newsom to imbibe in a little meditation and reflection.  At his Wednesday coronavirus news conference, shortly after quoting Voltaire, Newsom offered the following epiphany:

“Businesses can’t thrive in a world that’s failing.”

Often the simplest insights into reality are the most essential.  We’ll give Newsom that.  Yet, this is hardly an insight.  Rather, it’s readily obvious…even to a numskull.

The world that’s failing, where businesses can’t thrive, is a direct consequence of government lockdown orders.  And Newsom, more than any other public official, has his fingerprints all over the offense.  If you recall, California, under Newsom’s command, was the first state to order lockdowns.  It’s a shame he didn’t pause for meditation before committing the state to ruin.

The dynamics of what would follow Newsom’s lockdown orders were predictable.  When government decrees froze the economy, bills were still due.  Yet many people’s incomes, in the form of paychecks, disappeared.

For businesses, outstanding accounts payable were still due.  Though accounts receivable quickly became overdue.  In short, the flow of cash, as delivered by an open economy of give and take, broke down.

Certainly, Newsom thought he was doing the right thing.  He had to keep everyone in the Golden State safe by locking them down.  Many governors followed Newsom’s lead, having the same disastrous results.

But that was just the beginning.  Soon the uplifters in Washington swung into action…

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Posted in Banking, Business, Collapse, Currencies, Debt, Economy, Financial markets, Government, Money

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Takeover, by Sven Henrich

Posted on April 13, 2020 | Leave a comment

The Fed’s frenzied balance sheet expansion is laying the groundwork for the next bubble, which will be even more detached from reality than the present one. From Sven Henrich at northmantrader.com:

We can’t print ourselves out of this crisis again, but that isn’t stopping the Federal Reserve from trying. Thursday’s intervention program, the latest in a string of panic moves to keep the financial system afloat, constitutes a complete takeover attempt of the market ecosphere, only the buying of stocks directly is last missing piece of eventual complete central bank control of equity markets. But seizing control of the bond market is the nearest equivalent step.

Not only that, the Fed is buying junk corporate debt propping up companies that should be let to fail as Chamath Palihapitiya pointed out poignantly this week. But not this Fed, no, with its actions it is again setting up the economy for yet another slower growth recovery, financed by even more debt.

QE doesn’t produce growth, that is the established track record:

Nobody wants to talk about the consequences to come following this crisis, but that doesn’t mean the consequences won’t be a real and present reality.

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Risk? We Don’t Need No Stinking Risk! by Tom Luongo

Posted on April 13, 2020 | 1 comment

Financial downside risk, at least the kind that Wall Street supposedly faces, has been socialized. From Tom Luongo at tomluongo.me:

We’ve crossed the monetary Rubicon. There is no going back to the way things were. With the creation of a series of Special Purpose Vehicles (SPV) the Treasury Dept. and the Federal Reserve have fundamentally altered the financial landscape of the United States.

We are no longer a country that tolerates the risk of capitalism. To be honest, we haven’t been that country for a very long time. Steadily over the course of my life (I was born in 1968 the year the London Gold Pool failed), the global monetary system has cut tie after tie to the discipline of the free market in money.

With the U.S. at the center of the system, it was inevitable that we would reach the point of no return once there was no other way to reflate the system.

And it has been in the service of arrogating the power of money creation, and by extension the power that confers to the printers, to a global oligarchy I’m fond of calling The Davos Crowd.

My last post was an open letter to these folks letting them know that no matter how much they try to scare us into accepting a world where they have total control over our lives their chances of success are limited because we can see them and what they are planning.

The response I’ve received from people to that post confirm my view on this. Few things I have written have generated the kind of passion I’ve seen from folks.

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Posted in Banking, Business, Capitalism, Crime, Cronyism, Currencies, Debt, Economy, Financial markets, Governments

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Bailing Out the Bailout, by Matt Taibbi

Posted on April 4, 2020 | Leave a comment

That’s the thing about bailouts. Often times there are one or more repeat performances. From Matt Taibbi at rollingstone.com:

“I’ve never signed anything with a ‘T’ before,” Donald Trump quipped at the signing of the $2 trillion CARES Act. He reportedly wants his signature on coronavirus relief checks, as if they were Trump Plaza casino chips. This might be a fitting metaphor for America’s post-virus economic future.

The new bailout bill, which combined with a series of Federal Reserve interventions is more like a $6 trillion rescue, is a massive double-down on the 2008 rescue efforts. This bailout of the last bailout sets the stage for permanent state sponsorship of America’s overheated financial markets.

Like 2008, only more so, the new mega-rescue is a bipartisan effort. Lawmakers sold this as a good thing.

“This is a 9/11 moment,” said Republican congressman Dan Newhouse of Washington state. “A time to put partisan differences aside.”

“We have our differences, but we also know what is important to us,” saidHouse Speaker Nancy Pelosi. “America’s families are important to us.”

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Boeing, Which Repurchased Over $100BN In Stock, Is Downgraded To BBB, Seeks “Short-Term” Bailout, by Tyler Durden

Posted on March 17, 2020 | Leave a comment

Corporate America gorged on share buy backs for years, much of it debt funded, and now many corporations are running to Washington for bailouts. Boeing is one of the worst. From Tyler Durden at zerohedge.com:

ust hours after S&P took the machete to Exxon’s long standing AA+ credit rating, moments ago the rating agency went after the company which until just a few weeks ago seems invincible, and whose stock price has crashed from $350 to $130 in a little over a month after it announced it was fully drawing down its revolver: Boeing.

S&P cut Boeing’s credit rating by two notches late on Monday, to BBB from A-, as its “cash flows for the next two years are going to be much weaker than we had expected, due to the 737 MAX grounding, resulting in worse credit ratios than we had forecast.” In addition, S&P notes, “the significant reduction in global air travel due to the coronavirus will likely result in an increase in aircraft order deferrals, further pressuring cash flows.”

And worst of all, Boeing will likely be downgraded again, as S&P kept it on Credit Watch negative, meaning it may be just a matter of time before Boeing is downgraded to junk, making it the world’s most iconic fallen angel.

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