Paul Craig Roberts - Financial Collapse At Hand: When is "Sooner or Later"?

Ever since the beginning of the financial crisis and Quantitative Easing, the question has been before us:  How can the Federal Reserve maintain zero interest rates for banks and negative real interest rates for savers and bond holders when the US government is adding $1.5 trillion to the national debt every year via its budget deficits?  Not long ago the Fed announced that it was going to continue this policy for another 2 or 3 years. Indeed, the Fed is locked into the policy. Without the artificially low interest rates, the debt service on the national debt would be so large that it would raise questions about the US Treasury’s credit rating and the viability of the dollar, and the trillions of dollars in Interest Rate Swaps and other derivatives would come unglued. 

In other words, financial deregulation leading to Wall Street’s gambles, the US government’s decision to bail out the banks and to keep them afloat, and the Federal Reserve’s zero interest rate policy have put the economic future of the US and its currency in an untenable and dangerous position.  It will not be possible to continue to flood the bond markets with $1.5 trillion in new issues each year when the interest rate on the bonds is less than the rate of inflation. Everyone who purchases a Treasury bond is purchasing a depreciating asset. Moreover, the capital risk of investing in Treasuries is very high. The low interest rate means that the price paid for the bond is very high. A rise in interest rates, which must come sooner or later, will collapse the price of the bonds and inflict capital losses on bond holders, both domestic and foreign.

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http://globalresearch.ca/index.php?context=va&aid=31272

Student Loan Debt Explodes, Climbing 275% Since 2003

New data released today by the Federal Reserve shows, while general consumer debt has decreased in the first quarter of this year, student loan debt in particular continues to aggressively increase. Overall student loan debt has skyrocketed in the past 10 years, rising by 275%.

According to the Federal Reserve, student loan debt hit $904 billion in the first quarter of 2012; however, the Consumer Financial Protection Bureau puts the number at the $1 trillion mark.

"While consumers have been whittling down that debt in recent years, student loans have been on the rise. The high unemployment rate has prompted more people to go back to school for retraining, which has contributed to loan demand," reports Reuters today. "Since household debt peaked in the third quarter of 2008, student loan debt has climbed by $293 billion, while other types of debt have dropped by $1.53 trillion, the Fed report said."

Others lay some of the blame on the continually increasing costs of education, as college tuition and fees continue to reach new levels.

Read More:

http://www.commondreams.org/headline/2012/05/31-8

Matt Stoller - Over 99% of Federal Reserve Bank Enforcement Actions Are Resolved Without Admission of Guilt

In a hearing last week titled “Examining the Settlement Practices of U.S. Financial Regulators”, various regulators tried to justify their practice of settling with financial firms and not requiring them to admit wrongdoing. In that hearing, Federal Reserve General Counsel Scott Alvarez, stated that only seven of the roughly one thousand enforcement actions taken in the last decade were resolved without consent.

The vast majority of the Federa Reserve’s formal enforcement actions are resolved upon consent, which is fully consistent with the goal of resolving supervisory concerns with bank management quickly and firmly. In crafting enforcement actions that are entered by consent, the Federal Reserve typically sets out summary recitations of the relevant facts in “Whereas” clause provisions; however, like our fellow banking regulators, it has not been our practice to require formal admissions to the misconduct addressed in our enforcement orders given the remedial nature of our enforcement program. Requiring admission of fact and legal conclusions as a condition of entering into a consent action is likely to have a deleterious effect on our supervisory efforts by causing more institutions and individuals to challenge the requested relief in contested administrative proceedings, which typically takes years to reach final resolution, and which could delay implemenattion of necessary corrective action.

In other words, the Federal Reserve will only punish banks who break the rules if those banks consent to punishment.  This attitude is pervasive among all regulators.  Here’s the Office of the Comptroller of the Currency, which regulates among other banks JP Morgan Chase.

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http://www.nakedcapitalism.com/2012/05/over-99-of-enforcement-actions-by-federal-reserve-are-resolved-without-admission-of-guilt.html

Elizabeth Warren - Wall Street Waging 'Guerrilla War' on Financial Regulations

Elizabeth Warren speaking on CNN stated that the issue embodied by JPMorgan Chase CEO Jamie Dimon is a symptom of the regulation-avoiding power that financial behemoths have to take on risks and let the public take on the consequences.

"This isn't personal to Jamie Dimon. It's what's been going on ever since Dodd-Frank passed. There's been a guerrilla war out there in which the largest financial institutions have been doing everything they can to make sure that financial regulations don't get put in place. And if they do get put in place, that they're loaded with loopholes and not very effective. There's been a lobbying army hired by these financial institutions because they really don't want to have any oversight," stated Warren.

“The problem is a combination of size and attitude. They’re too big, there’s too much power concentrated in just a handful of institutions but it’s also that they have the attitude of leave us alone, we’ll manage our risks internally, we’ll take care of it all ourselves, we’ll come back to you only if things go wrong and we need some help and we need a bailout. We can’t run an economy that way. We can’t run a country that way. We have to stand up as a people and say, 'No more of this.'"

Read More:

http://www.commondreams.org/headline/2012/05/14-2

10 Things That Every American Should Know About The Federal Reserve

What would happen if the Federal Reserve was shut down permanently?  That is a question that CNBC asked recently, but unfortunately most Americans don't really think about the Fed much. Most Americans are content with believing that the Federal Reserve is just another stuffy government agency that sets our interest rates and that is watching out for the best interests of the American people.  But that is not the case at all.  The truth is that the Federal Reserve is a private banking cartel that has been designed to systematically destroy the value of our currency, drain the wealth of the American public and enslave the federal government to perpetually expanding debt.  During this election year, the economy is the number one issue that voters are concerned about.  But instead of endlessly blaming both political parties, the truth is that most of the blame should be placed at the feet of the Federal Reserve.  The Federal Reserve has more power over the performance of the U.S. economy than anyone else does.  The Federal Reserve controls the money supply, the Federal Reserve sets the interest rates and the Federal Reserve hands out bailouts to the big banks that absolutely dwarf anything that Congress ever did.  If the American people are ever going to learn what is really going on with our economy, then it is absolutely imperative that they get educated about the Federal Reserve.

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http://theeconomiccollapseblog.com/archives/10-things-that-every-american-should-know-about-the-federal-reserve

Robert Reich - The Widening Wealth Divide, and Why We Need a Surtax on the Super Wealthy

Let Santorum and Romney duke it out for who will cut taxes on the wealthy the most and shred the public services everyone else depends on.

The rest of us ought to be having a serious discussion about a wealth tax. Because if you really want to know what’s happening to the American economy you need to look at household wealth — not just incomes.

The Fed just reported that household wealth increased from October through December. That’s the first gain in three quarters.

Good news? Take closer look. The entire gain came from increases in stock prices. Those increases in stock values more than made up for continued losses in home values.

But the vast majority of Americans don’t have their wealth in the stock market. Over 90 percent of the nation’s financial assets – including stocks and pension-fund holdings – are owned by the richest 10 percent of Americans. The top 1 percent owns 38 percent.

Read More:

http://robertreich.org/post/19205965330

Joseph de la Torre Dwyer - The CFPB vs. Student Loan Sharks

College students today take on more debt than ever with fewer prospects of paying that money back. The Federal Reserve Bank of New York reported that 27 percent of education borrowers have past due balances.

This stems from a few causes. For starters, average college tuition has more than doubled since the 1980s in inflation-adjusted dollars. This means that college costs have risen significantly faster than the average family’s income. At the same time, grant-based financial aid has remained virtually flat. As a result, most students and families find no other recourse but to use loans—a financial instrument about which, all too often, they possess incomplete, confusing, or inaccurate information.

Now those students and their families have a powerful ally: The new Consumer Financial Protection Bureau.

Read More:

http://www.policyshop.net/home/2012/3/8/the-cfpb-vs-student-loan-sharks.html

Tom Carter - US Congress passes authoritarian anti-protest law

A bill passed Monday in the US House of Representatives and Thursday in the Senate would make it a felony—a serious criminal offense punishable by lengthy terms of incarceration—to participate in many forms of protest associated with the Occupy Wall Street protests of last year. Several commentators have dubbed it the “anti-Occupy” law, but its implications are far broader.

The bill—H.R. 347, or the “Federal Restricted Buildings and Grounds Improvement Act of 2011”—was passed by unanimous consent in the Senate, while only Ron Paul and two other Republicans voted against the bill in the House of Representatives (the bill passed 388-3). Not a single Democratic politician voted against the bill.

The virtually unanimous passage of H.R. 347 starkly exposes the fact that, despite all the posturing, the Democrats and the Republicans stand shoulder to shoulder with the corporate and financial oligarchy, which regarded last year’s popular protests against social inequality with a mixture of fear and hostility.

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http://www.wsws.org/articles/2012/mar2012/prot-m03.shtml

Jesse Eisinger - Fed Shrugged Off Warnings, Let Banks Pay Shareholders Billions

In early November 2010, as the Federal Reserve began to weigh whether the nation’s biggest financial firms were healthy enough to return money to their shareholders, a top regulator bluntly warned: Don’t let them.

“We remain concerned over their ability to withstand stress in an uncertain economic environment,” wrote Sheila Bair, the head of the Federal Deposit Insurance Corp., in a previously unreported letter obtained by ProPublica.

The letter came as the Fed was launching a “stress test” to decide whether the biggest U.S. financial firms could pay out dividends and buy back their shares instead of putting aside that money as capital. It was one of the central bank’s most critical oversight decisions in the wake of the financial crisis.

“We strongly encourage” that the Fed “delay any dividends or compensation increases until they can show” that their earnings are strong and their assets sound, she wrote. Given the continued uncertainty in the markets, “we do not believe it is the right time to allow transactions that will weaken their capital and liquidity positions.”

Four months later, the Federal Reserve rejected Bair’s appeal.

Read More:

 http://www.nationofchange.org/fed-shrugged-warnings-let-banks-pay-shareholders-billions-1330783928

Bob Chapman - In the Wake of Davos -- The Fed overshadow's the European Central Bank

On Friday from the Bilderberg conclave at Davos, appointed European Central Bank President, Mario Draghi proclaimed that Europe had averted financial disaster and cited the improvement in euro zone markets in recent weeks. He said it was the ECB’s duty to guard against deflation as well as inflation. The fact of the matter is that he and his friends at the Fed arranged a currency swap of $1 trillion of which the ECB dispersed $660 billion to 523 EU banks, at 1% interest for three years. He also cut interest rates twice and extended loans for 1 to 3 years. Mr. Draghi could be expected to take the easy Anglo-American way out. He is fully Illuminati trained and that is where his orders emanate from.

He continued about how the conclusion of a fiscal pact, the ESM, the European Stabilization Mechanism, where budgets and fiscal spending policies would be determined by unelected, Treasury appointees, who have been officially immunized by the EU government. Mr. Draghi makes no note of these qualifications and forgets to let us know that in this new ESM pact all the nations lose their sovereignty.

As yet, after a month, there is no evidence that the funds had reached the real economy. The banks that just received the funds at 1% interest have been depositing them at ¼% interest with the ECB. They have not lent to each other because bankers say they do not trust each other. What a sad state of affairs. In addition to the above the ECB now accepts loan collateral of much lower quality than previously was approved. As you can see there were a lot of facts Mr. Draghi deliberately left out.

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http://www.globalresearch.ca/index.php?context=va&aid=29011