The Fed Responds To Zero Hedge

The Fed Responds To Zero Hedge: Here Are Some Follow Up Questions

http://www.zerohedge.com/news/2016-01-18/fed-responds-zero-hedge-here-are-some-follow-questions

Over the weekend, we gave the Dallas Fed a chance to respond to a Zero Hedge story corroborated by at least two independent sources, in which we reported that Federal Reserve members had met with bank lenders with distressed loan exposure to the US oil and gas sector and, after parsing through the complete bank books, had advised banks to i) not urge creditor counterparties into default, ii) urge asset sales instead, and iii) ultimately suspend mark to market in various instances.

Moments ago the Dallas Fed, whose president since September 2015 is Robert Steven Kaplan, a former Goldman Sachs career banker who after 22 years at the bank rose to the rank of vice chairman of its investment bank group – an odd background for a regional Fed president – took the time away from its holiday schedule to respond to Zero Hedge.

This is what it said.

We thank the Dallas Fad for their prompt attention to this important matter. After all, as one of our sources commented, “If revolvers are not being marked anymore, then it’s basically early days of subprime when mbs payback schedules started to fall behind.” Surely there is nothing that can grab the public’s attention more than a rerun of the mortgage crisis, especially if confirmed by the highest institution.

As such we understand the Dallas Fed’s desire to avoid a public reaction and preserve semantic neutrality by refuting “such guidance.”

That said, we fully stand by our story, and now that we have engaged the Dallas Fed we would like to ask several very important follow up questions, to probe deeper into a matter that is of significant public interest as well as to clear up any potential confusion as to just what “guidance” the Fed is referring to.

  • Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, met with U.S. bank and other lender management teams in recent weeks/months and if so what was the purpose of such meetings?
  • Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, requested that banks and other lenders present their internal energy loan books and loan marks for Fed inspection in recent weeks/months?
  • Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, discussed options facing financial lenders, and other creditors, who have distressed credit exposure including but not limited to:
    • avoiding defaults on distressed debtor counterparties?
    • encouraging asset sales for distressed debtor counterparties?
    • advising banks to avoid the proper marking of loan exposure to market?
    • advising banks to mark loan exposure to a model framework, one created either by the creditors themselves or one presented by members of the Federal Reserve network?
    • avoiding the presentation of public filings with loan exposure marked to market values of counterparty debt?
  • Was the Dallas Fed, or any other members and individuals of the Federal Reserve System, consulted before the January 15, 2016 Citigroup Q4 earnings call during which the bank refused to disclose to the public the full extent of its reserves related to its oil and gas loan exposure, as quoted from CFO John Gerspach:
    “while we are taking what we believe to be the appropriate reserves for that, I’m just not prepared to give you a specific number right now as far as the amount of reserves that we have on that particular book of business. That’s just not something that we’ve traditionally done in the past.”
  • Furthermore, if the Dallas Fed, or any other members and individuals of the Federal Reserve system, were not consulted when Citigroup made the decision to withhold such relevant information on potential energy loan losses, does the Federal Reserve System believe that Citigroup is in compliance with its public disclosure requirements by withholding such information from its shareholders and the public?
  • If the Dallas Fed does not issue “such” guidance to banks, then what precisely guidance does the Dallas Fed issue to banks?

Since the Fed is an entity tasked with serving the public, and since it took the opportunity to reply in broad terms to our previous article, we are confident that Mr. Kaplan and his subordinates will promptly address these follow up concerns.

Finally, in light of this official refutation by the Dallas Fed, we are confident that disclosing the Fed’s internal meeting schedules is something the Fed will not object to, and we hereby request that Mr. Kaplan disclose all of his personal meetings with members of the U.S. and international financial system since coming to office, both through this article, and through a FOIA request we are submitting concurrently.

Debt 7 Out Of 10 Believe “Necessity”

Debt Slaves: 7 Out Of 10 Americans Believe That Debt “Is A Necessity In Their Lives”

Submitted by Michael Snyder via The End of The American Dream blog,

Most of us will spend our entire lives paying off debt.

That is why we are called debt slaves – our hard work makes others extremely wealthy.

Could you live without debt?  Most Americans say that they cannot.  According to a brand new Pew survey, approximately 7 out of every 10 Americans believe that “debt is a necessity in their lives”, and approximately 8 out of every 10 Americans actually have debt right now.  Most of us like to think that “someday” we will get out of the hole and quit being debt slaves, but very few of us ever actually accomplish this.  That is because the entire system is designed to trap us in debt before we even get out into the “real world” and keep us in debt until we die.  Sadly, most Americans don’t even realize what is being done to them.

In America today, debt is considered to be just part of normal life.  We go into debt to go to college, we go into debt to buy a vehicle, we go into debt to buy a home, and we are constantly using our credit cards to buy the things that we think we need.

As a result, this generation of Americans is absolutely swimming in debt.  The following are some of the findings of the Pew survey that I mentioned above…

 *”8 in 10 Americans have debt, with mortgages the most common liability.”

*”Although younger generations of Americans are the most likely to have debt (89 percent of Gen Xers and 86 percent of millennials do), older generations are increasingly carrying debt into retirement.”

*”7 in 10 Americans said debt is a necessity in their lives, even though they prefer not to have it.”

Most of us wish that we didn’t have any debt, but we have bought into the lie that it is a necessary part of life in America in the 21st century.

It has been estimated that 43 percent of all American households spend more money than they make each month, and U.S. households are more than 11 trillion dollars in debt at this point.

When it comes to government debt, that is easy for us to blame on someone else, but all of this household debt is undoubtedly something that we have done to ourselves.

It all starts at a very early age for most of us.  When we are still in high school, we are endlessly told about how important a college education is.  All of the authority figures in our lives insist that we should just try to get into the best school that we possibly can and to not even worry about how much it will cost.

So many of us go into staggering amounts of debt before we even get out into the working world.  We had faith that the “good jobs” that were being promised to us would be there when we graduated.

Unfortunately, in this day and age those “good jobs” end up being a mirage more often than not.

But whether or not we can find a good job, we still have to pay off all that debt.

According to new data that was recently released, the total amount of student loan debt in the United States has risen to a grand total 1.2 trillion dollars.  If you can believe it, that total has more than doubled over the past decade.

Right now, there are approximately 40 million Americans that are paying off student loan debt.  For many of them, they will keep making payments on this debt until they are senior citizens.

Another way that they get you while you are still in school is with credit card debt.

I got my first credit card while I was in college, and nobody ever taught me about the potential dangers.

Today, the average U.S. household that has at least one credit card has approximately$15,950 in credit card debt.

So let’s say that you have that much credit card debt and you are paying an annual interest rate of 17 percent.  If you only pay the minimum payment each month, it will take you 229 months to pay your credit card off, and during that time you will have paid $13,505.82 in interest charges.

In other words, you will almost have paid twice as much for everything that you originally bought with your credit card by the time it is all said and done.

This is why banks love to give you credit cards.  If they can get back nearly twice as much money as they originally give you, they get rich and you get poor.

Most of us get loaded down with even more debt when we go to buy a vehicle.  Instead of saving up and getting what we can afford, many of us end up getting the largest loans that we can qualify for.

In a previous article, I discussed the fact that the average auto loan at signing in America today is approximately $27,000.  In order to get the monthly payments down to a level where we can afford them, many of these auto loans are now being stretched out for six or seven years.  In fact, the number of auto loans that exceed 72 months has hit at an all-time high of 29.5 percent.

It is the same thing with home loans.

In the old days, it was extremely rare for a mortgage to be stretched over 30 years, but today that is pretty much the standard.

Sadly, most people don’t understand how much money this is costing them.

If you take out a $300,000 mortgage at 3.92 percent and stretch it over 30 years, you will end up paying back a grand total of $510,640.

In other words, you will pay for two houses by the time you are done.

Yes, we all need somewhere to live, and there are definitely negatives to renting as well.  But it is very important that we all understand what is being done to us.

And I haven’t even discussed one of the most insidious forms of debt yet.

Have you noticed that most doctors and most hospitals will never tell you how much something is going to cost in advance?

They get us when we are at our most vulnerable.  When there is something wrong with us physically, we are often desperate to get help.  So we don’t ask too many questions and we just go along with whatever they say.

But then later we get the bill and we are often completely shocked by what they have charged us.

If you are completely unethical, it is a great business model.  People that are extremely desperate and needy come to you and you don’t even have to tell them how much your services are going to cost.  And then once they leave, you send them an absolutely outrageous bill for whatever you feel like charging.

Frankly, I don’t know how a lot of people working in the medical field live with themselves.  In their extreme greed, they are ruining the lives of millions of ordinary American families.

One very disturbing study found that approximately 41 percent of all working age Americans either currently have medical bill problems or are paying off medical debt.  And collection agencies seek to collect unpaid medical bills from about 30 million of us each and every year.

Most of us will spend our entire lives paying off debt.

That is why we are called debt slaves – our hard work makes others extremely wealthy.

Running From Police “Often” A “Death Sentence,” Former Cop Says

Submitted by Tyler Durden on 04/23/2015 15:16 -0400

Earlier today we brought you the story of Texas Department of Public Safety trooper Abraham Martinez, whose flying jumpkick has now been officially enshrined in the annals of police dash cam history. As it turns out, we have The Austin American Statesman to thank for the footage. The newspaper recently took an in-depth look at the Texas DPS’ use of force during pursuits. Here’s an excerpt:

 The trooper who shot and kicked him, Abraham Martinez, last year received a minor penalty for the incident — three days off without pay. Yet the fact that a traffic infraction could escalate into a lengthy, high-speed motorcycle pursuit ending in gunshots provides a graphic illustration of how a relatively permissive DPS culture of use-of-force during pursuits is out of step with evolving national standards, experts said. A leading researcher on police pursuits, University of South Carolina criminal justice professor Geoffrey Alpert, called the agency’s policy permitting troopers to shoot at fleeing vehicles “stupid.”

Fortunately, no one was killed in that particular incident, but as we’ve seen recently — the most poignant example being the shooting death of a fleeing, unarmed Walter Scott by a South Carolina officer earlier this month — running from the police can end fatally. Incidents like that which unfolded in South Carolina have inflamed already fragile race relations across the US and now, former Alabama state trooper Orrin Hudson has a simple message for African Americans who are confronted by the police: “I’ve said it before, and I’ll say it again: In a situation with the police, it’s not immediately about who is right or wrong, it’s about staying alive.” 

Here is the 6-year police veteran’s “Open Letter To Unarmed African Americans”:

 Too many unarmed African American men are losing their lives to white police officers, and most of the time justice is not being served. But even if justice is served, a valuable life has already been lost…

1) Don’t run. Although running from the police should not be a death sentence, it often ends up this way. So don’t do it! Doing so will heighten the aggression of an officer, especially if he/she is not sure if you are armed. It also puts them in a position where they have to make spur-of-the-moment decisions, which increases the chance of an officer deciding to end your life. So stay put!

2) Show respect at all times. A police officer’s duty is to serve and protect, but if he/she is out of line or bullying you, continue to be respectful. Say “sir” and “no sir,” and “may I” and “thank you!” These will keep the situation from escalating. If the officer is violating your rights in any way, you can fight this matter at a later and safer time.

3) Keep your hands where they can be seen. Do not make the officer feel threatened in any way. At all times, keep your hands visible. Many police officers, especially white police officers, will feed into stereotypes. They may be assuming that you have a weapon just because you are Black or because they feel you look like you are up to no good!

4) You have the right to remain silent. If you feel that you are being wrongfully arrested, you do not have to speak on it as this likely will not change the officer’s mind. Keeping quiet protects you legally, and also keeps the situation calm and peaceful.

5) Sign the ticket and leave. If you are being pulled over for speeding, simply sign the ticket and leave. Signing the ticket does not mean that you are admitting guilt; its only a promise to appear in court on the date listed on the ticket. Arguing with the officer about it will only make the situation worse, and perhaps raise his level of aggression.

Mr. Hudson now runs a non-profit organization that seeks to promote better decision making among  urban youth and adults.

*  *  *
We’ll leave it to readers to determine for themselves what it says about the justice system when it is “often” the case that running from the police is a “death sentence.”

Bank deposits no longer considered money

Bank deposits will soon no longer be considered money but paper investments

By Kenneth Schortgen Jr, published on Examiner.com, on November 12, 2014

This weekend the G20 nations will convene in Brisbane, Australia to conclude a week of Asian festivities that began in Beijing for the developed countries and major economies. And on Sunday, the biggest deal of the week will be made as the G20 will formally announce new banking rules that are expected to send shock waves to anyone holding a checkingsavings, or money market account in a financial institution.

On Nov. 16, the G20 will implement a new policy that makes bank deposits on par with paper investments, subjecting account holders to declines that one might experience from holding a stock or other security when the next financial banking crisis occurs. Additionally, all member nations of the G20 will immediately submit and pass legislation that will fulfill this program, creating a new paradigm where banks no longer recognize your deposits as money, but as liabilities and securitized capital owned and controlled by the bank or institution.

In essence, the Cyprus template of 2011 will be fully implemented in every major economy, and place bank depositors as the primary instrument of the next bailouts when the next crisis occurs.

On Sunday in Brisbane the G20 will announce that bank deposits are just part of commercial banks’ capital structure, and also that they are far from the most senior portion of that structure. With deposits then subjected to a decline in nominal value following a bank failure, it is self-evident that a bank deposit is no longer money in the way a banknote is. If a banknote cannot be subjected to a decline in nominal value, we need to ask whether banknotes can act as a superior store of value than bank deposits? If that is the case, will some investors prefer banknotes to bank deposits as a form of savings? Such a change in preference is known as a “bank run.”

Each country will introduce its own legislation to effect the ‘ bail-in’ agreed by the G20 this coming weekend.

Large deposits at banks are no longer money, as this legislation will formally push them down through the capital structure to a position of material capital risk in any “failing” institution. In our last financial crisis, deposits were de facto guaranteed by the state, but from November 16th holders of large-scale deposits will be, both de facto and de jure, just another creditor squabbling over their share of the assets of a failed bank. – Zerohedge

For most Americans with savings or checking accounts in federally insured banks, normal FDIC rules on deposit insurance are still in play, but anyone with over $250,000 in any one account, or held offshore, will have their money automatically subject to bankruptcy dispursements from the courts based on a much lower rank of priority, and a much lower percentage of return.

This also includes business accounts, money market accounts, and any depository investments such as a certificate of deposit (CD).

What makes this sudden push to securitize cash held as bank deposits is the pending question of whether the central banks or sovereign governments know that a crisis is forthcoming, especially in light of Europe’s rapid decline into recession, and Japan’s need to monetize their entire budget through central bank easing?

Just as people thought the ownership of gold and silver was inviolate prior to 1933 when the government ordered it confiscated to bailout the banks and Federal Reserve during the Great Depression, we are all now faced with the realization that the money we thought was our own, and protected in our checking and savings accounts no longer is. And after Sunday at the G20 meeting, the risks of holding any cash in a bank or financial institution will have to be weighed as heavily and with as much determination of risk as if you were holding a stock or municipal bond, which could decline in an instant should the financial environment bring a crisis even remotely similar to that of 2008.