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The Biggest Bank Robbery In History? More Quantitative Easing = Backdoor Bailouts For The Big Banks Without Having To Go Through Congress

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The U.S. Federal Reserve is getting ready to conduct another gigantic bailout of the big banks, but this time virtually nobody in the mainstream media will use the term “bailout” and the American people are going to get a lot less upset about it.  You see, one lesson that was learned during the last round of bank bailouts was that the American people really, really do not like it when the U.S. Congress votes to give money to the big banks.  So this time, the financial “powers that be” have figured out a way around that.  Instead of going through the massive headache of dealing with the U.S. Congress, the Federal Reserve is simply going to print money and give it directly to the banks.  To be more precise, the Federal Reserve is going to use a procedure known as “quantitative easing” to print money out of thin air in order to purchase large quantities of “troubled assets” (such as mortgage-backed securities) from the biggest U.S. banks at well above market price.  Some are already openly wondering if this next round of quantitative easing is going to be the biggest bank robbery in history.  Most Americans won’t understand these “backdoor bailouts” well enough to get upset about them, but that doesn’t mean that they won’t be just as bad (or even worse) than the last round of bailouts.  In the end, all of the inflation that this new round of quantitative easing is going to cause is going to be a “hidden tax” on all of us.

These new backdoor bailouts are going to work something like this….

1) The big U.S. banks have massive quantities of junk mortgage-backed securities that are worth little to nothing that they desperately want to get rid of.

2) They convince the Federal Reserve (which the big banks are part-owners of) to buy up these “toxic assets” at way above market price.

3) The Federal Reserve creates massive amounts of money out of thin air to buy up all of these troubled assets.  The public is told that all of this “quantitative easing” is necessary to stimulate the U.S. economy.

4) The big banks are re-capitalized and have gotten massive amounts of bad mortgage securities off their hands, the Federal Reserve has found a way to pump hundreds of billions (if not trillions) of dollars into the economy, and most of the American people are none the wiser.

During a recent appearance on MSNBC, Matt Taibbi of Rolling Stone did a great job of explaining how this all works….

But this isn’t the only way that the Federal Reserve forks over massive amounts of cash to the big U.S. banks.  In a previous article, I described how the U.S. Federal Reserve lends huge quantities of nearly interest-free money to big U.S. banks which they turn around and invest in U.S. Treasuries which bring in a return of three percent or so.  In essence, it is a legalized way for the big U.S. banks to make mountains and mountains of free money.

The truth is that the Federal Reserve does whatever it can to ensure that the big U.S. banks stay fat and happy. 

So what about the small banks?  What happens to them?

Well, the vast majority of the small banks are considered “not big enough for bailouts” and they are allowed to die like dogs.

Don’t let anyone ever fool you into thinking that the U.S. banking system has a level playing field.

For weeks, Federal Reserve officials have been coming out and have been dropping hints about how important it is for them to take “action” and implement another round of quantitative easing in order to help stimulate the U.S. economy.

In fact, during his speech on Friday, you could almost hear Ben Bernanke salivating at the thought of printing more money.

But nobody ever really asks who is going to be the first to get their hands on all this money that the Fed is going to pump into the economy.

The answer, of course, is obvious.

It is going to be the big banks – the same banks that are part-owners of the Federal Reserve and that have tremendous influence over Fed policies.

But even though this is all more than a little shady, is it such a bad thing for the rest of us if the Federal Reserve bails out the big banks and brings some much needed stability back to the U.S. financial system?

After all, if “Foreclosure-Gate” could potentially cause a nightmarish financial meltdown, isn’t it better for the Federal Reserve to step in and soak up large amounts of these toxic assets?

Those are legitimate questions.

Certainly the Federal Reserve has the power to step in and smooth over all sorts of short-term problems by papering them with money, but in the end printing more money will just make our long-term problems even worse.

Whenever a new dollar is introduced into the system, every other dollar in existence loses a little bit of value.

When trillions of new dollars get introduced into the system, it has the potential to create an inflationary nightmare. 

Already, a number of top Fed officials are publicly saying that inflation is “too low” and that we need to purposely generate more inflation in order to “stimulate” the U.S. economy.

Yes, that is just as insane as it sounds, but that is what they are actually proposing.

Apparently many top Federal Reserve officials honestly believe that they can pump trillions into the economy, jack up inflation significantly, and little harm will be done.

But even before “QE2” has begun, we are already starting to see all kinds of little bubbles beginning to develop in the financial system.  For example, commodity prices are skyrocketing right now, and that will soon be affecting the price we pay for food at the supermarket.

We are already on the road to serious inflation and the Federal Reserve has not even fired up the money hoses yet.  So what is going to happen after they pump trillions more into the economy?

Printing more money and giving it to the banks is not going to solve our economic problems.  It is just going to make them worse.

But unfortunately, American voters get no say about any of this.  Our national monetary policy is in the hands of an unelected central bank that does pretty much whatever it wants.   

An economic nightmare is coming, and you had better get ready.

  • We are now living in a totally irrational financial world, where the real value of things is not taken into account any more.

    The best example is Treasury bonds. The more there are on the market (and they are literally flooding it), the more their price go… up !

    This goes against the basic law of supply and demand, but laws don’t apply anymore. It is as if the government decided that gravity doesn’t exist anymore, because it is a pain in its a..

    One may ignore basic laws for some time, but sooner or later they come back into effect with full force, and there is hell to pay.

    In short, the US will not be able to entertain 1,3 trillion deficit, year after year, indefinitely.

    Tomorrow, in one month, one year or 5 years, buyers of treasury bonds will come to their senses, as did buyers of dot-coms or buyers of housing before, and that will be the end of the game.

  • Matt Taibi is ******* *******, but he happens to be right about this one. On the other hand, it seems like we have no good alternatives here. These are the horns of the dilemma.

    1. The amount of quantitative easing required to sop up all the bad debt will effectively make the dollar valueless, but it might allow the machinery of everyday life to keep functioning in a somewhat recognizable manner.

    2. Forswearing the above-mentioned economic legerdemain will cause the monetary system to seize, resulting in a deflationary death spiral.

    So it seems like the death sentence has already been handed down. We can no longer avoid our fate; the only choice (possibly) left open to us is the precise method of our execution.

  • VegasBob

    Actually, we could have told the super rich to go pound some sand 3 years ago. Sure, we would have had a depression (we have anyway, just not as bad), but we might have recovered and prospered.

    Instead we chose to ignore every law on the books and shovel trillion$ into the hands of the banksters and Wall Street.

    People like Ben ‘Bernokio’ Bernanke and Lord Blankcheque need to be tried for their crimes. They need to be wearing orange jumpsuits.

    We will have no chance of economic recovery in this country until we act to restore the rule of law.

  • The U.S. Federal Reserve is doing the great task…quantitative easing is good for Americans.

  • Mark McBee

    The stock market is rigged. The government is pumping it up with POMO. DOW numbers are no longer important.

  • William

    What do YOU know about the UNCONSTITUTIONAL
    Federal Reserve system and the major financial institutions on Wall St?? What do they have in common?? Now do you understand why America is doomed?? This has all been “in the works” since the late 1700s.

  • Matt

    We are the Soviet Union economy. We have Central Planning in full force. There is no free market ecomony anymore. Ever wonder why the stock market continues to defy the terrible fundamentals? The rest of the world is now freer than us. Ever wonder why gold keeps going up? Because it cannot be totally controlled by the U.S. Central Planners and the rest of the world is smart enough to keep buying it.

  • NadePaulKuciGravMcKi

    enter runaway inflation

  • Lennie Pike

    When you own Congress and have the exclusive right to fabricate money, any problem (except one) that may arise has the same solution.

    If a problem arises like a JFK printing up Treasury Notes, the people who own the Federal Reserve have to get creative to apply the one and only solution available to them to deal with that type of situation.

    They hold the American People in a much worse situation but are fortunate we are not the same type of people they are. They couldn’t throw JFK in jail for his attempt to obey the law. We have an option they did not have.

    The Fed is illegal because it (they) is unconstitutional. If the total effect they have had on the World could be weighed and fully seen and understood, it would be clear that there have never been any criminals worse than the people behind the Fed.

  • happy face

    It is impossible to maintain the level of outrage this article and all its predecessors scream for.

    The American standard of living will decline to levels more in keeping with the historical mean. And there’s nothing anybody can do about it. This is old news.

    As that occurs we will continue to fidget with the central air thermostats of our outsized houses, polish our foreign cars and conplain about the crowded condition of our closets. Nothing new here.

    Don’t worry about what you can’t control.

  • alice

    QE2 will save wall street, banks, insurance, autos, etc.. from a disaster, but it won’t solve any of the real problems in the economy! Actually it’ll make things a lot worst for most Americans. We will continue to lose jobs, houses, businesses, savings, equity, confidence, etc… We have exchanged places with the old China, if that doesn’t scare you, I don’t know what will! Keep voting the incumbents out of office every 2 years, until all a politician can hope for is one term in office, until they will realize that when WE elect them in office, they become our lobbies, nobody else. That will be the day, the American People will have regained control over this country

  • With all due respect to M Beck, there are always alternatives. In the face of what he describes as the “death sentence” that “has already been handed down”, perhaps it is time for more boldness in our monetary policies.

    Indeed, if our economy is in its death throes… it is time to stop using the same kind of remedies, that only treat symptoms while creating other side effects, and start using more drastic measures…. such as a heart transplant.

    The banksters have become increasingly brash over the past 30 years, resulting in the loss to “the masses” of not only wealth but certain liberties as well. It isn’t just America that is in trouble here, we must acknowledge the devastation caused in other countries by the aggressive greed and corruption of the few.

    It is time to put an end to this worldwide spiral into the abyss of debt. Pushing for monetary reform is our best hope of preventing future calamities caused by the manipulation of unelected and unaccountable profiteers.

  • Lord Koos

    There are easing it to the American public, for sure, and without the lubricant. The Fed certainly doesn’t seem worried about the inflation that will result from printing more billions of dollars. The thing about printing money is, it’s worth the most to the people who get it first (the banks) by the time any of it trickles down to the average person, it’s inflated. They could be printing this money and giving it to people so they could pay their mortages, this would probably to the economy more good. But that would be socialism. When they give money to the banks, it’s capitalism, right? I can hardly wait to see what problems the free market will solve next.

  • Your current article was excellent and true!!! There is an old adage that says, So shall it be written, so shall it be done!!! Most Americans are totally asleep and have no idea what is about to happen to American and the current world we live in!!! Bible prophecy is about to come true right before your eyes in a neighborhood close too you!!!

  • jc

    Commodities are ‘skyrocketing’? Isn’t that a bit of an overstatement? Yes, they’re going up, and in many cases for reasons other than QE2. There’s a lot of bad weather out there causing crop failures.

    Most of this inflation is happening over our heads. It exists merely for certain asset classes (eg. real estate) to keep prices propped up. Credit for consumers and small businesses is drying up, which is deflationary.

    We need to stop thinking the Weimar Republic is our fate. All we need to do is look back at our own country’s history in the 1930s and we can see what’s going to happen to us… only worse.

  • GoneWithTheWind

    It is not possible to fix this mess. We cannot possiby pay off $14 trillion in debt. There aren’t enough rich people to tax to do it. Soon inflation will rear it’s ugly head and interest rates will rise. When interest rates rise the interest on the debt will rise with it until it too reaches an amount we cannot pay. When that happens we will be officially bankrupt. There are two choices: 1)Print up $14 trillion and pay the debt. This would be an economic and financial disaster resulting in hyper-inflation and serious repercussions from countries holding our debt.
    2)Declare a bankruptcy and walk away from our debt and start over. This would be an economic and financial disaster resulting in hyper-inflation and serious repercussions from countries holding our debt.

    Choosing the 1st option requires the president and congress to actually take action which will be reviled by everyone. The second option could be forced on the president and congress (if they do nothing for long enough) thus protecting them from blame and criticism. So that is the most likely choice.

  • mondobeyondo

    Fraud and corruption to the 10th power.

    The simple fact of the matter is, bankers don’t care about the country. They could care less about you, or your foreclosed house and starving children.

    They care only about themselves and their friends.

  • Dear GoneWiththeWind;

    There are many alternatives for curing the debt crisis- not just the two you mention. That’s far too simplistic.

    I’d like to call a states convention. It’s sole purpose would be to eliminate the FED entirely.

    Poof. Gone.

    Then the US begins issuing a new currency. Ours. We negotiate with debt holders to pay off principal and forgive interest with our new money. We don’t charge ourselves interest.

    Do not ever forget this inescapable truth.

    it is the QUANTITY of that money that causes booms and busts, bankruptcy and death. A regulated quantity to allow commerce to take place is all that is needed.

    The FED has been screwing with the QUANTITY of money since 1913.

    It is absolutely RIDICULOUS and beyond REASON to allow a private bank to do what we could do ourselves. It is insanity.

  • CJFYuma

    It is evident – clear as bell – that the Federal Reserve System has failed the American people big time. They are responsible for the ever frequent financial credit bubbles, and busts, so engineered and timed – with insider information – to make their bankster owners on Wall St. rich off the public treasury, while destroying productive lives on Main St. as a consequence of their unbridled greed. We know this…

    O.K. What has the American public (voters) accomplished, since the Vietnam War period (when this Fed currency manipulation all started during the Nixon years)to reform this crooked central banking system? ABSOLUTELY NOTHING!

    Americans either voted for the Democrats or Republicans, both of whom are bankrolled by the same Fed banksters. Yeah, yeah, both of these crooked parties promised to throw the masses a bone here, or a bone there – either some pork, or a little tax cut. The ignorant masses always bit the hook, and voila! The Fed banksters kept solid control of the financial system and economy, to the detriment of most Americans, because they had already bought out the two-party political system a long, long time ago (1913).

    The Fed banksters grew more and more emboldened over time to rip off the people – becoming more and more corrupt! Then, to top it all off, they didn’t have to operate under a gold, silver standard since Nixon(1972)anymore. They were then scot-free to manipulate, and eventually destroy our currency, in pursuit of their shameless bankster profits.

    Yes, we know the QE money will be transferred to the same greedy banksters that own the Fed central bank; we’ll see none of it! They’ll do absolutely nothing economically productive with the money they receive. These “white shoe” boys are far from being altruistic with their money. They’d rather play the stock market casino with our money. Yet, we’ll all be required to pay for this greatest rip-off with higher inflation, higher taxes, and interest rates!

    No populist, political action means no restructuring of the central banking system – period! I hate to say this, but the Fed will crash the nation’s economy before anything is done politically about it. The American sheeple don’t have the political will to fight anymore. They can’t stand united behind the common good,in their own best interest, which in this case is the repeal of the Federal Reserve Act, and the creation of a new national bank acting in the interest of the economic well-being of all the people – not just a few banksters on Wall St.

    Don’t expect change anytime soon. The economy will collapse first. These crooked, stupid goons have boxed themselves into a corner with their deviant manipulation of our national finances. They can’t untangle our economy now from experiencing either a deflationary depression, or a hyperinflationary depression. Prepare people for one or the other economic disaster, or both! There’s no “middle ground”, “soft-landing”, “jobless recovery”, “blah, blah, blah”, on the table anymore. The Fed banksters know this – you should too.

    Here’s a final thought folks: Do you like the feeling of being robbed, then having to pay the thief your loss over and over again, as you become poorer and poorer? That’s how it works today with the Fed boyz!

    Are you “fed up” yet?

  • A simple truth:
    When two people play a game where one follows the rules and one does not, the winner will usually be the one that cheats.
    In a system where the government and the banking system cheats while the average citizen obeys the rules, guess which one will lose.
    No amount of elections, no efforts of the people, will change this. To think otherwise is the penultimate folly.
    There is only one way to ultimately beat this system; only one hope to be the winner….

  • ClassWarFare

    Back in the early 1980’s, the FED raised the interest rates to @ 21%. Remember it did not work. At the same time and with these high interest rates, the FDIC did not have enough money to cover all the bad loans and thus your savings/checking accounts, so they did loan work outs to prolong the pain and suffering. They called it a savings and loan crisis, however, the money came from the banks to make these loans. So let’s not fool ourselves. Eventually everything collapsed along with costs and prices. The US entered a period of prosperity, only because the baby boomers had been sitting on the side lines waiting for things to become affordable. And boy did they consume. However, the boomers are now entering retirement at record rates drawing on social security, pensions and IRS/401K. The banks, government and investment houses are now having to pay the fiddler, and they don’t like it because they spent, squandered and pillaged the accounts with massive debts, bonuses and paychecks. They are manipulating the stock market to make up for lost ground, but it won’t work, because the next generations are unemployed, under-employed, under water on their mortgages and/or supporting other family members. Basic essentials of food, utilities, gas, insurance and health care eat up what might be left of any income for the majority of the middle class along with paying more taxes for social programs for those that won’t work or pop a baby as a meal ticket along with free housing. And each successive generation is in worst shape and less educated despite record spending. So the politicians, FED and banks can attempt to hoodwink the public, but the majority of the public is going broke and someone will have to pay the bills. I just know that it will not be the middle or lower class Americans, because they cannot give what they don’t have. It is the perfect storm for a collapse, which is why those that have wealth are so nervous. They will have to pay and create jobs, because they are currently way out numbered. See what greed can get you. Time to pay up.

  • lostinmissouri

    William Black, bank regulator, who has been sounding the alarm for years, once said:

    “The best way to rob a bank, is to own one.”

    The best way to rob a Country, is for the banksters to own CONgress.

  • Amazing

    Amazing. The Fed gets to benefit its own constituency exclusively – big banks, bank CEO’s, and bank executives and shareholders – by printing money that directly increases the equity of banks at the expense of taxpayers and anyone who holds or gets paid in dollars.

    In effect, the Fed has been given (or ceded by Congressional inaction and Presidential inaction) a trillion+ dollar budget which it can spend any time it wants to benefit banks rather than the American taxpayer.

    The US budget is, say, $3.5 trillion per year (don’t quote me). On top of that, the Fed can just unilaterally spend another trillion dollars or two, whenever it wants, on banks, by printing money.

    This situation obviously violates the principle of separation of fiscal and monetary policy on which the Fed was founded. This situation lets the Fed decide how to *spend* money, not just how much money should *exist*. Like any other political institution, given the power to spend money, the Fed is going to spend it to benefit its constituency, which is the banks, not the American people.

    Very worrisome is the fact that the Fed has no real restrictions on the amount of money it can spend in this way. The federal annual budget is $3.5 trillion or so, yet the Fed can massively bust this budget by spending another trillion or two any time it wants, on “quantitative easing” i.e. on a gift to large banks.

    This is incredibly irresponsible. The problem in the economy is not liquidity. The economy is awash in liquidity. The problem is lack of demand and lack of jobs. A trillion dollars could be much better spent on *payroll tax reduction*, which would immediately lower the cost of American labor thus incentivizing companies to hire more employees, while also putting more money in the pockets of American consumers thus easing the financial burdens of the middle class and working Americans. A trillion dollars is what – $3000 for every man, woman and child? $5000 for every American with a paid job (sheer guess)? Imagine what a $5000 reduction in taxes this year for every American with a job, would do for the economy. Instead, the Fed members gets to spend it on their banking buddies. Obama is just letting it happen.

  • jimmy

    A couple of points;

    Ignorant masses, or brainwashed? either way, god punishes it.

    Printing money out of thin air is like a man with his arms chopped off trying to play basketball. You have to accept that the arms are gone, and the bleeding needs to be plugged.

    Please take care of yourselves.

  • Salty Kisses

    Oh my…So who remembers the missing 2.3 trillion?

    Sure it was back on 9/10/01 and Rumsfeld promised to work on it starting on 9/11/01. Convenient timing, eh?

    We’ve had 9+ years since to lose that much via the military spending which by all accounts since 9/11/01 has been poorly documented. I am sure that we have lost at least that much (no I dont have supporting documentation, just a feeling based upon news reports since 9/11/01 reporting fraudulent usage of funds by Halliburton and many others like Blackwater, et al.)

    Anyway, why couldnt the money be paid to all mortgage holders covering up to the first $1000/month on their primary residential home mortgage. If the mortgage is smaller then it is covered in full, if it is larger, well do Americans really need that much house? It would cover all Americans for a duration of 12 months with 1 automatic 12 month renewal with the option for Congress to terminate the automatic renewals after the first 12 months with at least 3 months notice. That way it helps out home owners that need the help, other home owners to save money, and allows banks to not have their home loans go into default and thus maintain a steady money flow for a year as they get their finances in order and fixed. This way the banks would be able to meet their financial obligations just as much as home owners. Would it be expensive, yes, but the boon to this solution is that it bails out the average home owner plus the banks are given time to fix their problems. This money that the fed is printing could still be printed and affect the economy in the same manner if not better because it goes through more hands helping out more by helping the average home owner versus just helping out big banks. This solution helps smaller and medium banks too.

    Per inflation, as long as the number of people in our nation continues to grow and the amount of income as it grows does not adversely affect the income of the new workers being added to the work force plus the unemployed workers, then inflationary pressures are kept at bay.

    The next solution that helps to alleviate the impact of the jobless problem and still keeps the economy going is to provide each and every US citizen with a weekly amount that covers the basic necessities: food, water, sanitation, public transportation to/from work/grocery store. Notice that I am not including shelter. Shelter is something that citizens should work for and I already addresses above for those that own plus live in said primary residence.

  • lostinmissouri

    It used to be said that the “Dollar is as good as gold”

    That must have been back in the days, when the “Dollar was as good as gold”

    How did Americans ever let the government turn our money over to the f*cking FedReserve?

    Surely, by now, we have learned something.

  • Greg Buls

    The bigger reason this is happening is that no one has the capital sitting around to pay for Obama’s spending. There’s not enough money in the world, at anything close to current interest rates.

  • RobertoB

    In the 1990s, Russia was cleaned out of hundreds of billions of dollars, state businesses were stolen and the treasuries looted even to the point of Aeroflot’s bank accounts being drained; Russia responded finally by imprisoning the so-called oligarchs that hadn’t escaped to Britain or some other country (which is probably why the relentless anti-Russia propaganda campaign has been stepped up seriously over the last decade).
    Now the States has been cleaned out of trillions of dollars in the first round approved by Congress, and the answer seems to be to follow up with trillions more, all of which the citizen-slaves and their grandchildren will be repaying forever.
    Russia has set an example; why don’t we follow it? No business is too big to fail – we should be purging the corrupt to save the healthy, not vice versa.

  • Philip Martins

    The U.S. Federal Reserve is getting ready to conduct another gigantic bailout of the big banks. Yes, that’s indeed outrageous! But unfortunately that’s not all!

    Big Banks Gobble Up Tax Liens Hoping to Put More Homeowners Through Foreclosure:

    Homeowners who paid off their mortgage can still loose their home to foreclosure if they default on property taxes. This hurts a lot.

    As if the current foreclosure mess weren’t enough, some banks have been creating front entities in which they are buying up tax liens en masse, then harass homeowners with legal fees while hoping to put them through a foreclosure and make a killing on the property.

  • Yes, it’s indeed the biggest bank robbery in history! Here is another example which shows how this banksters work.

    In August, we warned you that some banks were misleading homeowners by telling them to stop making their full mortgage payments after submitting a HAMP (or a HARP) application. Now a federal judge granted a La Jolla homeowner by the name of Kaveh Khast his motion for a temporary restraining order blocking Washington Mutual and JPMorganChase from foreclosing on his house on the grounds that the banks misled him into defaulting on his mortgage.

  • Barry M

    These things dont happen in isolation. The underlying cause is moral. At the end of WW2 the nations were were in horrendous debt, but the euphoria of victory and the lessons of WW1; the punishment of Germany and its horrendous consequences with the eventual rise of the Nazis had taught the victors a lesson. Instead of punishment and faced with the threat of communist E Europe they helped rebuild Germany. The euphoria of victory, the stimulous of reconstruction and the lack of the then yet to be invented pill saw a rapid increase in the birth rate. Governments could safely take on debt secure in the knowledge that a growing population and mild inflation would whittle that down in coming years. Then came the baby boomers, the pill and the sexual revolution. The aftermath is declining ageing populations and a birth rate well below replacement rate. However governments are still printing money while the ability to soak up the debt with future growth disappears. The problem is essentially moral and eventually moral failure has practical consequences. We are now living out those consequences.
    I sincerely pity the coming youth facing something that is essentialy the outcome of the previous self indulgent behaviour of earlier generations.

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