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

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….

http://www.youtube.com/watch?v=uwhMVB0XzPU&feature=player_embedded

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.

The Unbelievably Rampant Corruption On Wall Street

In order for a financial system to be able to function properly, it is absolutely essential that the general population has faith in it.  After all, who is going to want to invest in the stock market or entrust their money to big financial institutions if there is not at least the perception of honesty and fairness in the financial marketplace?  For decades, the American people did have faith in Wall Street.  But now that faith is being shattered by a string of recent revelations.  It seems as though the rampant corruption on Wall Street is seeping up almost everywhere now.  In fact, some of the things that have come out recently have been absolutely jaw-dropping.  The truth is that the corruption on Wall Street is much deeper and much more systemic than most of us ever dared to imagine.  As the general public digests these recent scandals, it is going to result in a tremendous loss of faith in the U.S. financial system.  Once faith in a financial system is lost, it can take years or even decades to get back.  So how is the U.S. financial system supposed to work properly when large numbers of people simply do not believe in it anymore?

Just consider some of the recent revelations of Wall Street corruption that have come out recently….

*Bloomberg is reporting that a massive network of big banks and financial institutions have been involved in blatant bid-rigging fraud that cost taxpayers across the U.S. billions of dollars.  The U.S. Justice Department is charging that financial advisers to municipalities colluded with Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Wachovia and 11 other banks in a conspiracy to rig bids on municipal financial instruments.  Apparently what was going on was that it was decided in advance who would win the auctions of guaranteed investment contracts, which public entities purchase with the proceeds from municipal bond sales, and then other intentionally losing bids were submitted in order to make the process look competitive.  The U.S. Justice Department claims that this fraud has been industry-wide and has been going on for years.  In fact, at least four financial professionals have already pleaded guilty in this case.

*An industry insider has come forward with “smoking gun” evidence that some of the biggest banks have been openly and blatantly manipulating the price of gold and silver.  For a time it looked like the federal government was just going to ignore all of this fraud, but after substantial public uproar some action is indeed being taken.  In fact, it has been reported that federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals markets.

*Goldman Sachs is getting most of the press about fraud in the mortgage-backed securities market these days.  Of course Goldman is strenuously denying that it “bet against its clients” when it changed its position in the housing market in 2007.  But we all know the truth at this point.  The truth is that Goldman Sachs clearly bet against its clients and was involved in a whole lot of things that were even worse than that.  Many did not think the U.S. government would dare go after Goldman, but that is what we are starting to see.  U.S. federal prosecutors have opened a criminal investigation into whether Goldman Sachs or its employees committed securities fraud in connection with its trading of mortgage-backed securities, and it will be very interesting to see if anything comes of that investigation.

*But not everyone is being held accountable for their actions.  The guy who helped bring down AIG is going to get off scott-free and is going to be able to keep the millions in profits that he made in the process.

*Entire U.S. cities have been victims of this rampant Wall Street fraud.  In fact, it is now being alleged that the biggest banks on Wall Street are ripping off some of the largest American cities with the same kind of predatory deals that brought down the financial system in Greece.

*The really sad thing is that fraud is very, very lucrative.  Executives at many of the big banks that received large amounts of money during the Wall Street bailouts are being lavished with record bonuses as millions of other average Americans continue to suffer economically.  Even the CEOs of bailed-out regional banks are getting big raises.  It must be really nice to be them.

So does all of this make you more likely or less likely to invest in the stock market?

Do you think that the American people can see all of this and still believe that the financial system is “fair” and “honest”?

The truth is that Wall Street is full of rip-off artists and fraudsters who don’t even try to hide their greed anymore.

It is as if a thousand junior Gordon Gekkos have been unleashed and they are all trying to be masters of the universe at any cost.

But what they are doing is ripping the heart out of the U.S. financial system.

If people lose faith in the system the system will ultimately fail.

A financial system that allows open fraud and manipulation is operating on borrowed time.

So will the rampant corruption on Wall Street now be cleaned up?

Only time will tell.

But one thing is for certain.

The American people will be watching.

SILVER MART

 

The Economic Collapse