Top Banking Analyst: Subsidies to Giant Banks Exceed $780 Billion Dollars Per YEAR

Source: Washington' Blogs

Trillions In Subsidies to the Giant Banks Are Continuing to This Day

Chris Whalen is one of America’s top banking analysts.
Well-known economist Nouriel Roubini notes:

Chris Whalen is one of the leading independent analysts of the US banking and financial system.

Whalen notes today that the big American banks get a subsidy in excess of $780 billion dollars per year.
Specifically, Whalen estimates the following types of subsidies to the giant banks:

• $360 billion in Federal Reserve subsidies, by creating an artificial “spread” in interest rates

• $120 billion in federal deposit insurance (through the FDIC, backed by the Treasury)

• At least $100 billion in government-guaranteed loans, especially mortgages

• At least $100 billion in monopolistic advantages in the secondary market for home mortgages. Specifically, the government subsidies the big banks to steal away fees earned from smaller banks, gain on sale into the TBA market and servicing. Whalen quotes a veteran banker explaining:

The smaller players lived on the bleeding edge of the mortgage market, but they were also far more efficient lenders than the large banks. Now, care of the Fed, we have a highly inefficient oligopoly in the US mortgage market that is built around the largest banks.

• More than $100 billion in fees in the over-the-counter (OTC) derivative market. Whalen explains

The lack of capital required in these transactions and other special dispensations from the Fed provide the zombie banks with unlimited leverage and almost no public scrutiny. The fact that OTC contracts are exempt from the automatic stay in bankruptcy is a huge subsidy. The bilateral market structure is another.

That totals $780 billion per year.
But Whalen notes that there are many other subsidies as well:

The above points are only a partial list of the subsidies and other flows that allow the members of the banking industry to pretend to be profitable, risk-taking organizations in a free market economy.

The bailouts of the big banks amount to trillions of dollars, are never-ending … and continue to this day. (Indeed, the government is arguably paying trillions of dollars more in unnecessary interest payments just to have the banks “create” money, instead of creating it itself … as the Founding Fathers may have envisioned.)
Whalen notes that the big banks are not really profitable:

[These are] structural subsidies blessed by Congress and the Fed that make large banks look more profitable than they truly are. In fact, the TBTF banks are not really profitable at all.
***
The reality, sad to say, is that banks in 21st Century America are government sponsored enterprises ….

Indeed, they are government sponsored enterprises where all of the profits are privatized, and all of the losses socialized.
And the big banks are not helping – but are rather destroying – the economy. Indeed, failing to break up the big banks– and the malignant, symbiotic relationship between D.C. politicians and the banking giants – is destroying our country.

Wave of euroscepticism reaches Germany

© Flickr.com/Luigi Rosa/cc-by-sa 3.0

German opponents to the common European currency have set up a new political party named Alternative for Germany. They urge disbanding the Eurozone, going back to national currencies and stopping financing other countries’ economies. Sociologists say that 26% of the electorate are prepared to give their votes to the new party. Germany was one of the first counties to support the idea of introducing the euro but today it is swept with euroscepticism.

The financial crisis in the EU is the reason for the growing ranks of eurosceptics. More and more German citizens have come to the conclusion that their country has to render assistance to its Eurozone partners to the detriment of its own people and spends enormous sums of money supporting an obviously unsustainable project. Many Germans share the opinion of the European MP, the leader of the UK Independence Party Nigel Farage who has rather convincingly predicted the collapse of the Eurozone.

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In this situation leading German economists, lawyers and businessmen have announced the establishment of the party Alternative for Germany. The main point of its programme is Germany’s withdrawal from the Eurozone. The constituent congress of the new party is to be held in Frankfurt in the near future. Interestingly, eurosceptics will meet within two hours’ drive from the city of Witzenhausen which has already started to use its local currency, the kirschblute, as an alternative to the euro. The local currency is used for buying locally manufactured products.

Analysts believe that the Alternative for Germany party is unlikely to win seats in Parliament because there is not enough time left till the next elections due in September 2013. At the same time, the new political force could pull aside quite a large protest electorate and impede the approval of package assistance to Germany’s partners in the Eurozone. The head of the Centre for German Studies of the Institute of Europe at the Russian Academy of Sciences Vladislav Belov is speaking:

“Germany is likely to follow Italy’s example where a humorist won protest votes by criticising the Eurozone among other things. Moreover, a book was published in Germany a year ago that offered an imaginary context for the establishment of a party in honour of the German mark. In the book the party wins enough votes, gets into parliament, deposes the Chancellor, etc. I believe that in reality the Alternative for Germany party would not win this high percentage of votes. However, as a protest image, including the protest against the euro, this party is likely to win a considerable number of votes.”

A number of social surveys have shown that about two-thirds of German citizens believe that they would be much better off with the German mark. Meanwhile, until now there has been no party in Germany that would aim at rejecting the euro, unlike in other Eurozone lender countries.

On the whole, the growing influence of nationalist and populist parties in Europe testifies to a management crisis in the entire EU, rather than in separate countries. In particular, British Prime Minister David Cameron promised to hold a referendum on the UK’s participation in the EU in 2014. Experts believe that this means that in the near future the national interests of certain members of the EU would not necessarily coincide with the aims of the EU’s social and economic policy.

Biderman’s Daily Edge: US Economy Not Growing While Stocks Soar

Dow at Record Highs, but U.S. Economy Continues to Worsen
By George Leong
The Dow Jones Industrial Average is firing on all cylinders, trading at a record high. The S&P 500 is also close to its all-time record. Technology and small-cap stocks are blazing along. The amount of new stock market wealth created in the first week of March and in 2013 has been great. Add in the better-than-expected jobs numbers and a decline in the unemployment rate to 7.7%, and you would think that the U.S. economy is back, loaded and ready to go. But we may be closer to a financial crisis than most think.
Here’s the problem: the creation of stock market wealth is heavily weighted with the institutional money and the top one to five percent of the wealthiest Americans. (I use the wider range of the top earners, since you have to be doing fairly well to be in this group.)
There’s an old saying—“Money makes money.” But let me put it another way: making money on $1.0 million is a lot easier than making money on $1,000. Earn two percent on $1.0 million, and you’d have an extra $20,000. Make two percent on $1,000, and you only have $20.00, just enough for a dinner for two at McDonald’s Corporation (NYSE/MCD). All I’m saying is don’t be fooled by the new headlines talking about how well America is doing, as a financial crisis is still possible.
http://www.investmentcontrarians.com/recession/dow-at-record-highs-but-u-s-economy-continues-to-worsen/1668/

Obama Won’t ‘Chase a Balanced Budget Just for the Sake of Balance’

President Barack Obama said on Tuesday that he would not “chase a balanced budget just for the sake of balance” over the next 10 years but would rather work to expand the nation’s economy.

“My goal is not to chase a balanced budget just for the sake of balance,” Obama told ABC News in an interview. “My goal is how do we grow the economy, put people back to work — and if we do that, we are going to be bringing in more revenue.”

The president attacked Wisconsin GOP Rep. Paul Ryan’s fiscal proposal introduced earlier on Tuesday. The plan would balance the budget in a decade — but Obama said it would “slash deeply” into entitlement programs.

“We’re not gonna balance the budget in 10 years, because if you look at what Paul Ryan does to balance the budget, it means that you have to voucher-ize Medicare, you have to slash deeply into programs like Medicaid, you’ve essentially got to — either tax — middle-class families a lot higher than you currently are, or you can’t lower rates the way he’s promised,” Obama told ABC.

“So it’s really, you know, it’s a reprise of the same legislation that he’s put before,” the president added.

“If we controlled spending and we have a smart entitlement package, then potentially what you have is balance — but it is not balance to, on the backs of the poor, the elderly, students who need student loans, families that have disabled kids,” Obama said. “That is not the right way to balance.”

In response to Obama’s remarks, Ryan said if the president and Senate Democrats do not balance the budget, the United States will face similar financial woes as in Europe.

“He’s never balancing the budget. That’s the point they’re making,” Ryan told Fox’s Sean Hannity. “Never, meaning, we have a debt crisis — and what happens is if we never balance the budget, if we keep on adding deficit upon deficit, we have a debt crisis like Europe has.

“That means, seniors lose their healthcare benefits,” Ryan added. “That means people in the safety net, get the safety net cut and they go on the streets. That means you have a recession.

“These things we prevent from happening by balancing the budget. Balancing the budget is but a means to an end: It’s growing the economy,” Ryan told Hannity. “It’s creating opportunity. It’s getting government to live within its means. It’s doing what all families and businesses do, which is making sure you don’t live beyond your means. Make sure you give your kids a debt-free nation.

“That’s what we’re proposing — and so when you see the president and the Senate say they never, ever want to balance the budget, I just don’t think that’s leadership.”





© 2013 Newsmax. All rights reserved.

Could Germany spark another war? I fear it's all too possible

The world is at  a crossroads in history. Vast, untameable economic forces are remaking the landscape of international affairs.

In Britain, a dithering Prime Minister is buffeted by crisis after crisis. Abroad, from the heart of Europe to the fringes of Asia, economic powers are rising. And there is talk of a new German empire, bigger and more powerful than ever.

Ever more citizens in the Mediterranean countries of the eurozone in particular argue that for the third time in less than 100 years Germany is trying to take control of Europe

It sounds like something ripped from today’s newspapers. But this was the state of the planet in 1913, 100 years ago.

At first glance, the Britain of 1913 appears impossibly different from the Britain of today. Our imperial dominion stretched across the globe, while our bankers and manufacturers were widely regarded as the best in the world.

And in a society rigidly divided by class, the Tories were in the wilderness, Labour was merely a minority third party and the Liberals — led by Herbert Asquith — were entering their eighth successive year of government.

Chilling

New Statesman described Merkel as 'the most dangerous German leader since Hitler'

Beneath the surface, however, the problems that confronted our forebears back then were uncannily similar to those facing us today, particularly in the changing balance of power in Europe.

This week, the faultlines that run ever deeper across the Continent were the subject of an extraordinary speech by a long-time president of the European Council, who insisted there are indeed chilling parallels between 2013 and the eve of World War I a century ago.

Jean Claude Juncker said that resentment against Germany is running high because its imposition of austerity — in a bid to shore up the euro — has exposed long-running tensions between nations.

‘The demons haven’t been banished; they are merely sleeping,’ he warned, adding that ‘anyone who believes the eternal issue of war and peace in Europe has been permanently laid to rest could be making a monumental error’.

Perhaps a decade ago he would have been dismissed as a scaremonger. But today, the political mood is shifting across Europe more dramatically than for many years. As the legendary American investor George Soros said last year, if the German Chancellor Angela Merkel continued in her economic demands on the rest of Europe, ‘the result will be a Europe in which Germany is seen as an imperial power that will not be loved or admired by the rest, but hated and resisted, because it will be perceived as an oppressive power.’

The Left-leaning magazine the New Statesman simply labelled Merkel ‘the most dangerous German leader since Hitler’. The language may seem inflammatory, but ever more citizens in the Mediterranean countries of the eurozone in particular argue that for the third time in less than 100 years Germany is trying to take control of Europe.

The close relationship Merkel enjoyed with the Right-wing Nicolas Sarkozy of France has been banished by the election of socialist Francois Hollande

Of course, the Germans would say they’re simply trying to maintain economic stability in nations which for years spent far beyond their means.
But if they continue to impose brutal economic strictures on Europe’s peoples, the consequences in terms of social alienation, international disputes and the rise of political extremism could be dramatic.
Already we have seen bloody protests against the German economic yoke in Athens, Rome and Madrid.
It is a situation tailor-made for ultra-nationalist, Right-wing parties such as Golden Dawn in Greece, which is acting with increasing violence and impunity against foreigners with every passing week.
At the heart of the crisis is the great euro project, an economic regime created in hubris — but now threatened with ruinous collapse.

Divide

In the past year, the close relationship Merkel enjoyed with the Right-wing Nicolas Sarkozy of France has been banished by the socialist Francois Hollande, who came to office on the promise of massive new state spending to reinvigorate the economy. Thus, a deep ideological divide now exists between the two nations.
The agonies of Greece, where effigies of Angela Merkel dressed as a Nazi were burned, have been well documented, but Portugal has been cruelly hit, too. After a 78 billion-euro bailout in 2011, its people have seen welfare spending cut and taxes raised. Even several public holidays have been abolished.
In Spain, meanwhile, cities have seen rioting as unemployment has soared to 25 per cent and anti-German sentiment has grown.

In the recent general election in Italy, Prime Minister Mario Monti - who sought to impose Brussels' austerity measures - polled just 9 per cent of the vote

Demonstrators dressed as Nazis and waving a swastika flag as they ride in an open-top car in Syntagma Square in Athens as they protest against Merkel's visit in 2012

Last year, hundreds gathered to protest in central Madrid after the German Chancellor had left the capital, waving banners and saying ‘Merkel go home’ and ‘No to a German Europe’. One Spanish economist who took part in the protest said: ‘The German financial mafia is taking Spaniards hostage . . . Merkel belongs to a political class that serves German oligarchies.’
The same sense of outrage is driving a massive protest movement in Italy, where the Right-wing newspaper Il Giornale published a front page picture of Merkel under the headline ‘Fourth Reich’.
In the recent general election, the technocrat Prime Minister Mario Monti — who sought to impose Brussels’ austerity measures — polled just  9 per cent of the vote.

 

   

Instead, the headlines were seized by the anti-establishment party led by stand-up comedian Beppe Grillo, who could yet prove to be kingmaker in a coalition government.
Thanks to this seemingly endless political crisis, Germany is increasingly being seen not as Europe’s economic saviour but its oppressor.

Of course, back in 1913, Kaiser Wilhelm II’s German Empire had more nakedly militaristic ambitions. Frustrated that his newly unified country had missed out on colonising Africa and Asia, he had embarked on a vastly expensive arms race with Britain, symbolised by the production of vast naval dreadnoughts.

Even at the time, many people warned that war was coming. As early as 1906, the Daily Mail — then just ten years old — had serialised a bestselling book by William Le Queux, who predicted that the inevitable war with Germany might lead to a Teutonic invasion of southern England.

Far-sighted observers of the global situation could see that behind all the domestic arguments about female suffrage, the popularity of gramophones and bicycles and all the celebrity gossip about high-society hostesses, the world was entering a new and extremely dangerous phase.

On the edge of Europe, the Ottoman Empire was breaking up, destabilising the alliances that had hitherto kept the Continent at peace.

In the First Balkan War of 1912, Bulgaria, Serbia, Greece and Montenegro had defeated the Ottomans and were busily carving up the Balkans for themselves.

In June 1913, the victors fell out over the spoils, with the Bulgarians fighting the rest for the disputed territory of Macedonia. And even now, a century on, that conflict is a reminder of the potential of ethnic passions and national resentments to unleash devastating violence on the peoples of Europe.

Superficially, of course, our own situation looks very different. Germany’s Chancellor, Angela Merkel, has even declared that the very existence of the euro is a guarantee the Continent will never again descend into bloodshed.  Only by such means, she said, could we be sure to enjoy ‘another half century of peace in Europe’.

Yet the truth is that lashing together the economies of nations as disparate as Portugal, Greece, France, Italy and Germany has served only to inflame old enmities.

Bloodiest

And if keeping the euro project alive means condemning the more impoverished nations to years of penury, with the Mediterranean economies in ruins, neo-Nazis marching on the streets of Athens and resentment building against Berlin and Brussels, it would take a brave man to predict that violence will never return to the cities of Europe.

So could war again haunt the cities of the Continent?

Alas, it is never easy to draw simple lessons from history. In 1913, few people in Britain realised that the bloodiest war in human history was just around the corner. Like most of us, they had known nothing but peace and prosperity, and assumed the golden age would continue for ever.

Germany's imposition of austerity - in a bid to shore up the euro - has exposed long-running tensions between nations, so could we actually face war in Europe?

Abroad, too, few could imagine the storm that was coming. Without realising it, Europe had been dancing on the edge of a precipice.

We, too, have been living the high life, enjoying comforts our predecessors could never have imagined. And if the story of 1913 does offer a lesson, it is that, even in these financially straitened times, we should count our blessings.

We often imagine that things can only get better. But as the events of a century ago so tragically and devastatingly proved, they can, in fact, get an awful lot worse.

Financial Doom? InTrade Shuts Down Suddenly Do To ‘Circumstances Recently Discovered’

Before It’s News – by Live Free or Die
Intrade, the worlds largest prediction market, has shut down suddenly, leaving customers with a worrisome and cryptic message upon their website. What ‘circumstances’ has Intrade recently discovered that has IMMEDIATELY caused them to cease all trading activity? They’ve announced that they have ‘closed and settled all open contracts at fair market value as of March 10th, 2013′ to ‘mitigate any further risks to members accounts’. What in the world does the Board of Directors of InTrade know that you and I don’t? Did they have inside info on the next pope? Were mass bets placed on a date for WW3 kick-off or an attack by North Korea? First from NPR and then from the Intrade website with a video discussion from Bloomberg below. 
The online betting market Intrade has shut down. Intrade allowed customers to wager on the outcome of events such as presidential elections. The company says all betting is on hold until it can investigate possible financial irregularities.
The selection of the next pope had been a hot topic on the site Intrade. That’s where anyone can place real money bets on future events like the outcome of a presidential race or who will win an Oscar. But that all changed yesterday when Intrade abruptly halted trading, pending an unspecified investigation. NPR’s Dan Bobkoff has that story.
The message below can now be found upon the InTrade website.
To Our Customers:
With sincere regret we must inform you that due to circumstances recently discovered we must immediately cease trading activity on www.intrade.com.
These circumstances require immediate further investigation, and may include financial irregularities which in accordance with Irish law oblige the directors to take the following actions:

• Cease exchange trading on the website immediately.
• Settle all open positions and calculate the settled account value of all Member accounts immediately.
• Cease all banking transactions for all existing Company accounts immediately.

During the upcoming weeks, we will investigate these circumstances further and determine the necessary course of action.
To mitigate any further risk to members’ accounts, we have closed and settled all open contracts at fair market value as of the close of business on March 10, 2013, in accordance with the Terms and Conditions of our customers’ use of the website. You may view your account details and settled account balances by logging into the website.
At this time and until further notice, it is not possible to make any payments to members in accordance with their settled account balance until the investigations have concluded.
The Company will continue the maintenance and technology operations of the exchange system so that all information is preserved properly.
We are not able to provide telephone support or live help services at this time, please contact the company by email at: accountservices@intrade.com
We appreciate your custom and support over the years. We are committed to reporting faithfully the status of things as they are clarified and hope you will bear with us as we do all we can to resume operations as promptly as possible.
Sincerely,
The Board of Directors of Intrade the Prediction Market Limited
Bloomberg discusses the InTrade shut down in the video below.

WARREN: ‘How Many Billions Have To Be Laundered For Drug Lords Before We Consider Shutting Down A Bank?’

Elizabeth Warren is still waiting for an answer.
In Senate testimony Thursday, Liz Warren asks how much drug-laundered money it takes before banking regulators consider shutting down a bank.  Hilarity ensues.  And no one ever answers the question.
Witnesses were:

1. David Cohen, Sec. for Terrorism and Financial Intelligence, U.S. Treasury
2. Thomas Curry, Comptroller, Office of the Comptroller of the Currency
3. Jerome H. Powell, Governor, Federal Reserve System

—
Transcript
WARREN: As Senator Reed just pointed out, the United States government takes money laundering very seriously for a very good reason.
Now in December, HSBC admitted to money laundering. To laundering $881 million that we know of for Mexican and Colombian drug cartels. And also admitted to violating our sanctions for Iran, Libya, Cuba, Burma, the Sudan. And they didn’t do it just one time. It wasn’t like a mistake. They did it over and over and over again across a period of years. And they were caught doing it. Warned not to do it. And kept right on doing it. And evidently making profits doing it.
Now HSBC paid a fine, but no one individual went to trial. No individual was banned from banking. And there was no hearing to consider shutting down HSBC’s activities here in the United States. So what I’d like is, you’re the experts on money laundering. I’d like your opinion. What does it take? How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this? Mr. Cohen, can we start with you?
COHEN: Certainly Senator. No question the activity that was the subject of the enforcement action against HSBC was egregious.
WARREN: But let me just move you along here on the point Mr. Cohen. My question is, given that this is what you did, what does it take to get you to move towards even a hearing? Even considering shutting down banking operations for money laundering?
COHEN: Senator, we at the Treasury Department under OFAC and (ph) authority, we don’t have the authority to shut down a financial institution.
WARREN: I understand that. I’m asking, in your opinion, you are the ones who are supposed to be the experts on money laundering. You work with everyone else, including the Department of Justice. In your opinion, how many billions of dollars do you have to launder for drug lords, before somebody says, we’re shutting you down?
WARREN: And I’m asking, what does it take, even to say, here’s where the line is. We’re going to draw a line here, and if you cross that line, you’re at risk for having your bank closed?
COHEN: But I’m not going to get into some hypothetical line drawing exercise.
WARREN: Well it’s somewhere beyond $881 million of drug money.
COHEN: Well Senator the actions, and I’m sure the regulators can address this issue. The actions that we took in the HSBC case, we thought were appropriate in that instance.
WARREN: So what you’re saying to me is you are responsible for these banks, and again, I read your testimony and you talk about the importance of vigorous enforcement here. But you’re telling me you have no view when it’s appropriate to consider even a hearing to raise the question of whether or not these banks should have to close their operations when they engage in money laundering for drug cartels?
WARREN: I understand that I’m over my time.  And I’ll just say here, if you’re caught with an ounce of cocaine, the chances are good you’re going to go to jail.  If it happens repeatedly you may go to jail for the rest of your life.  But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night.  Every single individual associated with this.  I just, I think that’s fundamentally wrong.
“How would you explain this to your neighbor?” Sen. Jeff Merkley (D-Ore.) asked, noting that the fine slapped on HSBC amounted to about one percent of its profits over 10 years. “Does that really send a message?”