Basel Commentary from Awhile Back

Basel is the seedbed of central bank financial schemes and scams. I wrote these awhile back on a blog that I will be discontinuing. The issues about central banking and attacks on main street continue unchanged:

Basel Part One:

Patrick Henry said, "Give me liberty or give me death". The liberty he was talking about was freedom from the Bank of England and control over the money supply. Well, Basel 3 is about to take away our freedoms again. I have argued that the central banks allowed the ponzi housing scam, the dot com scam and orchestrated bank bailouts. But Basel 3 wants to establish taxation without representation. In an article by John Carney at CNBC (one wonders why CNBC who shills for banks even allowed the article), the Basel 3 plan is exposed. This plan is to require banks to purchase Fannie and Freddie mortgage backed securities and get so deep into Fannie and Freddie, that no reform of the GSE's will be possible.

That means that if you took away the government guarantee, Fannie and Freddie would no longer be tier 2 required capital for these banks and another banking crisis would be baked in. As Carney says about this revision of the Bear Stearns Rule: 

This creates a huge subsidy for Fannie and Freddie. Banks will load up on GSE obligations, especially in an era where central bank reserves and Treasury bond yields are being depressed by policy-makers seeking to keep sputtering economies afloat. This artificial demand will scramble market signals about the risk taken on by Fannie and Freddie—all but ensuring that Fannie and Freddie will once again unwittingly take on more risk than they can handle. In short, the very same toxic situation created by the once implicit government subsidy of Fannie and Freddie is being baked right into Basel III.
Perhaps even more troubling, this will create a vicious cycle that will make reform of Fannie and Freddie next to impossible. Once banks have loaded up on Fannie and Freddie obligations, there will be no way for the U.S. government to remove government guarantees without triggering a liquidity crisis in banks around the world.
Link: Carney Article


Basel Part Two:

As I started discussing, the sovereignty of the United States is at stake in the Basel 3 revision of the Bear Stearns Rule. The Bear Stearns rule requires liquidity for the international big banks. The Bear Stearns Rule is to be revised to require the purchase of GSE mortgage backed securities. This is not a benevolent action by the World Economic Order. Indeed, this is an economic attack by the New World Order of finance upon the citizens of our nation.

No longer could the congress have the choice to take away the government umbrella of loan guarantees from the GSE's, Fannie and Freddie. The market place may dictate that these loans not be guaranteed, especially in times of reckless lending. But of course, this would not be possible if the banks were into these GSE's so deeply that there would be no way congress could act.

It is one thing if congress had the choice to give or take away guarantees for loans. It is quite another if there becomes no risk for the investors, and any losses on the loans becomes a risk for the taxpayer who would have to rescue Fannie and Freddie whether they wanted to or not. Can no one see the diabolical nature of this move? The citizens of the United States would no longer matter. If the loans all went bad, the US taxpayer is on the hook. If the loans were toxic and doomed to failure, the banks who bought the loans and facilitated the scam would have no fear from government intervention. After all, Basel 3 aims to make the banks and the investors whole at all costs! This no longer becomes investing, as with risk, but rather becomes a skimming of profits and a safe investment at taxpayer cost.

Then, what will happen is that the taxpayers will rebel against the poor in our society, rather than the scamsters. That is what is happening now. The Tea Party is even now taking it out on the poor, the borrower who was scammed, and the guy on unemployement, and is shielding the cause of the ponzi housing scam, the central banks and TBTF banks from fault and blame. Is the Tea Party now for perpetual taxpayer bailout of the banks? This is what happens when you trust banksters, Tea Party. What say you now?

Basel Part Three:

Lets see what abuses could come from the Basel 3 effort to add GSE bonds to tier 2 capital requirements of the TBTF banks. Well, certainly, mortgages could be like treasury bonds. In times of crisis, the banks could go to the discount window, borrow low, and make a great return on the difference between the mortgages and the discount rate. Oh wait, that already happens. But with Basel 3, the mortgage backed securities could come with no ability of congress to EVER pull back on the guarantees. This establishes moral hazard. Investing in MBS would be just like investing in treasuries with an ironclad guarantee that eliminates risk. It is coming folks. Fascism from Basel I call it.

Certainly you would think that the elimination of risk would keep interest rates down and keep the government solvent. However, if there is no failure on these loans, who cares about the underwriting quality. Just lend, lend, lend and let the chips fall where they may. Basel 3 is very interested in eliminating moral hazard they say. But they really want moral hazard. Moral hazard gives them the power to manipulate markets.

Is this the twilight of economic and political freedom? Banks could behave in any manner they want and buy any crap mortgages they want and there is no escape from moral hazard whatsoever, except to the taxpayer. This is not how investing is supposed to work, but then again, bondholders of TBTF banks already have no moral hazard, as these banks will not fail. So, the casino can lever up all these investments to the moon, and the rich will get richer, with no risk!

I see loans of all shapes and sizes coming on line with this scam. We could have 200 year loans, where people would pay more for the loans than rent, and still not own in their lifetimes. What a scam. If you think that is farfetched, read this.

Is this the death of democracy and of capitalism, to allow banks a permanent kitty of bailout money until mainstreet is completely destroyed?

Link: Suntrust Approves of Diabolical Plan to Create Moral Hazard

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