The Bare, Naked Truth About the Federal Reserve's Socialist Agenda
by Shah Gilani
The top line
story, according to the FDIC's latest Quarterly Banking Review,
is that the majority of U.S. banks are in better shape today than
they have been in years.
story is that when the Federal Reserve is done transitioning the
United States from capitalism to socialism, the few dozen banks
that remain in America will all be profitable until they need bailing
out again, but will never die and live on in infamy.
Is that just
hyperbole or some wild conspiracy theory? It's neither. Unfortunately,
it's the bare, naked truth about the Fed.
matter that you didn't know the Federal Reserve System was the brainchild
of a handful of the world's most powerful bankers.
Or that all
of them took a secret train from New Jersey to Jekyll Island, Georgia
(owned by J.P. Morgan) in 1910 aboard Rhode Island Senator Nelson
Aldrich's private car to devise and orchestrate the creation of
the Federal Reserve.
Or that Aldrich
was an investment associate of J.P. Morgan, that his son-in-law
was John D. Rockefeller, Jr., or that he was the political spokesman
for big business and banking interests in Congress.
matter if you don't know who the powerful bankers are today that
run the Fed's twelve district banks. Or that the Fed's New York
Bank conducts all its open market operations with a bunch of favored
big banks it protects (Case in point, MF Global).
Or that one
former Chairman of the New York Bank's Board, who was also and still
is a Goldman Sachs board member, resigned from the Fed when it was
discovered he bought $3 million worth of Goldman's stock right before
the Fed made sure Goldman wouldn't have to go out of business at
the height of the financial crisis.
is that without the Federal Reserve the banking system in the United
States would be more honest, more competitive and less of a risk
to the economy than it is now.
And what really
matters, is understanding the Federal Reserve could never exist
and do what it does in an open democracy, and that its agenda of
socializing risks (making taxpayers eat bankers' losses) and privatizing
their profits (letting them keep their bonuses) for the benefit
of its club members (the banks) means the Federal Reserve has to
transform America to a socialist model in order to maintain its
own growth and ultimate power.
it's not a stretch to see how the Fed's socialist agenda will eventually
encompass most of the American economy over time.
But to keep
it simple, let's look at how the Fed has already done that to the
benefit of its primary constituents: banks and bankers.
Thanks To The Federal Reserve...
With the Fed
at the helm, the FDIC's Quarterly Banking Review shows aggregated
FDIC insured banks' net operating revenues (net interest income
plus total noninterest income) in the third quarter of 2012 came
to $169.6 billion. That's up 3% from a year ago, or year-over-year
aggregate net income was $37.6 billion, up $2.3 billion YOY to the
highest level in 6 years.
In all, some
57.5% of FDIC insured banks had higher earnings than a year ago.
A year ago, in 2011's third quarter, 62.6% had higher earnings than
in the third quarter of 2010.
One thing to
watch, is whether the downward move in the percent of banks earning
more than in year-earlier periods is an aberration or the beginning
of a downtrend.
just 10.5% of banks reported losses vs. 14.6% one year ago. Problem
banks totaled 694 vs. 732 in Q2 of 2012. That's the sixth consecutive
quarter of fewer problem banks and a full three years since the
number was less than 700. Still, problem banks are 913% higher since
the 2008 crisis. There were only 76 problem banks at the end of
of problem banks fell from $282.4 billion to $262.2 billion, an
average of $377million in assets per bank. Still, that's a lot of
pain if they have to be rescued.
In the meantime,
everybody wants to know if banks are making loans. The answer to
that is, yes, but not a lot.
Martin Gruenberg called the loan picture an "extended period
of increasing loan balances. But still relatively modest."
0.9% to $7.8 trillion. Some 55% of banks reported loan growth.
and industrial loans (C&I) rose 2.2% to $1.45 trillion. But
construction and development loans were down 3.2% to $210 billion
, that's 18 straight down quarters. One bright spot was the 2.4%
increase in auto loans in the quarter.
Loans to individuals
rose just 1% to $1.29 trillion and residential mortgage loans rose
only 0.8% to $1.89 trillion. Still, total industry assets rose 1.4%
from Q2 to $14.2 trillion.
Net gains on
assets sold totaled $5.6 billion vs. only $639 million a year ago.
Of that $4.9 billion increase in net gains, $3.9 billion actually
came from loan sales.
Banks saw a
7% rise in non-interest income and a 0.7% increase in interest-
earning assets (net interest income) to $746 million. That's for
all banks, keep that in mind.
Loan loss provisions
declined to $14.8 billion , that's down 5.4% sequentially and down
20.6% year- over- year. All in all, loan loss provisions have fallen
in 12 straight quarters.
average net interest margins fell 13 basis points to 3.43%.
So, on the
surface the banking picture looks calm. That's thanks to the Fed
rescuing banks, most of whom would have been insolvent and gone
bankrupt in any other industry.
the real deal....
You only have
to look at a few important metrics to see that not everything is
as good as the FDIC and the industry will let on.
And as we take
quick note of them, understand that it's because banks are still
fragile and pretending to be strong that the Fed is continuing its
rescue efforts in the form of quantitative easing and other backstopping
Not a lot of
loans are being made and net interest margins (the core of banking
profitability) are falling to dangerously low levels. Net earnings
growth is coming from a long history of reducing loan loss provisions,
selling assets, and still a fair amount of trading at the big banks.
How else can
banks in the aggregate have managed a 7% rise in non-interest income
while only a 0.7% increase in interest earning assets to $746 million
for all banks?
brewing for banks is that they're upping their exposure to the same
high octane instruments (collateralized debt obligations, collateralized
loan obligations, commercial mortgage-backed securities, and leverage
structured finance products in general) that brought them down in
the last crisis.
They just bought
an additional $48 billion of structured finance "securities"
and packaged loans in the latest quarter according to the FDIC report.
Their leverage structured holdings are now the highest they've been
On top of reaching
for interest income by grabbing more leveraged products, banks are
extending "duration" on their balance sheets. That means
they're holding assets with longer maturities because they yield
more. But they are also far more prone to losses in a rising rate
environment, if and when we get into a period of inflation or rate
Of course the
Federal Reserve knows all this. And they have given their blessing.
How else are
the banks going to make money but take more risks by purchasing
leveraged instruments with the Fed's no-interest loans which they
use as capital?
rush to make loans when the Fed lets banks go for the quick bucks
to look healthy so they can pay back the federal government and
pay out dividends again, all to make their stock prices firm up
Why? To get
more stupid investors to buy more of their equity so their options
become "in the money" and they can get bigger and bigger
bonuses, until they implode again.
So what if
they do? The Fed is there to socialize their losses, as they will
from now on until the twelfth of never, or until the curtain is
pulled back and we see the Fed for what it really is.
Oh, and there's
more. The whole socialization thing, it's not just domestic. The
Fed has taken it global with the help of the biggest socialist governments
on the planet.
me? Wait until you hear what I have to say next Tuesday about the
a closet socialist you're going to be very, very mad. Maybe even
mad enough to do something.
with permission from Money
© 2012 Money