Federal Reserve Notes Backed by Worthless Mortgage Bonds- Who Will Bail Out the Fed?

[flashl]

The silence has been deafening. Since that fateful weekend in the middle of March when they almost lost control, things have been eerily quiet. In fact, today, the DOW finds itself up over 200 points in the face of another $5 Billion in losses at Citigroup. The losses have been spun as positive with most in the financial press saying in essence that we should be happy because it could have been a lot worse. Many have now even boldly called a bottom in the losses stemming from the subprime mortgage crisis. Haven't we heard this before?

In the Fed's defense, it has been extremely creative in using alphabet soup acronyms, fancy formulae, and dazzling doublespeak, all with the single purpose of placing money in the hands of those who have misbehaved without actually saying they're doing it. They have lent Treasuries and other assets off their balance sheet while accepting onto it a plethora of worthless mortgage bonds, credit derivatives, and other dubious instruments of the once gilded age of modern financial genius. And on the weekend of March 15-16, they became the final backstop: the lender of last resort.

We are learning firsthand the lesson that the longer a fraud is perpetuated, the more it must be perpetuated, because to allow it to collapse would be far too traumatic. The justification that Ben Bernanke used for getting involved in the Bear Stearns mess was that to sit on the sidelines would have meant a likely collapse of the financial system. That is how far things have gone. Perhaps we had quite a bit of warning though. Don't forget that it was 2 now defunct Bear Stearns hedge funds that fired the early warning flares of this mess.

There is one burning question that needs asking as a result of the steps the Fed has taken to ameliorate banking losses:

Is it not true that to an ever-increasing degree the Federal Reserve Notes that circulate in the economy are now ostensibly backed by worthless mortgage bonds rather than AAA rated US Government Treasury bonds?

Market Oracle

[gateley]

1. We The People. We foot the bill for everything. nt

[Bolo Boffin]

2. Ding, ding, ding! You get a cookie.

Unfortunately, it is only an digital cookie. Real cookies cost money, and yours is helping JPMorgan buy Bear Stearns.

[TomInTib]

3. If that is fact, I will see you in Hooverville.

Everyone I know is seriously thinking about cashing out and getting the Hell out of Dodge.

[papau]

4. :-) - I understand the thought -but reality is "full faith and credit of the US" is all we ever have

what the Federal Reserve holds does not mean a thing about anything.

Your money is backed by your government and its ability to keep order and to tax.

[truedelphi]

9. The government's ability to keep order and to tax us requires

That enough of us are working at a decent salary taht we won't storm the citadel.

And that there is someone or something somewhere who is able to foot the tax bill.

[NC_Nurse]

5. Do not look at the man behind the curtain. Pay no attention.

[bluesmail]

6. american taxpayers, naturally.

[formercia]

8. One good thing

I'm too poor to pay income tax, thanks to Bush Gang, so it won't come out of my hide.

[truedelphi]

11. It's gonna come out of everyone's hide.

517 Trillion Dollars in Derivatives that have crashed - this could mean that in a year or two there won't be any goods onthe shelves.

Now if you have land you can plant and water and firewood and you don't need the outside world - then you are immune.

Otherwise you face the same empty shelves we all do.

Jim Rogers, who is business partners with George Soros, is moving his family to Asia. He knows that the Central Banks operate better there, and I also think he realizes that here there will be civil unrest and martial law over the coming years.

[formercia]

12. 32 acres of woods and several artesan springs

My garden keeps getting bigger every year.

I've been anticipating this for a long time, but you're right, indirectly, it will come out of my hide too.

The neighbors used to laugh at my Victory Garden.

I'll give them veggies and they won't even have to beg.

[truedelphi]

13. You are very blessed - and also smart!! n/t

[formercia]

14. Not smart, just observant

The same gang that is ruining this country was around in Jan. of 1982 when I told them "You people are out of your fucking minds. When Congress finds out about this, they are going to cut our balls off. "

I'm still waiting.

[GuvWurld]

7. Good read. Recommended.

I am getting an education reading economic news and analysis lately. I recommend that as much as this specific article.

[Joanne98]

10. They can get a loan from the World bank then go thru an IMF restructing program

Reduce all their salaries by 90% and privatize their bathrooms.

[DemReadingDU]

15. Fed is considering borrowing from Treasury (US taxpayers)

http://globaleconomicanalysis.blogspot.com/2008/04/fed-is-terrified.html

[AdHocSolver]

21. The Fed caused the economic damage and now they plan to destroy the economy to save the thieves.

The astronomical debt in the economy is the cause of inflation and has reached a level where it is going to be impossible to pay it back. These financial "experts" do NOT have a clue about how to manage an economy beyond how to steal from the American people.

With all the tax cuts to the corporations and the wealthy, with offshoring all of the best paying jobs to China and India reducing the tax base, and with inflation devaluing the dollar to the point where it is becoming "play money" to the rest of the world, how can borrowing more money from the Treasury solve any problems? These people have NO idea what they are doing. They are idiots as well as crooks.

Borrowing money when there is going to be no way to pay it back does NOT solve any problems. Their plan to borrow from the Treasury is really a way to cover up their REAL intent: the Treasury will STEAL the money out of the Social Security Fund and leave a worthless IOU in its place. This is what they have been doing for the last twenty five years anyway. Slowly stealing the Social Security Fund. It is the only government fund with any cash left in it. Listen up you retirees. They have their paws ready to grab your life support.

There is ONLY one way to save the U.S. economy: Bring jobs back to the U.S. When you buy American, the money you spend stays HERE. You don't need to get a loan from China or India to buy your necessities. You do NOT create a huge trade deficit and thereby cause inflation, when you provide the goods and sevices that you need HERE.

People who have family supporting jobs pay income taxes. Then the government need not borrow money or steal the Social Security Fund to pay its bills. In fact, you have money left over to pay for health insurance for the uninsured, rebuild infrastructure like roads and bridges, improve education, promote mass transit, help our veterans, and many other good things. Just increasing the taxes on the rich won't pay for these needs. We need to bring jobs back to America. Workers paying taxes on a living wage will pay the bills. Lots of working Americans paying into the Social Security Fund will keep it viable for decades.

It is the loss of jobs due to offshoring that is causing almost all of our economic problems. Trade agreements like NAFTA, the WTO, IMF, the World Bank (which are written by corporate cartels for their own profit, and are NOT "free trade"), must be rewritten or rescinded. Tax laws must be rewritten to allow companies who want to provide jobs in America a level playing field to compete against the multinational corporations.

The problem is NOT China or India. Our problem is with the multinational corporations. They dictate and control American economic policy. Nothing will improve unless, and until, economic policy, including trade, is controlled for the benefit of the people.

[sabbat hunter]

16. wrong

nothing backs our money other than the full faith of the US government. We have not had anything backing our money since we went off the gold standard with the rest of the world.

[vaughnarceneaux]

17. Project 888

What's in your wallet? Tired of bankers screwing you? Like the $39.99 for being one day late? How about raising your interest rate because they got their fingers burned playing the three card monte with mortgage securities, shuffling high risk loans into lower risk ones and selling the package. Now the government has jumped in to bail them out. The rich get richer and we get screwed. I am asking everyone in the country, the world for that matter, to send the bankers a message--- on 8/8/8, that is August 8th, 2008, everyone is going to default on their loan obligations. Send no money after 8/8/8 to credit card companies, mortgage companies, pay day lenders, etc. Send them the message that you are mad as hell and you are not going to take it anymore! Together we can send such a shock through the system that change will come. Don't wait for the government or some politician to do it for you, because they never will. JOIN PROJECT 888

[barnel]

18. it's part of why gas prices are soaring, when fed guarantees junk debt

it's kind of having someone trade you their garbage for your steak and lobster dinner

'it's not a gift, it's a swap' riiiiiight

this is a smash and grab on an unbelievable scale, and is hidden because it is complex, and only one of the zillion ways the top are screwing everyone else

foreign interests see trash being stuffed into an already junky dollar, and this deal went straight to the gas pump price sign

[barnel]

19. and worse yet, it encourages oil speculation

so the effects of diluting the dollar, with 'welfare for the rich' 30 billion dollar givaways (which is exactly what guaranteeing junk debt with t-notes is), scares people into hedging oil aginst further rises, which makes big price jumps a self fulfilling prophesy - like a cat chasing it's tail, chase faster, the tail moves faster

translation: not only does the bailout go straight to the pump, it goes to the pump *magnified*, because it set a precident of 'hand in the till' that people hedge against

this screws the citizen in so many ways, via the pump, that 30 billion bailout didnt go onto a pile of debt to be 'repaid someday', you get your invoice for this at the pump 'due upon receipt'

[jr7]

20. Who Will Bail Out the Fed?

The tax payers