ppjg bailouts, Government asset bundling, banking, covered bond Act, derivatives, FDIC, insurance companies, Marti Oakley, securities, wall street

Marti Oakley(C) copyright 2011 All Rights Reserved

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Occasionally, amid the mountains of mindless legislation produced by those fools in congress, one or two really stellar examples of “what the hell were you thinking?” surfaces and leaves us wanting to bang our heads against the wall repeatedly out of frustration at the sheer stupidity of what is offered as necessary legislation. Never has this been quite as extraordinary as it is in the Covered Bond Act of 2011, a bill that is intended to avoid the hassle and exposure of public debate over bailing out the criminals while leaving the country twisting in the wind. Of course this will be supported by the full faith and credit (me & you) of the United States.

Avery Goodman at www.seekingalpha.com makes this observation:

“So long as the Federal Reserve exists and/or other financial regulatory agencies continue to be run by a revolving door staff that moves in and out of industry and government, crony capitalism will be alive and well in America. No amount of Dodd-Frank or Volcker rule legislation will ever protect savers, taxpayers or the American people. Profits will continue to be privatized and losses socialized.”

This bill will just confirm the practice of privatizing profits while nationalizing the losses, as a legal response to criminal activity.

From the folks over at Patrick.net:

“The United States Covered Bond Act of 2011 is designed to allow bundling of any kind of debt including derivatives, into marketable securities guaranteed at full face value by the FDIC.”

Derivatives? Weren’t those instruments the same ones that caused the near collapse of the system? So what are they, exactly?

Avery Goodman from seekinglapha.com explains them this way:

“Derivatives are highly volatile financial instruments that are occasionally used to hedge risk, but mostly used for speculation. They are bets upon the value of stocks, bonds, mortgages, other loans, currencies, commodities, volatility of financial indexes, and even weather changes. Many big banks, including Bank of America, issue derivatives because, if they are not triggered, they are highly profitable to the issuer, and result in big bonus payments to the executives who administer them.”

You can’t even mention the Economic Stabilization Act of 2008, or the Stimulus Package of 2010 without raising the hackles on otherwise uninvolved individuals in the national political fracas we call government. In 2010 in particular, and as the country screamed “NO!” in the face of yet another bailout of corrupt and criminal Wall Street and banking cartels and insurance companies, congress and the president bailed out the crooks and thieves at the expense of the American people and then stood by and watched as the housing market collapsed, home foreclosures went through the roof and massive unemployment spiraled out of control. What was obviously very clear was….these guys were to big to be allowed to fail, but if the rest of the country failed as a result of saving the criminals…..so be it.

With the country still seething from what was perceived as two near mortal wounds, and with the added insult of not seeing even one of the criminals charged with a crime, prosecuted or jailed for criminal activity, the wound is still raw and festering. Wanting to avoid another national discourse on why the citizens of the US should be made responsible for the massive financial corruption, essentially paying the bills for the crimes committed by these ever so special friends of government, Kay Hagan D(NC) and Bob Corker R(TN) have come up with a wonderful plan. They have decided it would be best to allow the bundling of these toxic instruments and to insure them in the FDIC.

Patrick.net fine tunes this for us:

“Asset classes eligible to be rolled into Covered Bonds are shown below including “H” which leaves the door open for anything left over, What would qualify would be the decision of one unelected official, the treasury secretary/Goldman Sachs representative.

(A) a residential mortgage asset class;

(B) a commercial mortgage asset class;

(C) a public sector asset class;

(D) an auto asset class;

(E) a student loan asset class;

(F) a credit or charge card asset class;

(G) a small business asset class; and

(H) any other eligible asset class designated by the Secretary, by rule

and in consultation with the covered bond regulators

This should make your eyes explode from your head:

Bloomberg reports that Bank of America (BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion.

75 TRILLION? 75 trillion worth of hedges, bets and speculation? I can’t help note the word “obligation”. Whose obligation? Ultimately mine and yours according to Corker/Kagan.

I noted that the bill had a big bolded S.___ (with no number) on the front page, meaning it is a Senate bill which can’t be and hasn’t been submitted yet because the Constitution requires all bills to originate in the House. I can’t find a corresponding, preceding House bill. Obviously this Senate bill will be sent over to good friends of the financial sector in the House who will dutifully write up a House bill identical to the Senate bill to get the ball rolling.

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http://www.hagan.senate.gov/files/111109_CoveredBond_BillText.pdf

http://seekingalpha.com/article/301260-bank-of-america-dumps-75-trillion-in-derivatives-on-u-s-taxpayers-with-federal-approval

http://patrick.net/forum/?p=1162830