Big Five tapped Fed for funds during financial crisis

Peacenik seems to recall lots of talk about how strong Canada's banking system is. How it is different from the U.S. banking system (which is bankrupt). Lots of talk about how Canada won't suffer the same housing meltdown that is occurring in the U.S. Peacenik didn't believe it then and Peacenik doesn't believe it now. The black hole of debt that is sucking European countries into its vortex right now is getting bigger and bigger. And of course the media accepts glib explanations from the banks. Peacenik wonders why it is not a matter of public record that a publicly traded company is borrowing big sums of money from the U.S. fed. What about all that superior Canadian bank regulation? Peacenik doesn't believe the banks and Peacenik doesn't believe the politicians. Something stinks.



Canada’s major banks were among numerous financial institutions across the globe which accessed funding from the U.S. Federal Reserve as part of its efforts to stave off economic collapse.

Among the thousands of transactions revealed by the Fed on Wednesday were a number involving Canadian banks, which took advantage of one program to borrow roughly $111-billion (U.S.) through their operations in the U.S.

Obliged to disclose the information under a new financial-reform law, the Fed provided an unprecedented look Wednesday inside a host of programs it used starting in 2007 to shore up a tottering U.S. banking system. The records show in stark terms how the Fed acted as a lender of last resort to a variety of players in the U.S. and beyond, extending low-cost loans and other sources of funding in a desperate effort to get financial markets functioning again.

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Marching Toward Zombieland

For a couple of weeks Kunstler veered off into neo con land. Today Kunstler is talking about the banks. Peacenik doesn't know when speculating about something turn's into advocating something. But this article sounds incendiary. Or is it just a warning? Peacenik is glad Peacenik is not a banker.

By James Howard Kunstler
on October 19, 2009 7:23 AM

When sober-minded individuals begin to regard an enterprise within a nation as "an enemy of the people" you can bet that some serious blood is going to flow. This is now essentially the situation for the Goldman Sachs company, which last week announced third-quarter earnings of over $3 billion largely derived from converting zero percent loans from taxpayers into zero risk profits off of anything paying more than zero percent in interest, revenue, or dividends.
The "people" across this big country may not have a clue how any of this is done, and there may be much to fault them on from the care-and-feeding of their own bodies to the content of their dreams, but you can't argue with the fact that they are heavily armed to an extreme. And although it may be hard to measure with precision, one might venture to state that they are increasingly pissed off. How else explain popular entertainments like "Zombieland?"

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Flaherty set to extend mortgage backstop

Peacenik has been talking about the housing bubble in Guelph and Canada for a while and reading about it at www.greaterfool.ca. And Peacenik has been doubtful that Canada's banks are as strong as our leaders and the media have said they are. Now we find out that Flaherty is going to piss away billions more propping up the supposedly strong Canadian banks and the Canadian housing industry. Low downpayments, long amoritization periods, and peak prices for housing are the exact ingredients that led to the U.S. financial collapse.

Why have a financial crisis today if you can delay it till tomorrow.? Peacenik and Peacenik's fellow taxpayers will be only too happy to help out the current crop of house purchasers. Its not their fault they are getting sucked into buying at the peak. Its not their fault income to purchase price ratio is totally out of whack. Its not their fault the economy is a mirage. Yes Peacenik says bail out the banks and the homeowners. That's what taxes are for. Healthcare. Not so much. Education. What dat? Social justice. That's for wimps.

Tara Perkins

Globe and Mail Update Last updated on Thursday, Sep. 24, 2009 08:57AM EDT

Ottawa plans to extend the biggest emergency measure it created to help the banks weather the financial crisis, a sign that the government and the banking industry are not yet prepared to call an end to the economic upheaval.

Finance Minister Jim Flaherty has decided to keep in place the government's $125-billion program to buy mortgages from lenders, a program that had been slated to end next week.

The banking industry has been pressing the Finance Minister to extend the length of the program because they continue to benefit from it and because there is still the possibility that liquidity pressures could re-emerge.

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More government money for Linamar

Is there any economy left that doesn't only exist due to government bailouts. Peacenik is all in favour of government intervention in and support of the economy. But Peacenik thinks there is good intervention and bad intervention.

Banks and Wall St. who have committed fraud should have the proceeds of their fraud confiscated. All those big bonuses. Take them back. And the criminals should go to jail. But what about the autoparts industry. What about Linamar. After the cash for clunkers ended, auto sales have crashed to the lowest level since 1981. What autos is Linamar going to be making parts for? Who is supposed to buy those autos?

Linamar got $44.5 million in 2006. And yesterday Linamar got $54.8 million as part of Harper's re-election strategy. Maybe it is time to start planning a new economy. A no-growth economy. Maybe it is time to invest in the future, not in the modern equivalent of buggy whips. Peacenik sees this all ending badly. Very badly. When Linamar inevitably downsizes to match the size of the real auto industry, or what is left of it, what is going to happen to all the mortgages that former Linamar employees will no longer be able to afford. Peacenik can hear the air leaking out of Guelph's real estate bubble as Peacenik types.

glayson@guelphmercury.com

GUELPH — Prime Minister Stephen Harper brought along quite the house warming gift Monday when he attended the grand opening of the Frank Hasenfratz Centre of Excellence in Manufacturing at Linamar Corporation.

Harper announced Linamar would receive from the government a $54.8 million repayable interest-free contribution to fund the development of the company’s green and fuel efficient powertrain projects.

The funding was made possible through the Automotive Initiative Fund, which will provide $250 million over five years to auto-related companies in support of strategic, large-scale research and development projects.

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More Sausage Hiding: Banks

Now we see real reporting instead of the puff piece on Bloomberg yesterday:

In a move that confirmed the suspicions of many analysts, the agency called off plans to start a $1 billion pilot program this month that was intended to help banks clean up their balance sheets and eventually sell off hundreds of billions of dollars worth of troubled mortgages and other loans.

Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay.

Translation:

The banks are still carrying these "assets" at well-above their actual market value. This means their balance sheets are showing them to be healthier than they really are.

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This is a fairly straight forward and understandable explanation of a large part of the current financial/credit crisis. The bank regulators are allowing American banks to do exactly what the Japanese did with their banks for more than 10 years. BTW the North American financial press excoriated the Japanese for doing this for more than 10 years. Now the financial press and the main stream media are colluding with the government, the banks, and the regulators to hide this information from the sheeple. The game is rigged. The banks are insolvent. Denninger says when the banks finally and inevitably explode everyone is going to lose every cent they have in the bank. Peacenik is digging a hole. You should too.

The Bottom

by Jim Kunstler

Euphoria managed to out-run swine flu last week as the epidemic-du-jour, with "consumer" confidence jumping and the big bank stocks nudging up. The H1N1 virus fizzled for now, at least in terms of kill ratio, though we're warned it might boomerang in the fall with a vengeance. No one was surprised to see Chrysler roll over like a possum on a county highway, but the memory of their muscle cars will linger on like a California surfing song. Here in the northeast, where Sundays are not spent at the Nascar oval, the spring foliage reached the tenderly explosive stage and it was hard to feel bad about anything.

For now, the "bottom" is in -- that is, the bottom of this society's ability to process reality. It may continue for a month of so, even after the "stress test" for banks is finally let out of the massage parlor with a "happy ending." But events are underway that are beyond the command of personalities. We're done "doing business" in all the ways that we've been used to, but we just can't get with the new program. Let's count the ways:

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Is the bottom really in? The swine flu didn't even make the front page of Tuesday's Globe and Mail. Instead the headline reads: Investors flock to stocks as market sees some good news. The leaves are coming out on the trees. Peacenik walked by a beautiful Magnolia tree in full bloom on Peacenik's way to work this morning. Its spring.

But is the bottom in? The auto industry is still in its death throes, with GM likely to soon follow Chrysler into bankruptcy. Many of the biggest banks are still bankrupt. Almost every sector of the economy is still lining up for bailouts. The commercial real estate sector is tanking. The world is past peak oil. Unemployment is soaring. The black hole of debt, containing more debt that the whole world's GDP, is still hungry. None of the structural issues that caused the financial collapse have been resolved. They are being ignored.

Is the bottom in? Jim Kunstler doesn't think so. Peacenik will stick with Peacenik's lottery tickets for future security, cash in Peacenik's pockets, Kraft dinner in Peacenik's cupboard, and a pitchfork by Peacenik's bed. Peacenik wishes all the best to anyone trying to time the top of what is a classic bear market rally.

British Pubs May Be Becoming An Endangered Species

LONDON -- Nothing can stay the same forever although Britain is one country where they try like the Dickens to fight that basic truth. The lyric of an old World War I song said it best:

There'll always be an England
While there's a country lane,
Wherever there's a cottage small
Beside a field of grain.

And down the lane from that cottage beside the field of grain there will always be a pub serving imperial pints (20 ounces) of beer. Well, that is changing rapidly. (Although you can still find some authentic pubs.)

Rural life is unrecognizable from 20 years ago and British drinking habits have undergone a sea change, as well. Both of these factors have led to a crisis for British pubs. Thirty-nine a week are going out of business forever.

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Peacenik calls for a bailout of all pubs, wherever they are.

Perp Walks Instead of Bonuses

by Robert Scheer

There must be a criminal investigation of the AIG debacle, and it looks as if New York's top lawman is on the case. The collusion to save this toxic company in order to salvage the rogue financiers who conspired to enrich themselves by impoverishing millions is being revealed as the greatest financial scandal in U.S. history. Instead of taking bonuses, the culprits should be taking perp walks.

I'm not just referring to the swindlers in the Financial Products Subsidiary of AIG who devised and sold those insurance policies on derivatives that brought the world economy to its knees. They do seem deserving of a special place in hell, and presumably the same divine power that according to Scripture labeled usury a high moral crime and threw the money-changers out of the temple will consider that outcome.

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Does anyone think it funny that the Bernie Madoff prosecution is over? The biggest fraud in human history and they wrapped up the case in months. Peacenik smells a coverup. Thousands of financial crimes have been committed and no one is getting arrested. Just Bernie. Is anyone even investigating the crimes? Obama is more interested in pasting together a corrupt defunct financial system that fixing anything. It is laughable to hear and read the rosy predictions that all will soon be well. No one has gone to jail. No new regulations have been made. Zombie banks continue in a zombie state. Bankrupt companies are allowed to fudge their books to pretend to stay alive.

And the Globe today headlines that major Canadian companies can't meet their pension obligations. And Chrysler wants to pay Canadians Chinese wages or they'll pull out of Canada. Peacenik wishes someone would tell these companies to just fuck off.

Canada's dirty subprime secret

An investigation by Globe reporters uncovers a burgeoning subprime mortgage problem that many, including Prime Minister Stephen Harper, have insisted does not exist in Canada

Greg McArthur and Jacquie McNish
Saturday, March 14, 2009

From the ramshackle, plywood deck on Brad Goodyear's rural Vancouver Island home, most people see piles of trash, a mattress, abandoned appliances and heaps of salmon fishing nets.

Mortgage lenders, however, have looked at the same property and, until recently, seen nothing but cash.

But after two decades of continually borrowing up – plowing through mortgages from Royal Bank, private lenders and credit unions, until settling on two subprime lenders – the 46-year-old fisherman has landed in a foreclosure proceeding.

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Peacenik missed this article in Saturday's Globe and Mail. Peacenik has always thought it was strange that Canada seems to have missed the worst of the banking/real estate crisis. Peacenik went for a walk on Sunday and "sold" signs were popping up everywhere. Life seemed great. But remember this article. And don't forget that while Harper is touting the health of the Canadian banking sector, he conveniently forgets to mention that this same sector has already received $75 billion in taxpayer funded bailouts.

The auto industry has long been one of the main engines of the Canadian economy. The auto industry is shrinking. Where are new jobs going to come from? Who is going to buy Canadian resources when the world is in a recession? Are the banks telling Peacenik the truth? Is Stephen Harper telling Peacenik the truth? Peacenik doesn't think so.

Guest Post: More Debt Won't Rescue the Great American Ponzi

Submitted by Rolfe Winkler, CFA, publisher of OptionARMageddon.com

Policy-makers not only misunderstand the economic crisis, they continue to underestimate it. Consequently, solutions to date have not only failed to "fix" anything, they have made the problem worse. The problem isn't falling asset prices, it's not rising foreclosures, it's too much debt. With an assist from mark-to-market accounting,* too much debt inflated the asset bubble in the first place. Yves has it exactly right that the only "solution" to this crisis is price discovery, to allow asset prices to fall to whatever level they need to in order for markets to clear. This is bad news for over-levered balance sheets, but there's nothing else to be done.

And yet American policy-makers appear convinced that more debt can rescue an economy already drowning in it. If we can just keep the leverage party going, all will be well. $787 billion to fund "stimulus," another $9 trillion committed to guarantee bad debts, 0% interest rates and quantitative easing to drive more lending, new off balance sheet vehicles to hide from the public the toxic assets they've absorbed. All of it to be funded with debt, most of it the responsibility of taxpayers.

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Did anyone one find any good economic news on the weekend or this morning? Peacenik looked and looked and looked. Peacenik didn't find any. Peacenik is trying to understand why this is happening. Peacenik is trying to understand what a credit default swap is. Peacenik just read the article posted above. It doesn't explain credit default swaps but it does make a compelling case for why the bailouts and stimulus plans will not work.

Peacenik will keep looking for good economic news. But in the meantime the DOW futures are down a lot. The Asian markets continued their march downward overnight. More and more people are contemplating collapse. Peacenik stopped by the Pub yesterday and was shocked to overhear three big believers of capitalism discussing survivalism. Actively planning survival. Peacenik needs to double check his inventory. And visit the seed store. Very Soon.

Foreclosure Prevention? BS! More Fraud Coverup!

Karl Denninger

So Obama comes out with his "plan" to try to halt foreclosures.

It won't do it, but it sure sounds good.

I will give him an "F" for substance but an "A" for effort.

Why an "F" for substance? Because what he's trying to do fundamentally cannot be done.

Here's the outline, in condensed form from Bloomberg:

Feb. 18 (Bloomberg) -- U.S. President Barack Obama pledged $275 billion to a program that will cut mortgage payments for as many as 9 million struggling homeowners and expand the role of Fannie Mae and Freddie Mac in curbing record foreclosures.

The plan also will help as many as 5 million homeowners refinance loans owned or guaranteed by Fannie and Freddie, according to a White House fact sheet. Treasury will buy as much as $200 billion of preferred stock in the two mortgage companies, twice as much as previously promised, the announcement said.

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Another Obama attempt at a solution and another thumbs down from the pundits. Peacenik is losing track of all of Obama's initiatives. Lets see. Continue Bush DOJ policies. Escalate in Afghanistan. Give zillions of dollars to the bankers and banks. Waiver on torture policy. Waiver on investigating the Bush years. Give billions of dollars to the automotive industry that is dead as a dodo bird. Cave in to wingnuts at every opportunity. Yes Obama is in an impossible position. But continuing with Bush policies, and turning his back on the progressive movemnent is not the way forward. And now Obama is visiting Canada and talking up the tar sands. As if there is a solution to the environmental problems of the tar sands. Oh yeah. Obama is still talking about a growth economy. This, as another 600,000 Americans lost there jobs last month. Can someone remind Peacenik of one slam dunk good thing Obama has done?

Fast Train Revisited: What’s a Doomer Chick to Do?

Sharon February 4th, 2009

You are hearing a fast train. - Van Morrison, sung by the incomparable Solomon Burke

Despite the fact that there are plenty of people out there who view me as wildly apocalyptic, I don’t actually consider myself a doomer. My own feeling is that while radical restructuring awaits us, our future probably won’t look much like _The Road_. I have argued that what we face due to peak energy, climate change and our financial crisis can best be described as “ordinary human poverty” - and we can do much to mediate our experience, that we can experience either an ordinary, survivable poverty or one that becomes pathological, based on our own choices.

On the other hand, compared to the mainstream culture, which tells us endlessly that things will stay the same or get better always, I am, of course, your friendly neighborhood Apocalyptic Dominatrix of Doom. That’s me, cracking the whip over my readers to get their gardens going, food storage in order, learn to darn socks and fix their own roofs, etc… Carolyn Baker was kind enough to mention me as a notable Dystopian chick in her well deserved rebuke to the New Yorker. So even though I often spend time observing “well, I don’t really think that we’re literally going to see TEOTWAWKI” I suppose I qualify as one of Cassandra’s descendents.

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Peacenik kind of enjoyed reading this post by Sharon Astyk. Enjoy the weekend.

January 26 2009: Gamblers, liars, fortune tellers and politicians

Ilargi: If today is any guide, my prediction yesterday that we might be in for a rough week looks spot on. Major corporations announced a minimum of 60.000 job losses. In one morning. The fact that this leads to stock exchanges doing happy dances, with London up close to 4%, and Amsterdam 6%, makes me lose what little faith I might have had left in our societies. As long as one man's misery is another man's profit in such a direct cause and effect line, there cannot be much of a future left.

What galls me in an equal fashion is reading about Citigroup buying a new $50 million corporate jet with its $50 billion taxpayer bail-out money. Or the ex-CEO of Deutsche Post, a semi-government institution as far as I can tell, getting a suspended sentence and a $1 million fine for sludging over $1 billion away from the German people. No jail, and an 0.1% fine. Justice, here we come. Or John Thain, who offers to pay back the $1.2 million he spent on his office while firing his employees. I think John Thain should by now be incapable of paying such amounts, period. Merrill Lynch paid out billions of dollars in bonuses when it was already clear they were going down and being bought up by Bank of America, with, there's the term once again, taxpayers' money. Confiscate it.

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Yes the perverse reaction of the stock markets to mass layoffs is a harbinger of the investors' depravity. Peacenik thinks the stock markets are totally detached from reality. The markets glom onto the smallest fact and race up. Meanwhile the house of cards has completely fallen down. Wall Street is now totally occupied by a bunch of Baghdad Bobs. When will everyone finally clue in. Peacenik thinks never. They will never clue in. The Dow will trade down into the low 7000's and someone will start a rumour that Buffet is buying in. Larry Kudlow will call the bottom for the 60th consecutive week. And there will be a rally. But the rallies will be smaller and smaller and shorter and shorter. As everything falls to zero.

U.S. mortgage insurers press Ottawa to fully guarantee policies

GREG MCARTHUR AND JACQUIE MCNISH
January 19, 2009

U.S.-based mortgage insurance companies are pressing the federal government to fully guarantee their home insurance policies in the pending federal budget to expand their market and possibly help resuscitate Canada's struggling real-estate market.

According to people familiar with the lobbying campaign, two leading mortgage insurers, Genworth Financial and American International Group, are fighting to raise existing government guarantees of private mortgage insurance to 100 per cent from the 90-per-cent level that has been in existence since the late 1980s.

Such a move would make the federal government ultimately liable for all of the hundreds of billions of dollars in insured mortgage debt.

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Reading this story this morning in the Globe and Mail almost made Peacenik's head explode. Peacenik can barely type. What is missing from this story? How about some background about how the U.S. insurers lobbied their ideological buddies in the Harper government to first allow insane lending policies in Canada. Polices that directly led to the housing fiasco that is at the heart of the world wide finanancial crisis. Oh, and no mention that AIG is bankrupt. AIG has received billions, Peacenik has lost track, of dollars in a bailout from the U.S. government. AIG is at the centre of the black hole of bad debt. It has so many toxic assests on its balance sheet that it may not survive. And here it is shamelessly lobbying the Canadian government to create policies that are proven to be bad. Peacenik needs to calm down. AIG needs to shut its pie hole.