Good Gold Article

Here is a great although somewhat complicated article on gold and why it may go to $5,000/oz by Martin Armstrong, President Princeton Economics.-Lou

Gold has been one of the most misportrayed mediums of wealth since the 1970's. Usually it has been marketed as the hedge against inflation during the good old days of the 1970's and 1980's. However, this has been a great misconception of the role gold truly plays. It is coming into its own and is still poised to rally to at least test the $3000 level if not much higher.

But this portentious view harbors within a lot of correlations on a global scale that truly needs some in-depth understanding. Gold is not about to make such a rally without critical developments in government. Gold is not the hedge against "inflation" but against the "collapse in the confidence of government". Government holds power only for as long as the people allow it. People are complacent and will not tolerate much.

During the 1970's and the days of OPEC, I will never forget a riot in Philadelphia of white middle class workers overturning cars and setting them on fire because people could not even get to work. There is a thin line between civilized conduct and a mob. When peop can no longer function in a basic way, holy hell breaks loose.The US political government has just become the greatest threat to our way of life, it is hard to understand how we have degenerated with no sense of posterity.

This recent incident going after UBS is a very serious departure in the entire rule of law. Switzerland has existed with its secrecy banking laws for a very long time. It was neutral during the world wars and its own rule of law has been respected by all nations until now. Why has the US now sought to destroy the civilization as we have known it?

The refusal of government to live within its means is destroying every- thing. Instead of reforming, they are lashing out against our own people as well as the whole world. They justify their actions by their own self-interest. Whatever they decree the courts merely rubber stamp. We have no one left in our corner to prevent the economic suicide that is taking place

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Listen To My First National Radio Show

Listen to my very first national radio show broadcast last night on XM Satellite Radio Talk Channel 165. My friend Peter Grandich joins me to talk markets and the economy-Lou.

Listen Here

Listen To MY 500th Radio Program

Listen to this past Sunday's "The Financial Physician" radio program. This past Sunday was my 500th weekly broadcast on WOBM-AM 1160 in New Jersey. Ironically Sunday was the same day as my very first national broadcast of "The Financial Physician" (different than my NJ broadast) on XM Satellite Radio Talk Channel 165 6-7 PM.

Listen Here

A Great Family Weekend

This Saturday my family celebrated my parents 50th Wedding Anniversary at my home. After days of torrential rain, prayers were answered and the sun came out minutes before the party started and a fabulous time was had by all.

During these turbulant times we are living in, we must always remember what is most important-the love of friends and family.

Bank Failure Friday Claims 3 More Banks

Just another average Friday at the FDIC with 3 banks failing. This week's closures will deplete the FDIC's insurance fund by $454 miilon, better than the last two weeks hit of $ 7 billion. It's almost time for the taxpaers to start paying for failed banks (not that we have not already with Citigroup)-Lou

2009 bank-failure tally rises to 84

SAN FRANCISCO (MarketWatch) -- Three more banks were closed by regulators Friday, bringing the 2009 toll to 84.

The largest of Friday's three closures announced by the Federal Deposit Insurance Corp. was Affinity Bank, based in Ventura, Calif.

Affinity, which had total assets of $1 billion, deposits of $922 million and 10 branches in Northern and Southern California as of July 10, will be taken over by San Diego-based Pacific Western Bank, the FDIC announced.

The FDIC said former Affinity branch offices in San Francisco and San Mateo will be-open Saturday and the rest will re-open on Sunday.

The FDIC said it and Pacific Western entered into a loss-share transaction of approximately $934 million of Affinity Bank's assets.

The federal agency estimated the cost to the Deposit Insurance Fund at $254 million.
Earlier Friday, regulars closed Baltimore-based Bradford Bank and Forest Lake, Minn.-based Mainstreet Bank.

Bradford Bank, the second bank to fail in Maryland this year, had $452 million in assets and $383 million in deposits as of June 30, according to the Federal Deposit Insurance Corp.
Buffalo, N.Y.-based Manufacturers and Traders Trust Company has agreed to assume the failed bank's deposits, the regulator said.

Bradford Bank's failure will cost the deposit-insurance fund $97 million, the FDIC added.
Mainstreet Bank had $459 million in assets and $434 million in deposits as of June 30, the FDIC reported.

Stillwater, Minn.-based Central Bank has agreed to assume the failed bank's deposits. Mainstreet Bank is the second bank to fail in Minnesota this year.

The FDIC estimated that Mainstreet Bank's failure will cost the deposit-insurance fund $95 million.

 NEWS FROM:

 FOR IMMEDIATE RELEASE                                          Contact: Drew Granchelli

                                                                                                                Contact #: (617) 202-4109
                                                                                           andrew.granchelli@newmancom.com

“The Financial Physician” Hits XM Radio

Lou Scatigna Takes Popular Financial Show to National Spotlight

Louis Scatigna, financial guru known to tens of thousands of devoted radio listeners in New Jersey as “The Financial Physician,” will kick off the national version of his popular weekly call-in show on Sirius-XM Satellite Radio on Sunday August 30 from 6-7pm ET. The August 30 edition of “The Financial Physician” will also mark the 500^th episode of the program on 1160 WOBM-AM in New Jersey. “The Financial Physician” will be heard on XM’s “Talk Radio” station, channel 165, following The Glenn Beck Program.

Scatigna’s weekly “The Financial Physician,” already a successful radio talk show, features live call-ins on 1160 WOBM -AM, broadcasting to southern New Jersey. During the show, Scatigna employs his special approach to money, treating finances like medicine. He stops the bleeding, performs triage, assesses the symptoms, renders his diagnosis, and then provides his Rx. Scatigna is able to shed light on many potential financial catastrophes through this no nonsense approach to money.  

“It’s exciting to take ‘The Financial Physician’ to the national level on Sirius-XM Satellite Radio,” said Scatigna. “I have been helping clients cure their own financial issues for nearly 30 years, and for 500 episodes of my radio show on 1160 WOBM-AM. There are a lot of folks around the country, especially these days, who can identify with the financial problems others are facing. Each week I’ll help callers, and many other listeners like them, diagnose and solve their financial ailments.”

The Financial Physician: How to Cure Your Money Problems and Boost Your Financial Health, the first book from Lou Scatigna, is due out from Career Press on December 15. 

More information on Lou Scatigna, The Financial Physician, is available at: HYPERLINK "http://www.thefinancialphysician.com/"www.thefinancialphysician.com.

For more information, or to schedule an interview with Lou Scatigna, please contact Drew Granchelli: 617-202-4109;  HYPERLINK "mailto:andrew.granchelli@newmancom.com" andrew.granchelli@newmancom.com  

For more information or to schedule an interview with the author, please contact 

Newman Communications at (617) 254-4500.

1,000 Banks to Fail In Next Two Years: Bank CEO

The big banks are "too big to fail" and the smaller banks are "too small to bail". The small banks are paying the price for the crazy risk taking of the big banks. The FDIC will no doubt have to be bailed out by the government with printed dollars.-Lou

The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May.

“We’ve already lost 81 this year,” Kanas told CNBC. “The numbers are climbing every day. Many of these institutions nobody’s ever heard of. They're smaller companies.” (See the accompanying video for the complete interview.)

Failed banks tend to be smaller and private, which exacerbates the problem for small business borrowers, said Kanas, who became CEO of BankUnited when his firm bought the bank and is the former chairman and CEO of North Fork bank.

“Government money has propped up the very large institutions as a result of the stimulus package,” he said. “There’s really very little lifeline available for the small institutions that are suffering.”

This comes at a time when the FDIC has established new rules on bank sales. Private equity, for instance, would have to hold double the capital of their competitors in order to buy such an institution, said Kanas.

“This will have somewhat of a chilling effect on our participation,” he said. “As a result of having to keep higher capital levels, we’ll see lower prices coming from that sector.”

Of the 81 failed banks this year, two have been successfully acquired by private equity, he said. Kanas’ private equity firm bought UnitedBank, the failed Florida-based bank, from the FDIC in May. Regulators also allowed the sale of IndyMac Bank of California earlier this year.

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National Radio Show Launch This Sunday

The first national broadcast of "The Financial Physician" radio show is this Sunday 6pm ET on Sirius/XM Satellite Radio Talk Channel 165. If your a Sirius XM subscriber please join me every Sunday 6 PM for my national broadcast.

This Sunday also marks the 500th broadcast of my radio show on WOBM-Am 1160 in New Jersey. Join me at 11Am for this special program.-Lou

What About The 9 Billion Hit Since June 30th?

These are numbers as of the end of June. In just the last 2 weeks the FDIC took a $7 billion hit. Since June 30th the fund has lost over $9 billion. The FDIC is virtually broke and will be hitting up the taxpayers very shortly. This is only the 3rd inning of the banking crisis, many more banks will be failing in the months to come. Stay within FDIC limits in all your accounts.-Lou

FDIC Insurance Fund Shrinks to $10.4 Billion

WASHINGTON (WSJ)-- The Federal Deposit Insurance Corp.'s fund that protects more than $4.5 trillion in U.S. bank deposits fell to just $10.4 billion at the end of June, as the banking industry continues to struggle with souring loans and regulators brace for pain in trying to clean up the mess.

The level of the FDIC's fund, the lowest since the savings and loan crisis, almost guarantees that the government will have to hit the banking industry with another special fee to recapitalize its reserves. Officials could also consider borrowing up to $100 billion from the Treasury Department, but government officials have avoided this option so far.

The FDIC was created specifically for times such as these," FDIC Chairman Sheila Bair said. "No matter how challenging the environment, the FDIC has ample resources to continue protecting depositors as we have for the last 75 years."

The deposit insurance fund topped $45.2 billion a year ago.

The agency said it had 416 banks on its "problem" list at the end of the second quarter, up from 305 at the end of March. Banks on the problem list are considered a higher risk of failure and face tougher regulatory scrutiny. The FDIC said the total assets of banks on the problem list was $299.8 billion, which suggests that Citigroup Inc. and some of the country's other largest banks, remained off the list.

..........The FDIC also said borrowers are falling behind on loans at record levels and across most major loan categories. The number of loans at least 90 days past due climbed for a 13th consecutive quarter, while the percentage of loans at least three months overdue hit 4.35%, the highest level recorded since the FDIC began collecting this data 26 years ago.

"Deteriorating loan quality is having the greatest impact on industry earnings as insured institutions continue to set aside reserves to cover loan losses," Ms. Bair said.
The biggest problem areas continued to be property-related loans, suggesting the housing market is still under stress despite some recent good news. The FDIC said residential mortgage loans at least 90 days past due climbed 12.7% in the quarter, construction and development loans at least three months behind increased 16.6%.

Quote of the Day

'The nearest thing to eternal life we will ever see on this earth is a government program.' -

Ronald Reagan

How The Fed Is Monetizing the Debt

For some time I have been wondering why interest rates have not been rising in the U.S. Treasury market given the huge issuance of new debt. One would think that a drastic increase in supply would result in lower prices and higher yields. In a normal market that would be the case but there are no normal markets anymore.

Chris Martenson has a great article detailing how the Fed is monetizing (funding U.S. debt with printed money) using a "backdoor" method in an effort to cover up their actions. Buying Central Banks agency bonds (Fannie Mae & Freddie Mac) and enabling them to reinvest in U.S Treasurys is the same thing as the Fed just printing money and buying the bonds themselves.

The dollar is doomed.-Lou

From Chris Martensens "The Shell Game - How the Federal Reserve is Monetizing Debt":

The US government has record amounts of Treasuries to sell.

Foreign central banks, which have a big pile of agency bonds in their custody account, would like to help but want to keep things somewhat under the radar to avoid scaring the debt markets.

The Federal Reserve does not want to be seen directly buying US government debt at auctions (and in fact is not permitted to, but many rules have been 'bent' worse during this crisis), because that could upset the whole illusion that there is unlimited demand for US government paper, but it also desperately wants to avoid a failed auction.

For various reasons, the Federal Reserve cannot just up and start buying all the Treasury paper that becomes available in record amounts, week after week, month after month. Instead, it uses this three-step shell game to hide what it is doing under a layer of complexity:

Shell #1: Foreign central banks sell agency debt out of the custody account.

Shell #2: The Federal Reserve buys those agency bonds with money created out of thin air.

Shell #3: Foreign central banks use that very same money to buy Treasuries at the next government auction

The Federal Reserve has effectively been monetizing far more US government debt than has openly been revealed, by cleverly enabling foreign central banks to swap their agency debt for Treasury debt.

This is not a sign of strength and reveals a pattern of trading temporary relief for future difficulties.This is very nearly the same path that Zimbabwe took, resulting in the complete abandonment of the Zimbabwe dollar as a unit of currency. The difference is in the complexity of the game being played, not the substance of the actions themselves.

The shell game that the Fed is currently playing does not change the basic equation: Money is being printed out of thin air so that it can be used to buy US government debt.

When the full scope of this program is more widely recognized, ever more pressure will fall upon the dollar, as more and more private investors shun the dollar and all dollar-denominated instruments as stores of value and wealth. This will further burden the efforts of the various central banks around the world as they endeavor to meet the vast borrowing desires of the US government.

One possible result of the abandonment of these efforts is a wholesale flight out of the dollar and into other assets. To US residents, this will be experienced as rapidly rising import costs and increasing costs for all internationally-traded basic commodities, especially food items. For the rest of the world, the results will range from discomforting to disastrous, depending on their degree of dollar linkage

Here is the link to Chris Martensen's interesting article

Chart Of The Day

Click on chart to enlarge

This is one scary chart folks. Foreign investment into U.S. assets is plunging. As a matter of fact there are now net outflows of foreign capital. Can a dollar crisis be far off?-Lou

Half Of Americans Are Broke

A scary situation indeed. Half of all American workers do not have enough savings to support their families for 1 month. This is because Americans are consumers, addicted to debt and spending. Although these people do not hav enough savings to last just one month, most have big screen TVs, drive new cars, have large cable bills and have cell phones. We all need to prioitize our financial lives and build up some emergency savings. Tough times are here to stay, we must be prepared for it.-Lou

34 Percent of U.S. Workers Surveyed Have Only One Week or Less of Savings to Cover Expenses if Laid Off from Work

MAYNARD, Mass.--(BUSINESS WIRE)--Despite the fact that most financial advisors caution workers to save the equivalent of six months’ salary in preparation for troubled economic times, a recent Monster Meter Poll reveals more than one-third of U.S. workers surveyed on Monster.com admit they have only one week or less of savings to cover living expenses if they were to be laid off from work. Monster.com is the leading global online career and recruitment resource and flagship brand of Monster Worldwide, Inc.

Over a one week period beginning July 6 and running through July 13, more than 16,000 visitors to Monster.com participated in the Monster Meter Poll question “If you were laid off without severance, how long would your savings cover your living expenses?” Thirty-four percent of U.S. workers report their savings would last one week or less if they were laid off, compared to 20 percent who say their savings would last six months or longer, according to a nationwide poll conducted by Monster.com®.

“In a recent Monster.com Career Advice article, Laid Off? Six Steps to Manage Your Finances, most financial advisors suggest saving the equivalent of six months’ salary to tide you over if you lose your job,” said Norma Gaffin, director of career content, Monster.com. “However, experts also agree, workers will likely need more savings, especially if they have a family and are the primary wage earner.”

If You Were Laid Off Without Severance, How Long Would your Savings Cover Your Living Expenses?

One Week or Less: 34%
2-4 Weeks: 16%
1-2 Months: 16%
3-5 Months: 14 %
6 Months or Longer: 20%

According to a recent Marketplace public radio broadcast, the size of the suggested emergency savings pot has evolved in recent years. “For a long time, the rule of thumb was to set aside 3 to 6 months of easily accessible savings. That number is now 6 months to 1 year.” Additionally, finance experts featured in SmartMoney.com’s article – 4 Smart Money Moves for a Down Economy – also advise workers to watch every dime by creating and sticking to a budget.

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Clunkers Program Advances Asian Automakers

Nice to know that U.S, taxpayers paid $3 billion to help the Asian automakers take a larger piece of the U.S. car market. Next is cash for appliances. Does the U.S. make any appliances anymore?-Lou

Japanese, Koreans gain most from cash for clunkers

WASHINGTON (Reuters) - Japanese and South Korean automakers registered the biggest market share gains in the U.S. government's "cash for clunkers" program that ended this week with bankruptcy related inventory shortages hurting General Motors Co GM.UL and Chrysler.
Toyota Motor Corp, Honda Motor Co Ltd, Nissan Motor Co Ltd, Hyundai Motor Co capitalized on the program's goal of pushing consumers away from gas guzzling sport utilities and pickups, to more efficient cars and trucks, preliminary sales figures showed on Wednesday.

Overseas manufacturers dominate in car sales, while U.S. companies have been stronger in the light truck segment. Cars outsold trucks 2-1 under the "clunker" initiative.

Ford Motor Co was the only domestic manufacturer to hold its own in market share compared with its performance so far this year, while GM slipped and Chrysler stumbled noticeably.
GM spokesman Greg Martin said the company, which slowed production significantly during the spring and its early summer bankruptcy, recorded brisk sales of Malibu, Cobalt and other car models in the first weeks of the program.

"We were running thin going into the summer to begin with and, as the program went on, inventory levels play(ed) a part," Martin said.

Ford was the only domestic manufacturer with top-selling models in the "clunkers" program.
Transportation Department figures on the "clunkers" incentive, which offered consumers up to $4,500 when they traded in their older vehicles for more fuel efficient new models, showed on Wednesday that total sales amounted to just under 700,000 with $2.87 billion in rebates.

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Geithner: Auditing The Fed Is A Line We Don't Want To Cross

A visibly uncomfortable Geithner attempts to dismiss the question by saying “I’m sure people understand that you want to keep politics out of monetary policy.” When Geithner is again pressed on the issue, he makes the startling assertion that conducting an audit of the Federal Reserve is a “line that we don’t want to cross,” stating that such a move would be “problematic for the country.”-Lou

Government Out Of Control

A measly $ 1 million

$1 Billion Dollars

$1 Trillion Dollars (each square is a billion)

When large numbers are thrown around it's easy to lose site over how much money is really involved. To most of us a million dollars seems like a lot of money, after all it's a thousand thousand. Just picture what a thousand piles of ten $100 bills would look like. A billion is a thousand million, now we are talking some major dough, a thousand piles of a million bukeroos, sweet. A trillion is a thousand billion or 1 million piles of a million bucks. So a 1.5 trillion dollar deficit means our government is spending 1,500,000 million more dollars than it is taking in. Try to picture what 1 1/2 million piles of a million dollars is. And they are doing it at least two years in a row for a total of 3 million million dollars. This is pure insanity and some wonder why I am so concerned about the value of the U.S. dollar and believe an inflationary storm is on the horizon.-Lou

$1.5 trillion deficits eyed for '09, '10

Washington Times August 29, 2009

The U.S. budget deficit will exceed $1.5 trillion both this year and next year, the White House Office of Management and Budget projected Tuesday in its Mid-Session Review.

Both the OMB and the nonpartisan Congressional Budget Office (CBO), which issued a separate report Tuesday, estimated that the U.S. unemployment rate would average about 10 percent next year.

The budget deficit for fiscal 2010, which begins Oct. 1, is projected to total $1.502 trillion, nearly a quarter of a trillion dollars higher than the White House forecast in May, when it released its detailed 2010 budget.

In 2011, the projected deficit of $1.12 trillion would top $1 trillion for the third year in a row.
For the 2010-2019 period, cumulative budget deficits are expected to exceed $9 trillion, averaging more than $900 billion per year. That's nearly double the $459 billion budget deficit recorded in fiscal 2008, which set the previous record before fiscal 2009.

The $9 trillion in cumulative budget deficits over 10 years is about $2 trillion higher than the Obama administration projected in February and May, but it is in line with March and June estimates by the CBO.

"Whatever their cause, the administration is very concerned about these out-year deficits, and getting those deficits under control is a top priority of the administration," said OMB Director Peter R. Orszag. He added that the administration's fiscal 2011 budget, which will be released in February, will "include proposals to put the nation back on a fiscally sustainable path."
The budget deficit in fiscal 2009, which ends Sept. 30, is expected to total $1.58 trillion, well below the $1.84 trillion deficit that the White House projected in May.

However, the difference relates to the $250 billion "placeholder" that appeared in the Obama administration's earlier budget estimates for 2009. The "placeholder" was for additional funds for the bank-bailout program. In the end, the administration did not need those funds.

The federal debt held by the public, which totaled $5.8 trillion at the end of fiscal 2008, is expected to more than triple by the end of fiscal 2019, when it will approach $17.5 trillion, according to the administration's latest estimates.

"These numbers are simply alarming," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan budget-watchdog group. "Even as the economy appears to be stabilizing, we are seeing unmanageable levels of red ink for the foreseeable future."

The Senate's top Democrat on the budget was also concerned.

"These deficit levels confirm what I have said for months - that we are on an unsustainable fiscal course for the future," said Sen. Kent Conrad, North Dakota Democrat, who chairs the Senate Budget Committee

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Rhode Island Shutdown

States, cities and towns are in terrible fiscal shape, everyone's standard of living will be affected.-Lou

RI gov to shut down state government for 12 days

PROVIDENCE, R.I. (AP) - Rhode Island will shut down its state government for 12 days and hopes to trim millions of dollars in funding for local governments under a plan Gov. Don Carcieri outlined Monday to balance a budget hammered by surging unemployment and plummeting tax revenue.

The shutdown will force 81 percent of the roughly 13,550-member state work force, excluding its college system, to stay home a dozen days without pay before the start of the new fiscal year in July.

The closures come as the worst recession in decades has eliminated hundreds of millions of dollars in tax collections and pushed unemployment to 12.7 percent, the second-highest jobless rate in the nation behind Michigan.

Carcieri predicted the state's fiscal future could grow even bleaker.

"There are going to be inconveniences for the public, and there are going to be sacrifices, as I said, for state employees," Carcieri said at a Statehouse news conference. "These steps right now are unavoidable if the state is to live within its budget, live within its means."

The governor ordered the shutdown in an executive order but said he's willing to negotiate a different deal with state employee unions so long as it saves the same amount of money, roughly $22 million. But time is short: the first shutdown day has been scheduled for Sept. 4. Additional shutdown days have been scheduled every month through June.

Critical workers such as state police, prison guards and child abuse investigators still will report to work during the shutdown, Carcieri said. He ruled out raising taxes to balance the budget and said the state cannot lay off more workers since it deeply trimmed its work force last year.

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Cash For Appliances

Good grief, what's nest "Cash For Anything"? Forced consumerism is not the way to bring us out of the financial mess we find ourselves in. "Cash For Clunkers" is being hailed as a great success. But is putting people who have a running car with no monthly payments into a new one with a large payment a smart thing to do? Many of these cars will be repossessed in the months to come.-Lou

Latest in Stimulus: 'Cash for Refrigerators'

A $300 million cash-for-clunkers-type federal program to boost sales of energy-efficient home appliances provides a glimmer of hope for beleaguered makers of washing machines and dishwashers, but it's probably not enough to lift companies such as Whirlpool and Electrolux out of the worst down cycle in the sector's history.

Beginning late this fall, the program authorizes rebates of $50 to $200 for purchases of high-efficiency household appliances. The money is part of the broader economic stimulus bill passed earlier this year. Program details will vary by state, and the Energy Dept. has set a deadline of Oct. 15 for states to file formal applications. The Energy Dept. expects the bulk of the $300 million to be awarded by the end of November. (Unlike the clunkers auto program, consumers won't have to trade in their old appliances.)

"These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy," Energy Secretary Steven Chu said in a statement announcing the plan. Only appliances covered by the Energy Star seal will qualify. In 2008, about 55% of newly produced major household appliances met those standards, which are set by the Energy Dept. and Environmental Protection Agency.

The money can't come soon enough for the home appliance industry, which is mired in an unprecedented sales slump that began when the housing market cooled in 2006. Since then that slump has worsened considerably. Shipments of washers, dryers, refrigerators, and ovens dropped 10% in 2008 and are down 15% through July, according to the Association of Home Appliance Manufacturers. "It's brutal," says Raymond James analyst Sam Darkatsh.

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A Marine Speaks For Many Of Us

This guy draws quite a response from the audience. His words refect the feelings of the majority of Americans at this time. The political temperature will hit the boiling point this fall-Lou

Yea right, if you believe this I have some cheap land for sale in Florida.-Lou

Geithner Says No Tilt to Goldman

By DEBORAH SOLOMON

WASHINGTON -- Treasury Secretary Timothy Geithner said Friday that government officials acted appropriately in their dealings with Goldman Sachs Group Inc. during the heat of the financial crisis last year.

Some lawmakers have questioned whether ties between government officials and Goldman Sachs influenced their decisions about which financial firms should be saved. The government's rescue efforts weren't intended to benefit Goldman but to prevent a broader collapse of the financial system, Mr. Geithner said in an interview with The Wall Street Journal and Digg, an online site where 39 million users share articles with one another and rate their popularity. Mr. Geithner was responding to questions submitted and voted on by Digg users in partnership with the Wall Street Journal.

We have been forced to do just extraordinary things and, frankly, offensive things to help save the economy," Mr. Geithner said. "I am completely confident that none of those decisions…had anything to do with the specific interest of any individual firm, much less Goldman Sachs."
Questions were raised about the government's decision to allow the collapse of Lehman Brothers, a Goldman Sachs competitor, and the decision to prop up American International Group Inc., a counterparty to Goldman that subsequently paid the Wall Street firm about $13 billion.

Much of the criticism has been aimed at former Treasury Secretary Henry Paulson, the onetime chief executive of Goldman Sachs who was aided at Treasury by a bevy of advisers with ties to the firm.

Mr. Paulson told lawmakers during a congressional hearing last month that government ethics lawyers gave him a waiver allowing him to talk with his former company last fall "when it became clear that we had some very significant issues with Goldman Sachs." While he was instrumental in the rescue of AIG, he told lawmakers he "had no role whatsoever in any of the Fed's decision regarding payments to any of AIG's creditors or counterparties."

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Fed Must Release Reports on Emergency Bank Loans, Judge Says

This should be interesting. Ben will be reappointed to another term today-Lou

Aug. 25 (Bloomberg) -- The Federal Reserve must make records about emergency lending to financial institutions public within five days because it failed to convince a judge the documents should be exempt from the Freedom of Information Act.

Manhattan Chief U.S. District Judge

Loretta Preska rejected the central bank’s argument that the records aren’t covered by the law because their disclosure would harm borrowers’ competitive positions. The collateral lists “are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression,” according to the lawsuit that led to yesterday’s ruling.

The Fed has refused to name the borrowers, the amounts of loans or the assets put up as collateral under 11 programs, saying that doing so might set off a run by depositors and unsettle shareholders. Bloomberg LP, the New York-based company majority-owned by Mayor

Michael Bloomberg, sued Nov. 7 on behalf of its Bloomberg News unit.

“When an unprecedented amount of taxpayer dollars were lent to financial institutions in unprecedented ways and the Federal Reserve refused to make public any of the details of its extraordinary lending, Bloomberg News asked the court why U.S. citizens don’t have the right to know,” said

Matthew Winkler, the editor-in-chief of Bloomberg News. “We’re gratified the court is defending the public’s right to know what is being done in the public interest.”
‘Involuntary Investor’

Bloomberg said in the suit U.S. taxpayers need to know the risks behind the central bank’s $2 trillion in lending because the public is an “involuntary investor” in the nation’s banks.

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Rolling Stone Exposes Goldman Sachs

Although my late father-in law was a floor traded on the NYSE for Goldman Sachs for years, I truly dislike the firm (so did he). As I have stated many times on my radio show and on this blog, I believe Goldman Sachs operates the largest insider trading operation in the world. All important financial positions both in the public and private sector are headed by ex Goldman executives. They have infiltrated the U.S. Treasury and the Federal Reserve. It is my guess that they have advanced knowledge of interventions in all financial markets incuding currency, bonds and especially the gold market. It's not hard to make money when you know ahead of time which way a market will move. Goldman CEO Lloyd Blankfein made 20 calls to former Treasury Secretary (and former Goldman CEO) Hank Pauson in the week leading up to the bailout of AIG that resulted in over $16 billion flowing through AIG to Goldman. Read this article and learn what Goldman Sachs is all about. I wonder why this information is published in Rolling Stone and not the mainstream financial media.-Lou

Inside The Great American Bubble Machine

Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression

Matt Taibbi

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.

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No COLA For Social Security Next Year

Well the good thing is that by law Medicare Part B premiums can not rise more than the COLA increase which will be zero. It's getting real tough for our seniors with low interest rates on savings, a diminished stock portfolio and rising medical expenses.-Lou

Millions face shrinking Social Security payments

WASHINGTON (AP) - Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal."

Cost of living adjustments are pegged to inflation, which has been negative this year, largely because

energy prices are below 2008 levels.

Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income.

"For many elderly, they don't feel that inflation is low because their expenses are still going up," said

David Certner, legislative policy director for AARP. "Anyone who has savings and investments has seen some serious losses."

About 50 million retired and disabled Americans receive Social Security benefits. The average monthly benefit for retirees is $1,153 this year. All beneficiaries received a 5.8 percent increase in January, the largest since 1982.

More than 32 million people are in the Medicare prescription drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the

Social Security Administration.

Millions of people with Medicare Part B coverage for doctors' visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law, the increase cannot be larger than the increase in Social Security benefits for most recipients.

There is no such hold-harmless provision for drug premiums.

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Accounting Rules Allow Banks To Lie About Health

Large banks have reported better than expected earnings and their stocks have risen dramatically. The main reason for the perceived health of banks is the FASB allowing banks to value their loans a ficticious levels thereby misleading investors into believing they are not as sick as they really are. Colinial Bank's loans were worth a third less than they disclosed just a few weeks before they failed? How many other banks are fudging the value of their loans?-Lou

What are bank loan values worth?

Forbes NEW YORK --

It took the liquidation of Colonial Bank to reveal an ugly truth: the loans on its books were worth a third less than what the failed regional lender had declared them to be just weeks before.
It's an ominous sign about weaknesses that may be lurking in other banks' loan portfolios. Regulations give banks wide latitude about whether to recognize potential loan losses on their balance sheets, so they remain largely out of view.

This is exactly why many investors were up in arms when the Financial Accounting Standards Board, which sets U.S. accounting rules, seemingly buckled under pressure from Congress earlier this year. Its board backtracked from rules that forced banks to be more transparent about the true value of assets.

Bank lobbyists and their congressional backers argued that it was needlessly destructive, in times of market disruptions when few buyers are available, to require lenders to base the value of assets on what they could be sold for at that time, using what is known as mark-to-market accounting.

But those who support mark-to-market counter that present rules allow banks to just delay their day of reckoning by not being upfront about their assets' value.

Take the case of a commercial real estate loan for a near-empty Florida strip mall. Even though it may never be repaid in full, the bank can keep the loan on its books at the historical valuation as long as it says it is holding it until maturity or for investment.

"We have plenty of banks holding loans at face value that they could never sell at face value," said Len Blum, managing partner at the investment-bank Westwood Capital.

All this gives banks less incentive to modify loan terms, because doing so would force them to acknowledge lower valuations on balance sheets. Instead, they have reason to keep up the facade that they will get paid back, and hope that they can hold out until the economy improves and real estate prices rebound.

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Dollar Will Be Toast

The White House announced late Friday a huge increase in deficit figures over the next nine years. There is no fiscal restraint at all in Washington. The dollar will depreciate more than anyone can imagine and the result will be high inflation and a lower standard of living. I feel bad for the generations that follow, I can't imagine what the country will be like in the future. Got Gold?-Lou

Obama to raise 10-year deficit to $9 trillion

WASHINGTON (Reuters) - The Obama administration will raise its 10-year budget deficit projection to approximately $9 trillion from $7.108 trillion in a report next week, a senior administration official told Reuters on Friday.

The higher deficit figure, based on updated economic data, brings the White House budget office into line with outside estimates and gives further fuel to President Barack Obama's opponents, who say his spending plans are too expensive in light of budget shortfalls.

The White House took heat for sticking with its $7.108 trillion forecast earlier this year after the Congressional Budget Office forecast that deficits between 2010 and 2019 would total $9.1 trillion.

"The new forecasts are based on new data that reflect how severe the economic downturn was in the late fall of last year and the winter of this year," said the administration official, who is familiar with the budget mid-session review that is slated to be released next week.

"Our budget projections are now in line with the spring and summer projections that the Congressional Budget Office put out."

The White House budget office will also lower its deficit forecast for this fiscal year, which ends September 30, to $1.58 trillion from $1.84 trillion next week after removing $250 billion set aside for bank bailouts.

Record-breaking deficits have raised concerns about America's ability to finance its debt and whether the United States can maintain its top-tier AAA credit rating.

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Bank Failure Friday Claims 4 More Banks

Guaranty Bank, what a great name, guaranteed by who?, the taxpayers! Over $6 billion has been drained from the FDIC insurance fund in 2 weeks, FDIC is now vitually broke. The banking system has big problems. Guaranty Bank is the eighth largest bank failure in US history. Last week Colonial Bank was the sixth largest. The stock market doesn't seem to care, closing at the 2009 highs. Volumes are low as it is the height of vacation season. This autumn will be very interesting to say the least, what a great selling opportunity-Lou

SAN FRANCISCO (MarketWatch) -- The Federal Deposit Insurance Corp. on Friday announced four more bank failures, including a Texas bank with total assets of about $13 billion, pushing this year's tally up to 81.

Guaranty Bank of Austin, Texas became the 81st bank failure of 2009 after it was closed by Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corp. as receiver, the federal agency said late Friday.

Guaranty Bank also joined the list of the 12 biggest U.S. bank failures of all time.
The FDIC said it has entered into a "purchase and assumption agreement" with BBVA Compass of Birmingham, Ala. As of June 30, Guaranty Bank had total assets about $13 billion and total deposits of about $12 billion.

The bank was one of the largest based in Texas, but had been reeling from nearly $1.5 billion in mortgage write-downs.

This year, 81 banks have failed as a lingering recession and surging unemployment leaves the industry nursing heavy loan losses. More than 1,000 banks may fail during the next three to five years, RBC Capital Markets estimated in February.
Guaranty, which started in 1988, had more than 150 branches in Texas and California, according to its Web site.
Earlier this month, Colonial BancGroup, which was shut down and sold to BB&T Corp. last week, became the biggest bank failure this year and the sixth-largest in U.S. history. Washington Mutual, which collapsed last year, was the biggest ever.

Guaranty Financial said earlier this year that it wrote down the value of some of its mortgage-backed security holdings by $1.45 billion, while taking a goodwill charge of $107 million. That left it with negative capital at the end of March.

Guaranty had been trying to raise new capital with the help of the FDIC and the Office of Thrift Supervision, but the losses scuppered those plans.

Meanwhile, Ebank, based in Atlanta, became the 78th bank failure of 2009, the FDIC said. Stearns Bank of St. Cloud, Minn. will assume all of the deposits and purchase Ebank's assets.
As of July 10, Ebank had assets of $143 million and total deposits of about $130 million. The failure marks the 17th in Georgia for the year.

First Coweta, Newnan, Ga., became the 79th bank to fail, after it was closed by the Georgia Department of Banking and Finance which appointed the FDIC as receiver, the agency said Friday.

The regulator said it has entered into a purchase and assumption agreement with United Bank, Zebulon, Ga., to assume all deposits of the bank, excluding those from brokers.
As of July 31, First Coweta's assets totaled $167 million, and it ad total deposits of roughly $155 million.

CapitalSouth Bank of Birmingham, Ala. became the 80th bank failure after it was closed by the Alabama State Banking Department, which appointed the FDIC as receiver, the agency also said Friday.

The FDIC said it has entered into a "purchase and assumption agreement with Iberiabank, Lafayette, La. to assume all of the deposits of CapitalSouth Bank, excluding those from brokers."
As of June 30, CapitalSouth had assets of $617 million and total deposits of roughly $546 million, according to the FDIC.

How About Some Good News For A Change

It's nice to see existing home sales starting to move up (I'm sure my real estate agent brother is happy about that). The only negative is that 31% of sales were short sales and foreclosure sales that were sold at distressed prices. Although report is better than expected, the housing market is still in bad shape.-Lou

Existing-Home Sales Rise 7.2%

WASHINGTON (MarketWatch) -- Resales of U.S. single-family homes and condos rose 7.2% in July to a seasonally adjusted annual rate of 5.24 million, the highest level since August 2007, the National Association of Realtors reported Friday.

Resales have gained for four consecutive straight months, the longest streak of increases since 2004. "Momentum is building," said Lawrence Yun, NAR's chief economist.
Economists surveyed by MarketWatch had expected sales to rise to an annual rate of 5 million, from a June reading of 4.89 million.

The inventory of unsold homes remained elevated, rising 7.3% to 4.09 million in July. There was a 9.4-month supply at the July sales pace, matching the prior month's result.

Without seasonal adjustment, the median sales price fell 15.1% in the past year to $178,400. Distressed properties accounted for 31% of sales in July. Realtors and economists agree that tax incentives have brought a lot of first-time buyers to the market.

While affordability is high, it's clear that some owners are distressed. On Thursday, the Mortgage Bankers Association reported that the percentage of residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the second quarter, a record high percentage.

Earlier this month, NAR reported that pending sales of existing homes rose in June for the fifth straight month, the longest streak of gains since 2003, as buyers were encouraged by low interest rates and bargain home prices.

US Treasury's Exploding Debt

No wonder Tim Geithner has requested an increase in the US debt limit (whatever limit means). The US has borrowed a half trillion dollars in less than two months.

The treasury will be borrowing billions more next week: $109 Billion in Treasury Bonds, as well as 88 Billion in Treasury Bills, for a total of $197 Billion!

This follows a busy July when the Treasury issued $229 Billion in Bonds and Bills, the first two weeks of August saw $75 Billion in Bonds, and is now launching another $109 Billion in Bonds, and $88 Billion in Bills: in two months alone, the USA will have printed just over half a trillion in new debt. Warren Buffet said this week that the U.S is on the road to becoming a Banana Republic - Lou

Here is the auction schedule :

$31 Billion in 13 Week Bills, August 24
$30 Billion in 26 Week Bills, August 24
$27 Billion in 52 Week Bills, August 25
$42 Billion in 2 Year Notes, August 25
$39 Billion in 5 Year Notes, August 26
$28 Billion in 7 Year Notes, August 27

Texas Based Guaranty Bank To Be Seized Today

Last week it was Colonial Bank, the sixth largest bank failure in US history. Today it will be Texas based Guaranty Bank with over $17 billion in assets. The FDIC is broke and will need to tap the $100 billion taxpayer credit line very soon. Let's see how many more bank join Guaranty on this Bank Failure Friday.-Lou


Guaranty Bank (based in Austin) is expected to be seized by the FDIC this week.This savings institution has over $13 billion in assets.

This is the second largest bank failure for Texas, (just behind the July 1988 failure of First Republic at $17 billion in assets).

Based on multiple reports, the Spanish Bank, Banco Bilbao Vizcaya has won the bidding for Guaranty.

Guaranty has over 150 locations in Texas and California with 8 branches in Bexar County.
The failure of Guaranty Bank can be attributed largely to the downturn in the housing market, mortgage-backed securities business and the homebuilder construction loans in California.

The state of Texas has a foreclosure rate of 4.68% (much better than some of our neighboring sunshine states). The highest foreclosure states are Florida at 17.2% and Nevada at 15.6% , Arizona at 11.05% and California at 10.81% . Source: Mortgage Bankers Association based on second-quarter 2009.

FDIC May Add to Special Fees as Mounting Failures Drain Reserve

The FDIC is broke. They are now going to hit banks with huge assesments just as the banks are hurting. This especially hurts small banks, the one's who had nothing to do with the current financial crisis, the ones who won't get a bailout when they are on the ropes. I spoke with a small bank CEO last week and he said the increase in his fees have been significant. He was upset that his healthy bank is paying the price for the casino banks.-Lou

Aug. 20 (Bloomberg) -- Colonial BancGroup Inc.’s collapse and the prospect of mounting failures among regional lenders may prompt the Federal Deposit Insurance Corp. to impose a special fee as soon as next month to boost reserves by $5.6 billion.

The FDIC board might act sooner than expected after the Aug. 14 failure of Alabama-based Colonial cost the agency’s insurance fund $2.8 billion, and as banks such as Chicago-based

Corus Bankshares Inc. report dwindling capital and Guaranty Financial Group Inc. of Austin, Texas, says it may fail. The fund fell to the lowest level since 1992 in the first quarter.

“With the failure of Colonial Bank and the possible near- term failures of one or two more large banks, the FDIC may be forced to levy a special assessment on the industry sooner than it had planned,” said

Camden Fine, president of the Independent Community Bankers of America, an industry group.

The

failure of 77 banks this year is draining the fund, prompting the agency in May to set an emergency fee of 5 cents for every $100 of assets, excluding Tier 1 capital, to raise $5.6 billion in the second quarter. The agency has authority to set fees in the third and fourth quarters, if needed, to prevent a decline in the fund from undermining public confidence.

The

FDIC board has until Sept. 30 to adopt a fee that banks would set aside in the third quarter. The agency has already signaled another special fee this year.

“We will likely have to have another special assessment in the fourth quarter,” FDIC Chairman Sheila Bair said in an Aug. 5 Bloomberg Television interview

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