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.

Read Article Here

Listen To This Week's Radio Show

Listen to this past Sunday's "The Financial Physician" radio program.

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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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