♭: FED's Policy Below the Intended Pitch

FED's Official Policy: From a Reserve of Value to a Not so Convenient Good



Recent Fed and Treasury actions and policies are working around the clock to debase the USD. This US wealth and purchasing power destruction forces investors to seek protection in precious metals (platinum, gold, silver, uranium...) and stocks with high earnings.

This current imported and commodity fueled inflation wawe is reminiscent of the 1979-80 episode when gold, energy, farm land, natural resources and tech stocks were the inflation shelter investors sought.

The Dollar Index chart below demonstrates that the USD reached a low point in 1980 as gold was taking off. You can readily see we're back at lows once again.

Conductor Extraordinaire: George W. Bush (United States President)

Intelligence Czar Can Waive SEC Rules

Now, the White House's top spymaster can cite national security to exempt businesses from reporting requirements.
President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye. Unbeknownst to almost all of Washington and the financial world, Bush and every other President since Jimmy Carter have had the authority to exempt companies working on certain top-secret defense projects from portions of the 1934 Securities Exchange Act. Administration officials told BusinessWeek that they believe this is the first time a President has ever delegated the authority to someone outside the Oval Office. It couldn't be immediately determined whether any company has received a waiver under this provision. The timing of Bush's move is intriguing. On the same day the President signed the memo, Porter Goss resigned as director of the Central Intelligence Agency amid criticism of ineffectiveness and poor morale at the agency. Only six days later, on May 11, USA Today reported that the National Security Agency had obtained millions of calling records of ordinary citizens provided by three major U.S. phone companies. Negroponte oversees both the CIA and NSA in his role as the administration's top intelligence official.

FEW ANSWERS.
White House spokeswoman Dana M. Perino said the timing of the May 5 Presidential memo had no significance. "There was nothing specific that prompted this memo," Perino said. In addition to refusing to explain why Bush decided to delegate this authority to Negroponte, the White House declined to say whether Bush or any other President has ever exercised the authority and allowed a company to avoid standard securities disclosure and accounting requirements. The White House wouldn't comment on whether Negroponte has granted such a waiver, and BusinessWeek so far hasn't identified any companies affected by the provision. Negroponte's office did not respond to requests for comment. Securities-law experts said they were unfamiliar with the May 5 memo and the underlying Presidential authority at issue. John C. Coffee, a securities-law professor at Columbia University, speculated that defense contractors might want to use such an exemption to mask secret assignments for the Pentagon or CIA. "What you might hide is investments: You've spent umpteen million dollars that comes out of your working capital to build a plant in Iraq," which the government wants to keep secret. "That's the kind of scenario that would be plausible," Coffee said.

AUTHORITY GRANTED.
William McLucas, the Securities & Exchange Commission's former enforcement chief, suggested that the ability to conceal financial information in the name of national security could lead some companies "to play fast and loose with their numbers." McLucas, a partner at the law firm Wilmer Cutler Pickering Hale & Dorr in Washington, added: "It could be that you have a bunch of books and records out there that no one knows about." The memo Bush signed on May 5, which was published seven days later in the Federal Register, had the unrevealing title "Assignment of Function Relating to Granting of Authority for Issuance of Certain Directives: Memorandum for the Director of National Intelligence." In the document, Bush addressed Negroponte, saying: "I hereby assign to you the function of the President under section 13(b)(3)(A) of the Securities Exchange Act of 1934, as amended."

A trip to the statute books showed that the amended version of the 1934 act states that "with respect to matters concerning the national security of the United States," the President or the head of an Executive Branch agency may exempt companies from certain critical legal obligations. These obligations include keeping accurate "books, records, and accounts" and maintaining "a system of internal accounting controls sufficient" to ensure the propriety of financial transactions and the preparation of financial statements in compliance with "generally accepted accounting principles."

Dawn Kopecki. BusinessWeek

Virtuoso: J.P.Morgan's Extravagant Market Manipulation Scheme

Regalian Powers, It's good to be the King!

J.P. Morgan Chase’s derivatives book has swelled by a cool 10 Trillion in notional in Q2-2007

In case any of you are wondering how big new growth of 10 Trillion in notional really is: 10 Trillion / 66 business days = 151 Billion per day
Can anyone tell me how or where it is possible to generate 151 Billion in new business per day – for 66 straight business days - in ANYTHING? Not even China can pull this off.

As reported in the Treasury's OCC’s Quarterly Report on Bank Derivatives Activities - Second Quarter 2007, on page 23:
http://www.occ.treas.gov/ftp/deriv/dq207.pdf

Conductor Extraordinaire: Hank Paulson (United States Secretary of the Treasury and ex-CEO at Goldman Sachs)

Henry Paulson presses for aid to sub-prime lenders
Suzy Jagger in New York

Henry Paulson, the US Treasury Secretary, is seeking to persuade the White House to offer financial compensation to American mortgage lenders that try to help troubled homeowners by renegotiating the terms of their loans.
The Times has learnt that Mr Paulson is lobbying President Bush to provide funds so that mortgage lenders can reduce the loss that they would incur from either reducing the rate of an adjustable home loan or extending the life of the mortgage to make it cheaper for the property owner.
It is understood that Mr Paulson’s proposals are meeting significant resistance within Washington, where it is perceived that such a move would be a bank bail-out scheme.
Washington is nervous about being seen to be preventing Wall Street companies from having to face the financial implications of their own lax lending practices and ill-judged investment decisions.
America is suffering its worst housing recession for 16 years. Mortgage arrears and foreclosures have soared as homeowners have struggled to keep up with their mortgage repayments.
A number of those homeowners — who typically have low incomes and poor credit histories — took out sub-prime mortgages that begin with a low introductory interest rate but which increase in their cost throughout the life of the loan.
Sub-prime borrowers bet that by the time the interest rate rises, the value of their home will have appreciated sufficiently to allow them to remortgage. Unfortunately, the housing slowdown has seen some states suffer house price falls of 40 per cent.
In the summer, President Bush sought to avert a deepening mortgage crisis and reduce the number of Americans who faced losing their homes. He urged mortgage lenders to contact borrowers and try to renegotiate the terms of their mortgages.
Earlier this week, Countrywide, America’s biggest mortgage lender, said it would begin contacting borrowers and modify $16 billion (£7.8 billion) worth of home loans whose interest rate will reset by the end of 2008.
David Sambol, Countrywide president and chief operating officer, said: “We are determined to assist borrowers who have the willingness and wherewithal to remain in their homes but need a little help to do it.”
It is expected that other mortgage lenders will follow suit, even though the cost of negotiating the terms of sub-prime mortgages will eat into their profits.
It is understood that Mr Paulson wants to offer the lenders compensation to offset these losses.
Chris Whalen, of Institutional Risk Analytics, said: “Paulson can’t go there. Paulson wouldn’t just be trying to help the banks, he would be trying to help the dealers, Wall Street as a whole. Ultimately, it’s the investors who take the hit.”
Mr Whalen added: “It is wrong for the Government to try to mandate loan modification. It sounds brutal, but a lot of these families should not have got mortgages in the first place. They couldn’t afford them. Modifying the loan in a number of cases won’t work. Historically, 30 to 40 per cent of borrowers whose loans are modified default again.”

The US Treasury and Countrywide failed to return calls yesterday.

Monetary Debauchery

"The system of banking [is] a blot left in all our Constitutions, which, if not covered, will end in their destruction… I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid by posterity… is but swindling futurity on a large scale."

Thomas Jefferson

Monetary Debauchery

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Henry Ford

Conductor Extraordinaire: Hank Paulson (United States Secretary of the Treasury and ex-CEO at Goldman Sachs)

"The US has responded in an ad hoc way by carrying on a “strategic dialogue” with China – by far the largest economy with an exchange rate linked to the dollar – backed by congressional threats to address exchange rate issues using the tools of trade policy and references to communiqués from the Group of Seven leading industrial nations. In reality the dialogue is anything but strategic. Like so much of American international policy in recent years, it seems to confuse the firm statement of legitimate desire with the serious conduct of diplomacy."

Lawrence Summers (United States Secretary of the Treasury and M.D. at D.E. Shaw)

Monetary Debauchery

"If Cheap Money is what the country needs, why don't we repeal the laws against counterfeiting?"

Senator Gore (OK), 1933

Monetary Debauchery

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

John Maynard Keynes quoting Lenine