Economic Collapse – Stop Geithner Bailouts for Europe

Lyndon Larouche

Fri, Sept 16, 2011

Subject: Geithner Killing America with Europe Bailouts

www.MorningLiberty.com

http://www.larouchepac.com/print/19443
Geithner is now arranging a massive bailout of the banks of Europe which
must be stopped NOW (see link).

LaRouche Demands: No More Bailouts!

September 15th, 2011 • 4:12 PM
Geithner's Plan to Bail Out London's European Banking System Will Destroy the United States.
Lyndon LaRouche today demanded that the United States Congress act immediately, this week, to stop U.S. Treasury Secretary Timothy Geithner from carrying out his proposed bailout of the entire bankrupt European banking system, by leveraging tens or hundreds of billions of U.S. dollars provided by the Federal Reserve, into trillions in bailout funds in Europe.
"This must be stopped," LaRouche stated. "The destruction of the United States is being proposed by Obama's Secretary Geithner. Honest depositors come first. No more bailouts; no more protection for speculative funds."
With Europe's entire banking system spiralling out of control, the European Central Bank announced today that it will be offering euro-area banks emergency dollar loans, with funds provided by the U.S. Federal Reserve through swap facilities. These unlimited swap facilities have been in place continuously since the 2008 crisis, and are now to be activated on a major scale.
At the same time, Geithner announced that he will participate in the meeting of European finance ministers in Poland this Friday and Saturday, Sept. 16-17, where he will urge them to use "overwhelming force" to address the banking meltdown. EU officials additionally told Reuters that Geithner will press the Europeans to leverage their bailout fund, by as much as a 10/1 ratio, along the lines of the U.S. TALF program—the Term Asset-Backed Securities Loan Facility, which was a major component of the 2008-2009 $17 trillion bailout of the bankrupt banks by U.S. taxpayers.
Geithner is reported to be acting under British instigation in this suicidal, hyperinflationary scheme. Indicative of this is the fact that the policy-setting "Lex Column" in today's Financial Times of London promotes the identical policy that Geithner is now preparing to execute. "The best tool to address solvency concerns is the European Financial Stability Facility," the "Lex Column" states. "The model is the US Troubled Asset Relief Program [TARP] of 2008, which succeeded by shifting its focus from liquidity to solvency. It is time to launch euro-TARP for eurozone banks."
A high level former U.S. government economic official yesterday confirmed the plans for a Fed mega-bailout of Eurozone banks. The European debt crisis is worsening by the hour, and is far more dangerous than 2008, the former official said. The Fed is going to have to open up new facilites and get in the middle of bailing it out; U.S. banks cannot avoid contagion from this.
"To hell with the swap lines," LaRouche stated. "Stop the British Empire's bailout gambit. We have to bankrupt them before they kill you. This plan is going to kill Americans, and it has to be stopped now. If we need to impeach the President of the United States to stop this, then do it now."
"This is why I insist that the United States must return immediately to the Glass-Steagall standard of Roosevelt's original 1933 Act, which presents the intent of the law in a kind of 'Preamble' in its very first words:
"An Act. To provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes."
"That stated intent is still the Constitutional law of the land," LaRouche stated. "So let us implement it—while we still can."
 
 
 

Geithner to Recommend TALF-Style Bailout for Europe

September 15th, 2011 • 5:17 PM
See also:
  John Hoefle September 15, 2011
U.S. Treasury Secretary Tim Geithner will attend the meeting of the European Economic and Financial Affairs Council (Ecofin) in Wroclaw, Poland, on September 16 and 17.
At this meeting, according to an "exclusive" report by Reuters, "Geithner is likely to suggest to European finance ministers on Friday that they leverage their bailout fund along the lines of the U.S. TALF program, EU officials said." Added Reuters:
"Geithner will probably insist on the importance of leverage to have more funds to ringfence the big Europeans, Italy and Spain, and to find a solution for Greece," one EU official said.
"The leveraging of the EFSF — I think this is something that he will put on the table," the official said. "There could be some openness to the proposal."
The Reuters report was quickly picked up by others, including Dow Jones and the Wall Street Journal. As of this writing, it appears that Reuters is the sole source, but further details should emerge.
Geithner has been on the stump in recent days. At the CNBC/Institutional Investor "Delivering Alpha" conference on Wednesday, Sept. 14, Geithner cynically complained about the "political dysfunction" in governments. According to CNBC:
"You have this terribly damaging political dysfunction here and in Europe that leaves the world wondering whether the political system has the capacity to do the right thing," he said. "That is very damaging to confidence…. We have an interest in helping them through this, but this is their challenge and they have the economic and financial capacity to meet this challenge," Geithner said. "The people who think this is beyond their (ability) are mistaken."
Speaking on CBNC the same day, Geithner defended the Obama "jobs plan" to host Jim Cramer:
Tim Geithner, U.S. Secretary of Treasury: "Absolutely not. I think that there's no reason now for the Congress of the United States not to act to help strengthen growth in the near term. It's the conservative, prudent, responsible thing to do. You can think of it as protection against Europe."
Cramer: "Okay."
Geithner: "You can think of it as insurance against weaker growth going forward. And you got to think about the alternatives. If Congress or Washington is incapable of acting, then policy will be damaging to growth because what you'll have is a deeper, steeper contraction in fiscal support than is prudent for an economy at this early stage of the crisis given the shocks we face. You know, life is about choices. Life is about alternatives."
The theme of political dysfunction in Washington and in the capitals of Europe has been a favorite lately among the financial parasite class. The technocrats could manage things quite well if those pesky issues like national sovereignty, legality, and the general welfare could be kept from interfering.
The discussions about a need for a TARP/TALF-like bailout for Europe are growing in the U.S. Banking analyst Dick Bove told CNBC on Sept. 13 that a program similar to the TARP would be a big help to Europe. Said Bove:
"The banks stop the run, they now start to write off their assets down to realistic levels and they start to build cash. So as a result of that the American banking system now has $1.6 trillion in cash sitting at the Federal Reserve, just sitting fallow. As a result this was the most successful program the US government has been in since it bought Alaska."
Bove said that some government agency or central bank could help coordinate the European arrangement. Presumably he means some sort of imperial overlord function, given what he said next:
"So we do have a mechanism in place to determine whether these banks are meeting what is required. The fact of the matter is I could care less whether Greece goes under or whether some other country goes under. What I'm interested in is whether the banks that hold that debt have marked it properly and have enough equity and liquidity to handle the hit."
It is not surprising that a man who "could care less" about nations would be in favor of destroying those nations to save the banks.
The TALF The Term Asset-Backed Securities Loan Facility, or TALF, began operation in March, 2009, for the express purpose of supporting the asset-backed securities markets. It was one of a string of an alphabet-soup of special Fed bailout facilities. Whereas most of the other facilities were created to provide liquidity to the financial system, the TALF was created to kickstart the market for asset-backed securities (ABS).
Under the TALF program, the Treasury agreed to provide up to $20 billion from the TARP (Troubled Asset Relief Fund) as backing for $200 billion in loans made by the Fed through the TALF. The scheme was to loan money to "investors" to buy ABSs in a range of classes. According to the Fed (in July 2010):
Under the TALF, which began operation in March 2009, the Federal Reserve Bank of New York extended loans to investors in highly rated asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS). By encouraging issuance of ABS and CMBS, the TALF was designed to increase credit availability and support economic activity. Although the TALF extended $70 billion in loans, many TALF loans, which have initial maturities of three or five years, have been repaid early, in part because the interest rates on TALF loans were designed to be higher than market rates in the more normal conditions that have come to prevail in a number of securitization markets.
Any losses on the TALF program would first be absorbed by the accumulated excess of the TALF loan interest payments over the Federal Reserve's cost of funds and then by the TARP funds. To date, the TALF program has experienced no losses and all outstanding TALF loans are well collateralized. The Board continues to see it as highly likely that the accumulated excess interest spread will cover any loan losses that may occur without recourse to the dedicated TARP funds.
The TALF covered ABS issued on auto loans, student loans, credit-card loans, equipment loans, floorplan loans, insurance premium finance loans, loans guaranteed by the Small Business Administration, residential mortgage servicing advances, or commercial mortgage loans. (It is likely that the TALF played a significant role in papering over the bloodletting in the commercial mortgage market, and it is also worth noting that the amount of ABS backed by student loans are now greater than those backed by credit cards and autos.)
Under the TALF program, the loans are non-recourse. When an "investor" borrows money through the program to buy new ABS, the investor provides collateral. If the value of the collateral falls below the amount owed on the loan, the "investor" can decide not to repay, and let the Fed keep the collateral. So if, for example, the "investor" used the same securities he purchased as his collateral for the loan used to buy them, he could keep them if they turned out to be profitable, and dump them back on the Fed if they did not. So the Fed is essentially guaranteeing a profit.
One could see where that sort of deal could appeal to the banks buying European "sovereign" debt.
Leverage
Asset-backed securities are essentially derivatives, whose value is nominally derived from the values of the assets upon which they are based. However, as we have seen with the residential mortgage-backed securities market in the U.S., this is an area rife with fraud, even in its own terms. So the TALF is explicitly a program to protect the derivatives market, which makes it a fraud even if all the "rules of law" are followed, an assumption that is not warranted.
The original TALF was leveraged 10-to-1, with $20 billion in TARP funds backing up to $200 billion in potential TALF loans. If one applied that same leverage to the 440 billion euros in the European Financial Stability Facility (EFSF), one would get a potential 4.4 trillion euros in TALF-style loans. (The Fed, it should be noted, is leveraged 55-to-1, with $2.9 trillion in assets backed by $52 billion in capital.) Under this potential Euro TALF then, using the U.S. program as the model, the ECB might buy up to 4.4 trillion euros in European government bonds.
The ABS market is a way to create fictional money out of thin air. The idea is that a lender, such as a bank, can make loans then sell the loans to get the money to make new loans. For example, a credit-card bank will package its credit-card loans into pools, then create and sell securities based upon those pools. In theory, these credit-card-backed securities are backed by the credit-card repayments, but in reality they are unsecured debt issued by the bank. So the whole scheme is a fraud from the beginning, and before all sorts of other derivatives are created from, and piled atop, the credit-card ABS. And, as mentioned before, there are all sorts of criminal side games played in this fundamentally criminal market.
 
 
 

Obama's plans to cut Medicaid translate to kill people and destroy nation's future.

September 14th, 2011 • 11:46 PM
Families USA, in partnership with the American Cancer Society, the American Diabetes Association, and the American Lung Association, on Sept. 14 has issued reports on the four most populous states of the Union — New York, California, Illinois, and Texas — showing that cutting Medicaid could leave hundreds of thousands of people across the country facing life-threatening illnesses on their own. In these four states alone, the report points out, almost 3.9 million depend on Medicaid. As the economy spins into deep depression, the poverty will rise and the poor's dependence on Medicaid for sheer survival will grow.
"Cuts to Medicaid would pose a specific and dangerous threat to hundreds of thousands of [people] who depend on the program for regular treatment for such medical conditions as cancer, diabetes, chronic lung disease, heart disease, and stroke," the groups said in a joint statement. "Without Medicaid, many of these seriously ill [people] would no longer be able to fill essential prescriptions, keep up with key screenings, or see a doctor if their condition worsens or recurs."
The group, which would release such a report for every state of the Union by Oct.3, pointed out that cuts would also affect individuals who don't directly rely on the program. For example, an increase in the amount of uncompensated care (a likely consequence of a rise in the number of uninsured) would translate into higher premiums for those with health insurance. Lost worker productivity, worse performance in school for sick children who can't get the care they need, and increased medical debt, would all be byproducts of cutting Medicaid, and that would be a drag on nation's economy. Medicaid is vital to all it covers, but its benefits are particularly clear to people with conditions like cancer, heart disease, diabetes, and chronic lung disease who need ongoing medical care."
"Hard-working Americans with diseases such as cancer can get health coverage through Medicaid after having lost their health insurance because they are too ill to work or run through their savings," said Christopher Hansen, President of the American Cancer Society Cancer Action Network (ACS CAN). "This program is a safety net for American families, and losing access to the program could force them to stop treatment that could save their lives."
"Cuts to Medicaid funding would be harmful to the millions of children, pregnant women, and adults with diabetes who rely on the program to manage their disease and avoid dangerous and costly diabetes complications such as blindness, amputations and kidney dialysis," said Gina Gavlak, Vice Chair of the National Advocacy Committee, American Diabetes Association.
"We need to protect the health of our nation's most vulnerable populations, particularly our children with asthma and cystic fibrosis who will face the biggest burden from cuts to Medicaid. If denied this critical health care coverage, it will result in more costly heath care options, including increased emergency room visits," said Charles D. Connor, President and CEO of the American Lung Association.
 
 
 

Kucinich v. Obama: Obama Has Arrogated the war Powers of the British King To Himself in Violation of the U.S. Constitution

September 13th, 2011 • 8:54 AM
On Sept. 9, the plaintiffs in Dennis Kucinich, et al., v. Barack Obama, et al., filed a 50 page Memorandum of Points and Authorities in Opposition to Defendant's Motion to Dismiss the plaintiff's legal action accusing Obama of violating the Constitution and the War Powers Resolution in launching military hostilities with Libya without a declaration of war by the U.S. Congress.
The fact is neither the House nor the Senate has voted to authorize continued U.S. military involvement in Libya. Meanwhile, President Obama has asserted that he alone defines what a war is for constitutional purposes.
The central thrust of the argument of the plaintiffs is that Barack Obama has arrogated to himself powers exercised by the British King, which the U.S. Constitution deliberately denies to the U.S. Presidency.
Quoting extensively from the Federalist Papers, the Records of the Federal Convention of 1787, the Debates in the Several State Conventions on the Adoption of the Federal Constitution, etc., the plaintiffs strongly assert that Obama as adopted the British model against which the Revolution was fought and in opposition to which the Constitution was adopted.
Thus, the memorandum says: "According to Hamilton, the President's authority as Commander-in-Chief was intended to be 'much inferior' to that of the British king…. By contrast, the power of the British king 'extended to the declaring of war and to the raising and regulating of fleets and armies—all which, by the Constitution under consideration, would appertain to the legislature.
"Participants at the Pennsylvania, Virginia and North Carolina ratification conventions repeatedly contrasted the system of war powers in Great Britain, where the king could unilaterally declare war, with the system envisioned by the proposed Constitution, where only the Congress had that power."
George Mason speaking on June 14, 1788 said: "How is this compared to the British constitution? Though the king may declare war, the Parliament has the means of carrying it on. It is not so here. Congress can do both."
Edmond Randolph declared that the proposed Constitution placed "more powers in the hands of the people, and greater checks upon the executive … than in England." Randolph argued: "In England the king declares war. In America, Congress must be consulted. In England, Parliament gives money. In America, Congress does it."
At the North Carolina ratification convention, James Iredell noted the "very material difference" between the war powers of the king of Great Britain and that of the President, and emphasized that the President as Commander-in-Chief was not authorized to unilaterally engage in war:
"The king of Great Britain is not only the commander-in-chief of the land and naval forces, but has power, in time of war, to raise fleets and armies. He has also authority to declare war. The President has not the power of declaring war by his own authroity, nor that of raising fleets and armies. These powers are vested in other hands. The power of declaring war is expressly given to Congress…."
The plainiffs also cite a letter written by Madison to Thomas Jefferson, in which he explained the basis for the divergence from the British model: "The constitution supposes, what the History of all governments demonstrates, that the Executive is the branch of power most interested in war, and most prone to it. It has accordingly with studied care, vested the question of war in the Legislature."
They quote from Abraham Lincoln's letter to William H. Herndon:
"The provision of the Constitution giving the war-making power to Congress, was dictated, as I understand it, by the following reason. Kings had always been involving and impoverishing their people in wars, pretending generally, if not always, that the good of the people was the object. This, our convention understood to be the most oppresssive of all Kingly oppressions; and they resolved to so frame the Constitution that no one man should hold the power of bringing this oppression upon us."
In 1970 the U.S. Second Circuit Court of Appeals wrote: "History makes clear that the congressional power to declare War …. was intended as an explicit restriction upon the power of the Executive to initiate war on its own prerogative which was enjoyed by the British sovereign."
Having thus made it clear that the issue at stake is Obama's adherence to the British system of government in opposition to the intention of the U.S. Constitution, the plaintiffs then address their standing to bring suit:
Specifically, they allege that the President's unilateral commitment of U.S. military forces in Libya deprives them of their constitutionally prescribed role in voting to initiate war, and represents an effective nullification of their votes against authorizing a continuation of hostilities in Libya. Plaintiffs have thus suffered a "complete nullification or withdrawal of a voting opportunity" concerning the initiation of hostilities.

 

 


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