Will It All Come Tumbling Down?
Courtesy of Karl Denninger at The Market Ticker
Let’s juxtapose two stories. First, from Bloomberg:
Aug. 14 (Bloomberg) — More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.
WASHINGTON (MarketWatch) — Delinquency rates for loans and leases at U.S. banks increased to a record 6.49% in the second quarter from 5.58% in the first quarter, the Federal Reserve announced Monday.
So let me see if I get this right.
At 5% of non-performing loans a bank is at risk of being insolvent.
But the entire banking system in The United States had its non-performing loan ratio increase from 5.58% in the first quarter to 6.49% in the second, a record, and higher than the 5% level at which the survival of a bank(ing system) is threatened with collapse.
Hmmmm…. So should we take from this that the entire US Banking System is about to collapse?
This much we know for certain – you’re being screwed – systematically – to cover the sins of these banksters who made loans to people who they had no reason to believe could pay:
Being in debt is about to get a lot more expensive for millions of Americans. Credit card issuers have been rushing to raise rates in advance of this Thursday, when the first provisions of the Credit Card Accountability Responsibility and Disclosure Act (CARD) will go into effect, with other protections starting in February 2010.
Right. Including those who are good credit risks.
This is the problem with allowing the blatant and outrageous fraud in our system to continue: Those who are prudent, who have done only good and not bad things, get reamed repeatedly and are forced, at gunpoint, to pay for the sins of those who committed that fraud.
Yet we, as Americans, permit this.
We absorb 20, 25, 30% interest rates (while the banks borrow at zero) so the bank executives who knowingly granted credit to those who could not pay, then sold worthless securities to investors, do not go to prison for fraud.
We pay more than $30 billion in overdraft charges and allow banks to "shuffle" deposits and withdrawals to generate the maximum in these fines so that the bank executives who are knowingly mis-marking "assets" at higher than their true values can "cover" their sin and do not go to prison for fraud.
We pay the FDIC "assessments" and "loans" from Treasury, as taxpayers and banking customers, so that the FDIC can repay depositors after it absorbs a loss that it should not have incurred – a loss that happened because OTS, OCC and the FDIC failed to close banks in a timely manner that were cooking the books when they either knew or were willfully blind to the control fraud taking place at these institutions.
Demand for loans continued to weaken across all major categories except for prime residential mortgages.
The American people are wising up, but only to a degree. They are refusing to take on new credit (as they should, seeing as they’re being charged not only for their own legitimate level of risk, but also for their next door neighbor who was intentionally given a loan that the bank knew he could not pay) and demanding in some small way that The Bezzle be eradicated.
The people recognize they’re being violated repeatedly by the scam artists on The Beltway and Wall Street, but they’re not quite sure how to stop it. Certainly, hollering at Congress hasn’t done any good. The Fed has refused to enforce consumer protections, as has Treasury, and both have done their damndest to overrule state regulations and even State Attorney Generals whenever possible.
Here’s reality folks:
The system still has too much non-performing debt in it, and that percentage is going up, not down.
It is getting worse, not better.
The only reason we have any "resemblance" of a functioning credit system at all at the present time is that the government and Fed are pumping upwards of $250 billion dollars a quarter – that is, $1 trillion a year – into the system to subsidize bad credit risks and keep those who have been and are getting screwed by these frauds – so long as they’re other banks and businesses – from having to bear the cost of these acts.
Instead of locking up the bank robbers (who wear a $3,000 suit instead of a kevlar vest and a gun) we are covering their theft with taxpayer money.
Instead of removing the embezzlement from the system and forcing fraud into the open, we are sweeping it under the rug.
Instead of demanding that people do business honestly and punishing those that refuse, we are allowing them $100 million dollar bonuses – after they run the price of your Granny’s Heating Oil up once again.
Tired of it yet? It appears not.
But there is a mathematical limit to this sort of papering over of control frauds. It cannot go on forever; we do not have the ability to tax or borrow an infinite amount of money. Unemployment will not ease and true production and consumption cannot resume at a normal level when a trillion dollars or more is being stolen every year to cover up these scams.
Ultimately the tax base and borrowing capacity will both collapse.
We will come to the end of this rope, and before we do we had better flush the system of these shysters and con artists or our economy will disassemble itself in a spectacle far worse than what you saw last fall and into March of this year.
Of that I am certain.
16% of our working-age population is unemployed but looking for work. Nearly 30% of people 16 to 19 years of age are out of work but desire a job.
Why aren’t those people in Washington DC? Whether they have to hitchhike, carpool, take a bus – why aren’t they on the steps of the Capitol? Why aren’t they on The Mall? Why have these millions of individuals who have been screwed, blued and tattooed by the thieving ways of the banksters and fraudulent accounting that our government and "business interests" have engaged in not shown up to press their demand for redress of grievances?
Have we really turned into Prozac Nation? Is American Idol really that powerful? Have we become so immune to being ripped off over the last 30 years that when a bank re-orders our transactions to turn a $30 overdraft charge into $300 worth of fees on $50 worth of checks we’re willing to simply bend over the table, place a stick between our teeth and take it, then ask "please Sir, may I have another?"
Or will we witness America turn to something more destructive – events that I’m hearing about more and more – civil unrest?
This has not yet turned to rioting, but in Chicago neighborhoods there are now crimes happening in areas – such as Lincoln Park – that were unheard of just a year or two ago (and when I lived there) – men being mugged, from behind, by gangs, being robbed and severely beaten (hat tip Janet Tavakoli for bringing this to my attention.)
There are a few people who are taking notice. Like this gentlemen:
No, that’s not someone about to commit an act of lawless violence. It is a man exercising his lawful Second Amendment right in a state that recognizes same – the right to keep and bear arms. He demonstrated, lawfully, while President Obama gave a speech in Phoenix. There was no violence, no shooting, just free speech coming from signs and mouths – and a polite society in which ideas were exchanged, backed up by the indelible yet unspoken statement: This demonstration WILL be and remain peaceful and I pledge my honor and, if necessary, life to guarantee every man and woman’s right to same.
As expected "the mainstream media" considered this gentlemen "a threat." Perhaps he is, but not in the way they’d like you to believe. Certainly, he’s a threat to anyone who might commit an act of random (or not-so-random) violence in that crowd! Certainly, he’s a guardian of freedom and the right to peaceable assembly and speech. Would you try to mug him walking down a street in Lakeview? Oh hell no. But you’ll never see that gentleman in the Lakeview neighborhood in Chicago because Chicago, unlike Phoenix, refuses to recognize your right to defend not only yourself but others as well, and as a consequence only the criminals are armed.
Certainly this gentleman is a threat – to a government that would run roughshod over people and ignore The Constitution and the lawful limits to its power, to a corporatist culture that has become imbued with fraud, deceit and lies, and to the heathens in Washington DC, all of them, who have knowingly and willfully cooperated with the lawless behavior of those who not only got us into this mess but refuse to this very day to put a stop to it.
Folks, wake the hell up. If you’re going to get mad and swear to "get even" with "the man", do so in a constructive fashion and channel that anger where it will do some good!
Do you want an America where your children cannot go to college without taking on $100,000 in debt? Where you can be taxed not by a government but by a bank to cover your neighbor’s bad loan – when the very same bank gave him that loan knowing he couldn’t pay it back? Where so-called "regulators" actively conspire to cook the books of a major thrift (IndyMac) which then fails, costing you – via FDIC assessments – billions of dollars? Where none of these acts of control fraud are prosecuted and in fact they are defended by our government going to court to block state law enforcement from protecting your rights?
What sort of nation do you tolerate, America? What sort of nation are you willing to live in?
Will you finally rise from your chair and demand that it stop when unemployment reaches 20%?
30%?
When you have no food in the pantry and no money to buy some?
When you are mugged and beaten, with the thieves stealing your cell phone and a mere $20 while walking home from the subway stop, or as you leave your local watering hole after a friendly drink? Or will you wait until you’re walking home from the corner grocer with a loaf of bread, purchased with your last $2, and are mugged by marauders who are hungrier than you – in a city that refuses to recognize your right of self-defense.
How high does your interest rate have to go on your credit cards – while your bank borrows the money it lends you at zero percent – before you cut ’em all up and send ’em to the bank with a picture of your erect middle finger instead of a payment?
How long will you sit while both Democrat and Republican lie to you about how the "bailouts" and "handouts" will help the economy. Has all this grift helped? Did the "stimulus" keep unemployment from going higher as was promised? Did you really get help with your mortgage or were you offered a scam "forbearance" that amounts to the back-end loading of your balance, turning it into a balloon note or worse? Have you enjoyed watching JP Morgan and other big banks that got tens of billions of taxpayer dollars lease tankers and then bid up the price of oil – causing it to double – with your tax money? How about The Fed and Treasury funneling tens of billions in taxpayer money through AIG to a literal "who’s who" of big banks so they could in turn pay billions in bonuses?
All of this obviously meets with your approval as demonstrated by your actions: You still sit back and pop a beer, you go about your daily routine, you refuse to rise from your chair and demand: STOP THE LOOTING AND START PROSECUTING, finally willing to back that up with your sacred honor – or more.
Sometimes I wonder what our nation will stand for – exactly where the breaking point is where we finally force the right things to be done. The right choices. Whether the time will come where we force the barons both inside the beltway and out to face the music for their sins.
Is it 10% unemployment? 15? 20? 1/3rd of our nation out of work and hungry?
Is it 2 million foreclosures, three, six, ten, thirty?
Is it credit card rates at 20%, 30, 50?
Will we submit to the jackbooted foot of the scammers and frauds on our collective necks, both in business and in DC, until our children starve and our grandmothers, mothers and fathers are shoveled in the hole, dead and cold?
Does America still truly have the capacity, as a people, as a nation, to get angry? To demand redress of grievance? To call, support, and honor a general strike? To take up, keep and bear arms not to commit violence but to stand shoulder-to-shoulder as our Constitution recognizes as our God-given right to prevent violence against not only ourselves but our neighbors – any and all of them? To peacefully occupy The Capitol and shut it down – not to loot, pillage or destroy, but to force the cessation of all commerce in an unmistakable and singular statement: This far you have gone, and you shall take not one step further until each and every guilty man and woman is under indictment, the institutions and businesses responsible are closed, and the ill-gotten gains returned.
Do we still have what it takes to make that happen? Do we have any more Rosa Parks’ in America? Any Dr. Kings?
Or is all we have left in us a descent into random lawlessness – civil unrest, or even full-scale riots where the looting and burning is not of the banks and others who have robbed America, but of the random store-owner, house or car – simply because it’s there?
I fear for my nation and her future.
I fear we have too few men like that gentleman in Arizona and too many muggers in Lakeview.
We live in a nation where our government’s founding documents formally recognize the supremacy not of the government, but of the people. Where government exists only by the consent of the governed.
Not of, by and for the corporation, but of the individual.
Not by the rule of man, but the rule of law.
But those are just words on parchment, over 225 years old.
Does the will and the desire to bring those words to life still exist? To render them something more than dry, old, cracked ink?
233 years ago there was.
Does it still exist in America today?
