The Ostrich Head

Tokyo Electric Power: A history of lies, denial and safety infringements now leads to disaster

    At first it was minor damage.  Then the "possibility" of a release of small amounts of contaminated steam that posed "no significant health risk." 

    Now, as a third explosion rips through Tokyo Electric's reactors and a fourth one catches fire, the company and national authorities continues to deny that there's any significant risk.  They're a bunch of liars.

 

    This isn't new.  A radiation leak at a uranium processing plant in Tokaimura in 1999 that killed 2 and irradiated 600 had the public skeptical about whether Tokyo Electric actually took safety seriously.  Sure enough, in 2002 it came to light that Tokyo Electric Power Company had faked safety reports since the 1980s.  

    In one of the most shocking ones, brought to light by Wikileaks, the company injected air into the containment area of the Fukushima reactor (yup, the one now leaking like a sieve) to artificially lower the leak rate.

    Then in February 2003, eight workers were accidentally sprayed with radioactive water.  Oops.  Wrong hose.

    Senior management was shuffled around, the Chairman was forced out, and the company temporarily closed all 17 of its plants in 2003.

    … and nothing changed.

    This is nuclear power we're talking about.  Not some kid's fun ride that could hurt a dozen people and some bystanders. 

    So the company promised to clean up its act and be safe.  Sure.  For a whole year.

    One year later, in August 2004, blasts of radioactive steam killed four workers and severely burned 7 others.  But the company vowed to make sure its nuclear facilities were actually safe.  I mean, really, really safe.  Especially against radiation leaks in one of the most earthquake prone countries in the world.

    Then, come 2007, the largest nuclear reactor in the world was hit by an earthquake with magnitude 6.8.  That, on the logarithmic Richter Scale, means it was less than 1/100^th the size of the most recent 8.9 magnitude earthquake.  

    Once again, the plant sent plumes of contaminated steam into the air and spilled 317 gallons of contaminated water.  

    The president of the Japan Nuclear Technology Institute was quick to criticize Tokyo Electric: "The plant did an excellent job of ensuring the safety of the reactors."  Say what?  Oh, a minor earthquake the shut them down, caused a fire, and leaked radiation into the sea and atmosphere… ensured the safety of the reactors?

    But to his credit, he did question why Tokyo Power would build a reactor on a fault line.  I think in grade one in primary school my teacher said, "Now remember, children, ever build a nuclear reactor on a known fault line.  And if you do, make damn sure it's earthquake proof."  I think she added, "And don't build it near the coast in the path of tsunamis.  That's a Japanese word, so they must have a lot of them over there."

    Naturally, after the 2007 earthquake, the Japanese government set up a committee to set new guidelines to earthquake-proof the rest of Japan's nuclear reactors.  So the committee set guidelines that looked more stringent, but didn't affect any of the existing plants or force them to increase safety standards.

    One member of the committee, who in a very un-Japanese style outburst, resigned in disgust saying, "The new guidelines are very insufficient and have loopholes."

    His critics responded with their own detailed incident analysis: "The Kashiwazaki plant was just unlucky."

    It also resulted in 50 unlucky cases of water leakage, fire and other problems at the seven reactors.  Well heck, you can't get unluckier than building on an earthquake fault-line.

    Oh, except building in the path of a tsunami.

    Damn unlucky.  A tsunami hasn't ever hit Japan except for an unlucky one in 1993.  And another unlucky one in 1983.  And in 1952, 1946, 1923…  

    But the new guidelines simply ignored the possibility of luck and stuck to proper issues, with the attitude of crossing that bridge when it got washed away.

 

    But back to Tokyo Power and The Authorities…

    According to Cabinet Secretary Yukio Edano yesterday, there's little or no health danger from radiation outside the 12-mile evacuation zone. 

    This is slightly better than Tokyo Electric.  The only thing on its website that would make you even suspect there was a major problem was this little announcement:

At approximately 6:00am, a loud explosion was heard from within the
power station. Afterwards, it was confirmed that the 4th floor rooftop
area of the Unit 4 Nuclear Reactor Building had sustained damage.

 After usage, fuel is stored in a pool designated for spent fuel.
Plant conditions as well as potential outside radiation effects
are currently under investigation.

TEPCO, along with other involved organizations, is doing its best to
contain the situation. Simultaneously, the surrounding environment
is being kept under constant surveillance.

 

    Talk about forthcoming!

    Meanwhile, the USS Ronald Reagan, operating 100 miles away -- eight times as far as the evacuation zone -- had to reposition because crew members were exposed to radiation.  

    A reporter friend of mine fresh from Japan once told me, "You can call up a Japanese in an office building with smoke billowing out of his window and he'll still insist that there's no fire and everything's under control.

    Well everything seem to be under control right now, according to the authorities.  They may change their tune at the first sign of a mushroom cloud.  Maybe.

 

  Update:  Not an effing chance.  Now, far greater levels of radiation are being found in water and the government's telling people, "But it's still safe for you.  Just not for babies."  But this is a one off.  Apparently there was a natural phenomenon that caused this.  Yup, the Science Ministry blamed it on the rain.

 

    And to make sure people know they're in no real danger, they raised the decontamination threshold from 6,000 cpm to 100,000 cpm.  Say what???

    That's the equivalent of raising the safe blood alcohol content for driving from 0.06% to 1%.  It's ludicrous.  It's insane.  The lies and the coverups are getting worse.

    Two nuclear plant workers were hospitalized with radiation injuries.  One wonders if they had been within the decontamination threshold.  

For news on the coverup and how bad this is really going to get, have a look at http://thekeytoeternity.blogspot.com/2011/03/worlds-worst-nuclear-disaster-newly.html

 

    Second update:  The Japanese government 

The most corrupt company in history

    The Daily Bear (aka The Ostrich Head) has, through perusing thousands of audit reports, selected the most hideously corrupted company in the world.  Here are a few extracts of the 26 page report:

    Material weaknesses discussed later in our report continued to (1) hamper the [company]'s ability to reliably report a significant portion of its assets, liabilities, costs, and other related information; (2) affect the [company]'s ability to reliably measure the full cost as well as the financial and nonfinancial performance of certain programs and activities; (3) impair the [company]'s ability to adequately safeguard significant assets and properly record various transactions; and (4) hinder the [company] from having reliable financial information to operate in an efficient and effective manner.

 

  • Certain material weaknesses in internal control over financial reporting and other limitations on the scope of our work resulted in conditions that continued to prevent us from expressing an opinion on the accompanying consolidated financial statements for the fiscal years ended September 30, 2009 and 2008.

 

    Because of the [the company]'s inability to demonstrate the reliability of significant portions of the its accompanying consolidated financial statements for fiscal years 2009 and 2008… we are unable to, and we do not, express an opinion on such consolidated financial statements.

 

    As a result of these limitations, readers are cautioned that amounts reported in the consolidated financial statements and related notes may not be reliable. 

 

    The material weaknesses that contributed to our disclaimer of opinion on the consolidated financial statements were the [company]'s inability to

 

  • satisfactorily determine that property, plant, and equipment and inventories and related property were properly reported in the consolidated financial statements;

 

  • ensure that the [company]'s consolidated financial statements were (1) consistent with the underlying audited entities’ financial statements, (2) properly balanced, and (3) in conformity with GAAP; and

 

  • identify and either resolve or explain material differences between certain… changes in cash balance… and underlying financial information and records.

 

    Due to the material weaknesses and other limitations on the scope of our work discussed above, there may also be additional issues that could affect the consolidated financial statements that were not identified.

 

    To make the fiscal years 2009 and 2008 consolidated financial statements balance, [the company] recorded net increases of $17.4 billion and $29.8 billion, respectively, to net operating costs, which it labeled “Unmatched transactions and balances.”  An additional net $8 billion and $11 billion of unmatched transactions were recorded in costs for fiscal years 2009 and 2008, respectively.  [The company] is unable to fully identify and quantify all components of these unreconciled activities.

    It goes on and on and on.  I mean, this is worse than Enron right?  What company, seriously, could possibly get away with this and pull the wool over both government and shareholders' eyes? 

    And don’t tell me you actually guessed this is the US government.  I mean, this is the fair and transparent administration of Barrack Obama we're talking about. 

    But yes, sadly, this is from the official audit of the US government by the Government Accountability Office.

    And you wonder why the SEC can't find guys like Madoff?  Here's what the GAO had to say about the SEC:

 

    As of September 30, 2009, SEC did not have effective internal control over financial reporting.  We identified six significant deficiencies that collectively represented a material weakness in SEC’s internal control over financial reporting.

    In other words, the regulator that's supposed to weed out poor reporting and governance can't even get its own house into order!

    To clarify the accounting text in the Government Accountability Office Auditor's Report (or, rather, the non-report), the Whitehouse issued A Citizen’s Guide to the Financial Report of the United States Government.

     For easy consumption, the Whitehouse managed to reduce a 26 page report into 14 pages.  At least it does discuss transparency (once):

The website, Recovery.gov, is the centerpiece of the President’s commitment to transparency and accountability. Recovery.gov features information on how the Act is working, tools to help hold the government accountable, and up-to-date data on the expenditure of funds.

    Oops.  That's somewhere between an untruth and a straight out lie!

    The Citizen's guide also had a look at the problem of the horrendous lack of controls and balances -- in the securities market!  In fact, the citizen's copy totally missed out the bulk of the GAO report.

    Specifically, it missed the 27 pages (of a total of 28) that stated why the GAAP reported budget deficit of just $1.4 trillion was a complete sham.

    Fair enough I guess.  You don't want concerned citizens finding out about this sort of thing.

    Fortunately, you can't fool everyone all the time, and the guys at Shadow Stats who take government figures and compare them to reality found that the actual GAAP loss was $4.3 trillion.

    The reason I bring this up is the number of tea parties held recently.  For those of you who don't know the history of the Boston Tea Party, it basically marked the end of low-tax British Government Regime and the institution of the high-tax US Government Regime.

    Thanks to the GAAP loss, which is in essence a deferred tax, and to the corrupt and absurd policies that created it, Americans really should be holding their tea parties the day after Christmas!!

Cheers,

Peter.

The Tea Parties should be held the day after Christmas

    A number of tea parties were held recently in celebration of the Boston Tea Party.  For those of you who don't know the history of the Boston Tea Party, it basically marked the end of low-tax British Government Regime and the institution of the high-tax US Government Regime.

    Not much to celebrate for sure.  Now Tea Partiers celebrate the time of year when they've finished paying money to the government (about 35% of their year) and are now earning for themselves. 

    This is clearly misdirected and wrong.  These guys really need to take a long hard look at the numbers.

    The GAAP budget shortfall of $4.3 trillion is what Americans will have to pay in future taxes.  So it's nothing more than a deferred tax.

    If we add on the $1.75 trillion that individual American's already paid in tax, that brings the total tax bill to $6.05 trillion. 

    With the 155 million Americans over 15 that are working and earning an average of $39,500 a year, total personal income in the US is $6.12 trillion.

    That means total paid and deferred taxes account for 98.9% of the average income.  This puts the proper celebration for the Tea Party on the day after Christmas.  This still gives Americans four days to earn money for themselves (and five in a leap year)!

 

    Cheers,

    Peter.

SEC brings a harsh judgement against arms dealer Adnan Khashoggi

    Bad boy Adnan Khashoggi, the Saudi arms dealer who negotiated the arms sales to Iran in the Iran-Contra affair, has finally been brought to justice by the ever-vigilant SEC.

 

Let me give you some background:

    Having started his career as an honest businessman, brokering arms deals in the Middle East for Lockheed Martin, Raytheon, and Northrop-Grumman, and investing in diamond mining in the Central African Empire, Khashoggi became the world's richest man in the 1980s.  (It was his yacht below that was used in the James Bond film Never Say Never Again.)

    However, business wasn't always good.  His Triad Holding Company, for example, went bankrupt after he was indicted for using it to channel money for the Iran-Contra deal.  Fortunately, he made his $4 million bail thanks to his friend, Peter Munk, chairman of Barrick Gold.  Barrick Gold, which was founded by Khashoggi in the first place, is also deep into illegal government activity.  He still held onto his Barrick Gold shares though -- despite them being held as collateral for the arms deal.

    Business was good for a while, having helped out his good friend Imelda Marcos hide her gold and assets -- legally according to the verdict.

    Having got off that one, Khashoggi started another business, called GenesisIntermedia, a telemarketing company.  This was during the .com boom. 

    The stock was the best performer in 2000 despite losses of more than $17 million on just $229,000 revenue.   

    However, it wasn't the best performing stock for no reason.  And this is where Khashoggi began breaking the law.  Didn't see that coming did you?

 

    A well known financial commentator, Courtney Smith, helped push this stock on CNBC, Bloomberg, and elsewhere, for a tiny $1.1 million fee. 

    Having pushed the stock from $1 a share all the way up to $17, Khashoggi paid off some brokers to borrow his stock and lend it to Deutsche Bank Canada to the tune of $130 million.  (Yup, the very same company with internet revenues of less than half a million.)

    Under this scheme, Deutsche borrows the stock and pays Khashoggi the value of the shares.  Or, to put it another way, Khashoggi gets the cash for his shares without having to sell them and give away his game.

    After 9/11 his stock crashed and he owed Deutsche Bank Canada and other brokerages $130 million.  Naturally, GenesisIntermedia went belly up and Khashoggi made out like a Saudi oil tycoon.  Deutsche Bank and a few securities companies were left holding the baby.  Khashoggi made the $130 million disappear -- cleverly done considering the FBI was watching every international bank transfer at the time!

    Now what Khashoggi did was illegal.  As were the actions of the Deutsche Bank employee who circumvented the safeguards, other principals of the company, and Courtney Smith.  The SEC went after them with the speed of an oak tree.

 

    This month, however, the SEC finally brought them to justice. 

 

    As a result of this fraud, Richard Evangelista, who enabled the $130 million stock lending fraud was fined a hefty $40,000 in settlements and penalties.

    But Khashoggi didn't get away anywhere near as lightly as that.

    Nope, the arms broker, in a settlement with the SEC, agreed to a five year officer and director ban in return for the SEC dropping all charges, fines, and penalties.

    And you think that's stiff?  The SEC managed to get even more from him than that.  Khashoggi even had to agree to an order preventing future violations.  Take that!  Now it's illegal and, and... you promise not to do it again too.  So there!

 

Cheers,

 

Peter

Operation Iraqi Freedom a resounding success

    Since the invasion of Iraq in 2003, the number of Iraqi deaths by suicide bombers, car bombs, gunfire and executions has fallen from a peak of 72 per day to just 9.6 a day this year.  That corresponds to just 11.2 per 100,000 population per year. 

    If we call that the murder rate (and it's probably pretty close), see how well Iraq stacks up:

Sources:
http://www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_08.pdf
http://www.nationmaster.com/graph/cri_mur_percap-crime-murders-per-capita
http://www.census.gov/compendia/statab/cats/law_enforcement_courts_prisons/crimes_and_crime_rates.html

 

    Heck, if Thailand gets any more dangerous, I'll head to Iraq for safety.  Well done George W Bush and Obama.  You guys are terrific. 

    Still, it gets me thinking that if the US had spent $3 trillion on New Orleans instead of Iraq -- $26.5 million per family instead of $0.6 million per Iraqi family -- it could have reduced the murder rate there slightly, as well as turning it into a show case city.  A hard sell politically of course.  They'd have to get the Congressional Budget Office to forecast a budget of just $20 billion a year and then watch it blow out 30-fold!

    It worked for the war, it will probably work for health care, so why not for the poor souls in New Orleans.

    Realistically, though they are probably better at helping to reduce Afghan civilian casualties.

 

Cheers,

 

Peter. 

IMF gold holdings: why mine the stuff when your accountants can create it?

    Last week Eric Sprott, who heads up the Sprott Physical Gold Trust (NYSE:PHYS), created a bit of a storm when he offered to buy the IMF's remaining 191.3 tons of gold for sale on the market.  The IMF told him to piss off.

     So the world started wondering if the IMF actually has the 3,005.3 metric tons of gold it claims.  Or, if the US and other countries have the gold they claim to have.

     The issue really comes down to ownership.  We all know the old adage, "Possession is 90% of the law."  One wonders if that applies to the IMF. 

     The IMF originally got most of its gold from payments of quotas, whereby member countries paid in 25% of their funding quotas to the IMF in physical bullion.  This method was maintained until 1978 when it was already abundantly clear that gold production couldn't keep up with government printing presses and the gold standard was abolished.

     Since 1978, the IMF hasn't dealt much in gold, but did manage to acquire 403.3 tons of gold since then, mainly from South Africa in 1999.  That's the gold for sale (less the 212 sold to India, Sri Lanka and Mauritius central banks).

     The rest of the gold paid in by member countries is stored in depositories in the US, the UK, France, and India (which made the 200 ton sale to India rather simple, not to mention coincidental). 

     This gold belongs to the IMF of course.  But if 85% of IMF vote holders decide to send the gold back to whence it came, the gold goes back to the countries that donated it.  The US, with 17% of the vote, obviously has veto power over this. 

     Of all the gold paid into the IMF, 50% had to be stored in "the depository designated by the member in whose territories the Fund has its principal office."  That's another way of saying "Uncle Sam's vault" (the IMF is headquartered in Washington D.C. across the road from the World Bank and less than a km from the Federal Reserve).

     This is all pretty boring stuff, until you read the adjustment to the articles adopted on 1 April 1978 (not an April Fool's Day joke, but it may as well be):

 

       F-2. The Fund may hold gold under earmark for members.

 

    This is such a tiny innocuous little phrase and really shouldn't make a diff right? 

     But the problem comes down to its other articles of incorporation, which state that the IMF can't loan its gold.  However, if instead of calling the gold its own, it holds gold "under earmark for members" then the members can simply loan out the gold... as well as call the gold their own.

    Sure, I'm not a lawyer and may be misinterpreting this deliberately ambiguous phrase, but it's what is actually going down. 

     The US gold reserves, for example, include the gold it has paid into the IMF and which the IMF holds "under earmark for members".

 

    This came out last year when in an interview with Conny Lotze of the IMF who stated that, "Members do not include IMF gold within their reserves because it is an asset of the IMF.  Members include their reserve position in the fund in their international reserves."  That's world-class gobbledegook.

     To put it in English, IMF gold isn't counted as reserves, but the gold that the IMF holds under earmark for members is their reserve position in the fund and therefore gets counted in their international reserves. 

     That's all pretty handy really.  So the IMF owns the gold and doesn't lend it, but because it's held under earmark for members, the members themselves can lend it (and include it in their own stated gold reserves). 

     It also brings into question the accounting standards used. 

     If the countries that provided the gold are still counting that gold amongst their reserves -- or can selectively decide to do so -- one wonders how much of the IMF gold is double counted as central bank gold.  It seems pretty clear that if you added up all the gold in the world's central banks plus the IMF gold, you'd be coming up about 3,005.3 tons short of what's actually in the depositories.  Or at least physical bullion plus JP Morgan IOUs!

     Once again, this is mere speculation with little factual basis.  But there is an interesting jump in the amount of official gold holdings between 1958 and 1959.  This was the first major increase in IMF gold since 1945, and boosted institutional gold holdings (IMF) by 797 tons.  At the same time, central bank holdings -- the supposed source of this gold -- fell by just 48 tons.  Hah!  And you through Enron was breaking ground with accounting fraud!

     This one time jump in total official gold holdings of 749 tons was the second largest on record -- beaten only by the 1963 jump of 833 tons ahead of the 1966 increase in IMF gold.  Since 1966 there has only been one year where official global gold reserves rose by more than 150 tons.  And if you haven't guessed that it was the next time the IMF increased its gold holdings, then you really aren't getting my drift.  That was 1970 when world official gold holdings rose by 320 tons.  I'm willing to bet the IMF's entire gold reserves (less 191.3 tons) that they are double counted.

     One final thought... between 1950 and the peak of the 1980 gold bubble, world official gold holdings rose by 4,740.1 tons, according to the World Gold Council.  The same source notes that gold held at institutions (IMF, BIS, EMI) which was transferred from central banks also increased by 4,740.1 tons.  Gold held at central banks was unchanged after 30 years at 29,721.0 tons. 

     This is entirely coincidental by the way and you shouldn't read anything into it at all.

 

 

Cheers,

 

Peter.

 

 

The US economy created 162,000 jobs in March

    There are few clearer signs that the recession is over than rising employment.  Clearly, that's precisely where we are.  For the month of March, the Bureau of Labor Statistics report that 162,000 jobs were created in March.

    This is the best result since March 2007.  TIME TO CELEBRATE.

    But, as always when good news comes out, the bloody naysayers, pessimists, and perennial bears come out with some claptrap to suggest that this isn't as good as it seems.

    One hugely positive report was the number of temporary workers hired by the 2010 census.  Some of the naysayers suggest that the extra 48,000 temp workers hired to get surveys filled in shouldn't count because they aren't contributing anything to the economy and are only temporary.  Not like newsletter writers or the other 313,000 temporary help workers hired since September.  Besides, this is government employment.  Of the entire public service (17% of all employed), these census workers are probably the most productive.

    Then there's the population gain.  The population is growing at a rate of 0.997% per year, or around 250,000 a month, implying an extra 62,500 more service providers are required each month (based on a ratio of 1 in four -- a rather conservative estimate given that the current ratio is 1 in 3.4).

    Sure enough, health care and social assistance alone added on 36,700 new jobs in the month.

    "And don't forget the weather!" yell the pundits.  Sure, global warming took a holiday in February, which meant fewer jobs as construction and other outdoor work to the tune of around 100,000 according to Whitehouse estimates.

    So, three temporary effects added 210,500 new jobs.  But apart from that, the 162,000 jobs number is pretty rosy right?

    Except for U6 unemployment -- the widest measure of unemployment -- rising to 16.9% from 16.8% in February and 16.5% in January.

    Oh, and the 414,000 increase in long term unemployed (27+ weeks).

    And irrelevantly, average hourly earnings of all employees fell by 0.1%.

    But at least at 9.7%, the US is still in single figures in terms of headline unemployed and there's no sign of an uptick.  At least on the official U3 headline number!

 
 
   

Cheers,

 

Peter.

Geithner to adopt bankrupt firms’ plan to regulate derivatives

    Geithner, knowing full well that he isn’t qualified to actually regulate anything (isn’t that the SEC’s job?) has turned to four experts:  Credit Suisse, Goldman Sachs, JP Morgan, and Barclays Plc.  These banks have all demonstrated their ability to fully understand the risks of derivatives and are models of conservative banking and fiscal responsibility except that:

Goldman Sachs received a $10 billion bailout directly from the government and, while maintaining it had nothing to gain by its independent advice, advised the government to bailout AIG for $180 billion.  AIG promptly paid $13 billion to Goldman.  It helps of course when the CEO of AIG was a former director of Goldman, and was appointed by the former Treasury Secretary Hank Paulson who was a former CEO of Goldman.  After receiving the handy $13 billion from AIG, Goldman crowed about how it was so financially responsible that it could repay the TARP funds early.  Thanks Tim!  After giving such blatantly self serving advice to the government that benefited nobody but itself, secretary Geithner is rushing back to Goldman for even more independent advice.

Barclays narrowly avoided getting a bailout from the UK government, which would have involved taking on subordinated debt and preferred shares at a hefty cost of 11% per year.  Instead, the bank courted the states of Qatar and Abu Dhabi for $7.3 billion in convertible preferred shares and subordinated debt paying a ridiculous 14% interest.  The management considered this a better option for shareholders because it avoided the executive compensation limits that the UK government was trying to impose.

JP Morgan was one of the first in line when the TARP funds became available and received $35 billion off the top to shore up its derivative losses.  Meanwhile, other banks further down the foodchain that went bankrupt due to the mortgage crisis were told to get screwed. 

Credit Suisse was forced to arrange its own $10 billion bailout from the same Middle Eastern sources that Barclays tapped.

    Having received advice from the experts, Geithner is now considering a few wise moves in regulation, such as:

    Making the Federal Reserve the regulator

This makes sense because the banks own the Fed, so there won’t be any conflict of interest.  The SEC seems to have missed this job because it failed to notice a $50 billion ponzi scheme and lost all credibility.  The Fed, on the other hand, failed to notice the entire banking system it was supposed to regulate going bankrupt to the tune of $12.5 trillion -- the equivalent of 250 Madoffs -- and actually GAINED credibility. 

    Increasing capital requirements for banks, corporations, hedge funds, and energy companies that trade in the OTC derivatives market.

Who ever heard of capital requirements for hedge funds?  And for energy companies???  In fact, the only corporations that are set up to meet any sort of capital requirements are banks such as Goldman Sachs, Barclays, JP Morgan etc.  The rest will be barred from trading in the OTC derivatives market except by paying commissions to banks such as... ah, I get it... great objective advice wasn’t it?

    Having OTC traders report to the Fed

This is probably the most blatant power grab by the banks.  ALL traders in OTC derivatives, such as hedge funds and energy companies, would now have to report everything to the Federal Reserve.  From being a simple bank-owned and operated money printing machine, the Fed will become the de facto regulator of industry, hedge funds, pension funds, and securities companies.

 

    The final version of the draft legislation hasn’t yet been released -- except to bank which are working on it to ensure that it is as fair as possible (to banks).

    Once it does go through, American corporations won’t be able to enter into hedging contracts without paying commissions to banks for execution.  No wonder banks make up such an outlandish percentage of US market cap -- they own the market!

 

Two more banks fail

    Two Illinois banks, Strategic Capital Bank and Midland States Bank, were shut down by regulators on Friday.  In the first 18 weeks of this year, 36 banks have now failed.  The steady stream of two banks a month hasn’t slowed down at all.  There were still 76 banks undercapitalized based on the updated regulatory capital guidelines as of March 31.  There are now 74 and falling.

    With bank failures being a leading indicator of economic recovery, it does make government claims that the economy is bottoming look like the brown stuff that comes out of the rear end of a bull.

 

Cheers,

Peter.