Another Five Billion Burned in Looter-Fest

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machinehead's picture
machinehead
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Another Five Billion Burned in Looter-Fest

From the NYT --

WASHINGTON — The Treasury Department injected $5 billion into GMAC,
the automobile financing company, as part of a deal announced Monday
night that will let GMAC convert itself into a bank holding company to
reduce its borrowing costs and thus borrow money at low rates from the Federal Reserve.

The deal came as the Treasury was also preparing to provide General Motors and Chrysler with $4 billion each in the first part of a bailout plan for the car companies.

The
Treasury will buy $5 billion worth of preferred equity shares in GMAC,
which used to be the financing subsidiary of General Motors and is now
owned jointly by G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler.

A
Treasury official said on Monday night that the deal had already closed
and that GMAC already had the money. In addition, the Treasury said it
would lend General Motors $1 billion so that it could purchase
additional equity offered by GMAC.

http://www.nytimes.com/2008/12/30/business/30auto.html?_r=1&hp=&adxnnl=1...

The true tragedy of such malinvestments is that we'll never see the
$5 billion of new start-ups in alt.energy, transit, education, health
services and technology which this wasted capital could have funded.

Spend enough years subsidizing politically-connected losers instead
of innovative winners, and pretty soon you're frickin' poor. But it
gets worse --

Last Wednesday, the Federal Reserve tentatively
approved GMAC’s petition to become a bank-holding company but demanded
that it persuade most of its bondholders to convert their debt into
equity and to raise more money to meet minimum capital reserve
requirements. GMAC had been racing to meet those requirements, but it
was silent on Sunday and Monday about whether it had cleared the
hurdle.

In shoring up GMAC, the Treasury resorted to using money from the Troubled Asset Relief Fund, the $700 billion rescue program for financial institutions that Congress approved in early October. The
Treasury had already allocated all the $350 billion that Congress
authorized for the first half of the program. But even though the
Treasury Department has not yet requested the second half of the money,
officials said they could provide the financing to GMAC because they
have not actually used all of the money allocated for recapitalizing
banks.

Got that? The Federal Reserve made GMAC into a bank, even though
GMAC never met the capital requirements. Then the Treasury illegally
gave GMAC money which has been allocated to someone else -- money which
has not been appropriated by Congress. Like Bernie Madoff, they have
promised the same funds to multiple beneficiaries, hoping that they
won't all draw down their Treasury lines at the same time.

Ben Bernanke and Hank Paulson are guilty of flagrant fraud. They should be
going to prison along with Bernie Madoff. But they aren't, because we
are living in a gangster state. As history attests, the economic future
of gangster states, devoid of the rule of law, is extremely dim. This
dying empire is being trashed and looted in broad daylight. Since there
is no visible reaction from the sheeple, they will smash and grab a
whole lot more in the next few weeks, before the new wrecking crew
takes office.

 

 

 

SamLinder's picture
SamLinder
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Re: Another Five Billion Burned in Looter-Fest
machinehead wrote:

Since there
is no visible reaction from the sheeple, they will smash and grab a
whole lot more in the next few weeks, before the new wrecking crew
takes office.

While I empathize with your frustration, I'm sure I represent a lot of folks out here who wonder what more we can do short of taking to the streets dragging a guillotine behind us.

When Paulson first tried the $700 billion dollar grab in September I, along with millions of others, contacted my Senators and Representatives demanding they vote NO! Initially that worked - to everyone's amazement. Then, just when we thought Congress was finally listening to their constituents, four days later they approved a pork-ladened version of the bill ticking off me and millions of others.

When we see the Executive, Legislative, and Judicial branches of our government all in apparent collusion, it becomes very difficult for the average citizen to know what to do - short of fleeing the country. But, these days, where do you go?

Fortunately, I had no money tied up in the stock market. However, as a retiree, I am still highly concerned that my relatively small retirement fund (in IRA CD's) is going to be eaten alive by future hyper-inflation. Again, where do I turn?

To be honest, I resent being considered one of "the sheeple". I would do more, but no one in Washington is listening to us anymore.

What are you doing to cope with these insane times?

Sam....

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MarkM
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Re: Another Five Billion Burned in Looter-Fest

Sam,

For you, personally, what will be the final straw.  You must have some point that might be reached where you will be in the streets with a guillotine.  After all, isn't that the one final card we, as a citizenry, have in our hand?

From the Declaration of Independence,

"Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security."

It is obvious that the voice of the citizens is no longer listened to.  Changes are near impossible at the ballot box.  What is our next option?

machinehead's picture
machinehead
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Re: Another Five Billion Burned in Looter-Fest

Sam,

Certainly anyone who bothered to protest the first $700
billion dollar grab is not a sheeple. However, the politicians
evidently feel (accurately, perhaps) that they can get away with this.

As
to your question of where to turn during rising inflation. TIPS, gold,
and short-bond funds are three ideas. It can pay to diversify (for instance, allocating one-third each to all three)
, so as to reduce volatility. Real estate, REITs and commodity ETFs are
three more ideas, to consider sometime during the next couple of years.
No one knows when real estate and commodities are going to bottom. But
the news is so spectacularly awful that a contrarian-minded person
would have to consider fading the doomsayer consensus.

SamLinder's picture
SamLinder
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Re: Another Five Billion Burned in Looter-Fest
MarkM wrote:

Sam,

For you, personally, what will be the final straw.  You must have some point that might be reached where you will be in the streets with a guillotine.  After all, isn't that the one final card we, as a citizenry, have in our hand?

From the Declaration of Independence,

"Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security."

It is obvious that the voice of the citizens is no longer listened to.  Changes are near impossible at the ballot box.  What is our next option?

 

MarkM,

For you, personally, what will be the final straw.  You must have some
point that might be reached where you will be in the streets with a
guillotine.

At this point, I can't answer that question. While I am highly frustrated, I don't think civilization will collapse to the point that it will require me roaming the streets looking for someone to behead. As the head of my homeowners association, I have a hard enough time getting anyone to cooperate on doing the simplest of things. I seriously doubt that I would be able to put together a lynch mob. Wink

Sam....

 

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SamLinder
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Re: Another Five Billion Burned in Looter-Fest
machinehead wrote:

Sam,

Certainly anyone who bothered to protest the first $700
billion dollar grab is not a sheeple. However, the politicians
evidently feel (accurately, perhaps) that they can get away with this.

As
to your question of where to turn during rising inflation. TIPS, gold,
and short-bond funds are three ideas. It can pay to diversify (for instance, allocating one-third each to all three)
, so as to reduce volatility. Real estate, REITs and commodity ETFs are
three more ideas, to consider sometime during the next couple of years.
No one knows when real estate and commodities are going to bottom. But
the news is so spectacularly awful that a contrarian-minded person
would have to consider fading the doomsayer consensus.

 

Machinehead,

... TIPS, gold,
and short-bond funds are three ideas. Real estate, REITs and commodity ETFs are
three more ideas, to consider sometime during the next couple of years.

As I noted in my earlier post, my funds are tied up in IRA CD's. If I tried to withdraw enough to make some of the purchases you suggest, the tax hit would be very painful causing my small nest egg to shrink even further. To be honest with you, even if I had some money available I would not feel comfortable purchasing anything but more food/water/shelter. Everything else that you mentioned is volatile and could destroy me in no time if the markets went the wrong way. And based on recent history, anything is possible.

As I've mentioned in past posts, I guess I'll just hunker down, cross my fingers and hope that "Damnthematrix" is a lousy prognosticator!  Wink

Sam....

 

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MarkM
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Re: Another Five Billion Burned in Looter-Fest
srlinder wrote:

 

 As the head of my homeowners association, I have a hard enough time getting anyone to cooperate on doing the simplest of things. I seriously doubt that I would be able to put together a lynch mob. Wink

Sam....

 

 

 

Thanks for the smile this morning.

Isn't that the truth.  I keep trying to talk to my closest friends and family about the potential (real as far as I am concerned) problems in the near future.  They really do think I am a little nutty.  I continue to prepare as best I can, in spite of their raised eyebrows.

 

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DrKrbyLuv
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Re: Another Five Billion Burned in Looter-Fest

machinehead wrote:
Ben Bernanke and Hank Paulson are guilty of flagrant fraud. They should be going to prison along with Bernie Madoff. But they aren't, because we are living in a gangster state. As history attests, the economic future of gangster states, devoid of the rule of law, is extremely dim. This dying empire is being trashed and looted in broad daylight. Since there is no visible reaction from the sheeple, they will smash and grab a whole lot more in the next few weeks, before the new wrecking crew takes office.

Sad but all too true. Our nation has become a herd of TV zombies who are satisfied having the corporate media tell them what's important and accepting their word as truth.

None of this would occur if people were vigilant, informed and vocal. I blame the people more than the crooks for allowing this to happen in clear violation of our laws and constitution. 

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DrKrbyLuv
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You may establish a self directed IRA

srlinder wrote:
As I noted in my earlier post, my funds are tied up in IRA CD's. If I tried to withdraw enough to make some of the purchases you suggest, the tax hit would be very painful causing my small nest egg to shrink even further.

You are free to establish a self-directed IRA which would enable you to invest in a great many things including gold, silver and real estate without any tax consequence.

For example, the EntrustGroup will act as your custodian for a fee to make sure all IRS requirements are met. There are many others offering similar services.

machinehead's picture
machinehead
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Joined: Mar 18 2008
Posts: 1077
Dang it, CRAP, THERE THEY GO AGAIN!

Speaking of 'smashing and grabbing a whole lot more in the next few weeks' -- DUH! Why
did I not realize that 'they' would announce their next move on New
Year's Eve afternoon, when everyone is cruising home from their
shortened workday and paying no attention? Me so stupid ... suckered again. Here's what I'm talkin' about:

Dec. 31 (Bloomberg) -- The U.S. Treasury drafted broad
guidelines for aid to the auto industry that would let officials
provide funds to any company they deem important to making or
financing cars
. With today’s announcement, the Treasury is giving itself
room to provide money from the Troubled Asset Relief Program
beyond loans already committed to General Motors Corp., GMAC LLC
and Chrysler LLC.

That’s consistent with analysts’ speculation yesterday that
suppliers, such as GM’s bankrupt former parts unit Delphi Corp.,
might be eligible for assistance. The Treasury guidelines may
encourage more guessing on what companies and industries are
next, said Vincent Reinhart, resident scholar at the American
Enterprise Institute in Washington.

Treasury officials “much prefer discretion, and so they
would view the statement as being constructively ambiguous,”
Reinhart said. “It’s appropriate that they end the year the way
they spent most of it -- that is, adding uncertainty into an
environment in which there’s a lot of uncertainty.”

http://bloomberg.com/apps/news?pid=20601087&sid=aY3eCakFleno&refer=home

OMG, the insanity. I just went out and started welding go-karts in the
garage from electrical conduit ('Machinehead Motors,' vital to the
'economy' ),
but it's too damned cold. Now I am upset. I would really recommend that
someone phone for psychiatric intervention, before a 'situation'
develops here. Don't make me self-medicate. Becuz when I'm on drugs,
I'll do anything ... Money mouth

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
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Re: Dang it, there they go again!

Good catch.

If I could be so bold, I have a proposed list of companies deemed "important to making or financing cars".

  1. Goldman Sachs
  2. Citibank
  3. Morgan Stanley
  4. Hank Paulson's wife's sister's interior decorating company
  5. Bank of America
  6. If anything is left, one could also make a case for GM, F, and Delphi but it's a stretch.
SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Dang it, CRAP, THERE THEY GO AGAIN!
machinehead wrote:

Speaking of 'smashing and grabbing a whole lot more in the next few weeks' -- DUH! Why
did I not realize that 'they' would announce their next move on New
Year's Eve afternoon, when everyone is cruising home from their
shortened workday and paying no attention? Me so stupid ... suckered again. Here's what I'm talkin' about:

Dec. 31 (Bloomberg) -- The U.S. Treasury drafted broad
guidelines for aid to the auto industry that would let officials
provide funds to any company they deem important to making or
financing cars
. With today’s announcement, the Treasury is giving itself
room to provide money from the Troubled Asset Relief Program
beyond loans already committed to General Motors Corp., GMAC LLC
and Chrysler LLC.

That’s consistent with analysts’ speculation yesterday that
suppliers, such as GM’s bankrupt former parts unit Delphi Corp.,
might be eligible for assistance. The Treasury guidelines may
encourage more guessing on what companies and industries are
next, said Vincent Reinhart, resident scholar at the American
Enterprise Institute in Washington.

Treasury officials “much prefer discretion, and so they
would view the statement as being constructively ambiguous,”
Reinhart said. “It’s appropriate that they end the year the way
they spent most of it -- that is, adding uncertainty into an
environment in which there’s a lot of uncertainty.”

http://bloomberg.com/apps/news?pid=20601087&sid=aY3eCakFleno&refer=home

OMG, the insanity. I just went out and started welding go-karts in the
garage from electrical conduit ('Machinehead Motors,' vital to the
'economy' ),
but it's too damned cold. Now I am upset. I would really recommend that
someone phone for psychiatric intervention, before a 'situation'
develops here. Don't make me self-medicate. Becuz when I'm on drugs,
I'll do anything ... Money mouth 

OK - That's it. Now I'm with machinehead. Since I don't have my guillotine handy I'm gonna have to start self-medicating. I just know I've passed through the Looking Glass and the Mad Hatter and the Mad March Hare are dancing around with buckets of money throwing $1,000,000 bills every which way. Please someone lock me up in a nice padded cell until this is all over!  Sealed

Sam....

SamLinder's picture
SamLinder
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Posts: 1499
Re: You may establish a self directed IRA
DrKrbyLuv wrote:

srlinder wrote:
As I noted in my earlier post, my funds are tied up in IRA CD's. If I tried to withdraw enough to make some of the purchases you suggest, the tax hit would be very painful causing my small nest egg to shrink even further.

You are free to establish a self-directed IRA which would enable you to invest in a great many things including gold, silver and real estate without any tax consequence.

For example, the EntrustGroup will act as your custodian for a fee to make sure all IRS requirements are met. There are many others offering similar services.

 

DrKrbyLuv,

Thanks for your advice. However, I'm so gun shy of any investments right now that I'm basically frozen in place. My IRA's are in cash CD's, my house is mostly mine (although the bank still has a claim), one of my two cars is paid off and I have food in the pantry and some emergency supplies if needed.

Until I get a better sense of which way things are going (is that even possible?), I'm going to wait right here and not rock the boat!  Surprised (deer in headlights!)

Sam....

 

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: You may establish a self directed IRA

Sam,

Portfolio theory says that varying the mix between a
risk-free asset (usually T-bills, but CDs are a close equivalent) and a
risky asset, you can set your risk at any level you want, from zero to 'full market risk.'

For instance, if you were to keep 90% of your assets in CDs and 10% in inflation hedge vehicles (gold, short bonds, commodity funds, REITs, whatever), then even a 30% hit to your inflation hedges would be muted to only a 3% impact on the overall portfolio. But in the other direction, a 30% gain in the risky portion leading to a 3% portfolio gain would be very significant in relation to CD interest, potentially doubling your total return for the year.

Everyone
has a different tolerance for risk. Using a risk-free asset as the
baseline of your portfolio, while making small allocations to riskier
plays, is the basic recipe for being able to sleep at night.

But a dangerous temptation arises
when the risky play has produced big gains. 'Great, I'm gonna redeem
all the CDs and buy small-cap offshore gold miners,' one exults,
pounding the 'Enter' button. This impulsive purchase usually proves to
be badly timed, whatever its long-term merits. The best purchases are
the ones that make you a little sick to your stomach, and people laugh
at you when they hear about them.

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: Another Five Billion Burned in Looter-Fest

When is the best time to pull off another $4 billion heist from the
Treasury? That's right -- on Friday night, in a holiday-shortened
workweek. Me so stupid -- SUCKERED AGAIN :

Jan. 2 (Bloomberg) -- Chrysler LLC, burning through cash as
sales slide, received $4 billion in an initial loan from the U.S.
Treasury to help stave off a collapse that could worsen a
recession.

Chrysler, based in Auburn Hills, Michigan, completed talks
with the Treasury and got its initial payment, according to a
company statement today.

http://bloomberg.com/apps/news?pid=20601087&sid=aVmQv0aunJOU&refer=home

Four billion here, five billion there -- pretty soon your kids don't have no future.

I will never buy another American car again (including the Jeep I own now). I don't do business with stinking looters. Yell

 

 

Damnthematrix's picture
Damnthematrix
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Re: Another Five Billion Burned in Looter-Fest
SamLinder wrote:

What are you doing to cope with these insane times?

Sam....

Ethanol.

I mean BEER!  Tongue out

Damnthematrix's picture
Damnthematrix
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Posts: 3998
the price of everything is being controlled

This came from my Aussie Running on Empty list.... thought you lot would be interested.

Mike

Here is an explanation that makes sense as to why
so much money is trying to buy into US bonds
that their price has gone up, = yields have halved.
 
Jim Willie
"The
other purpose is to encourage the many private banks to engage in a
basic form of carry trade. From their vast growing hoard, they borrow
short-term money at the official near 0% rate, and invest in long-term
USTreasurys at the higher rate. This carry trade has pushed the long
rates down from 4% to 2% in amazing fashion. Like the 2002 episode
urged by Greenspan, long-term rates are being directed lower, in order to aid the mortgage industry and housing market. "
 
[DK: the whole long article is good, here's a few snips :]
 
Amidst
a decade of huge monetary inflation and spectacular unbridled credit
expansion, the fools at the US Federal Reserve, US Dept Treasury, and
leading Wall Street firms have succeeded in producing a crash that has
destroyed at least $6 trillion of value in financial assets, which
offset the additional $6 trillion at least in property equity value.
They also killed Wall Street itself. The nature of their fool
status is a unique combination of stupidity (no learning from the
past), reckless risk management, corruption, bond fraud, and arrogance
that is closely linked with running a monopoly of power and influence.
One might better describe them as parasites inflicting a cancer upon
the nation, having taken control of brain functions.
Their risk
models have served as phony brain synapses within the banking system.
THESE CORRUPT INFLATION ENGINEERS HAVE KILLED ASSET VALUES WHILE
CONTINUING TO PUMP PRIME VIA THE INFLATION MACHINERY. The system is
near dead, if not dead. The banks are insolvent, and the households are
insolvent. A failed state is emerging.
 
[ ... ]
 
The newest bubble on the endless highway of US bubbles is the US Treasury Bond itself.
It is inconceivable that foreigners will be willing to pay top prices
for bonds yielding nearly 0% anchored to a USDollar grossly overvalued.
The USDollar will offer very little to prevent the gold price from
moving higher, step by step, as the switch is turned on by the Elite in
Power.
The clutch is soon to be released. Traction from the
monetary inflation engine will result in long ugly black rubber tire
patches. Gold will respond to the switch turned on. Then the
deflationists will be silent, and their wrong-footed analysis will be
forgotten.
machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: the price of everything is being controlled

'This carry trade has pushed the long
rates down from 4% to 2% in amazing fashion.'

As the FOMC announced in its Dec. 16th statement, this is likely to become an official policy --

'The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.'

http://www.federalreserve.gov/newsevents/press/monetary/20081216b.htm

Okay,
we took the hint, Ben. Front-run the government. Nice Bubble you've
made there. You're giving Mad Al a run for the money, aint ya?

When the going gets tough, the tough ... get down and party!

More free money! [lights blunt with hundred-dollah bill] Money mouth

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