Colonial Bank Failure Highlights the Problem 68 comments
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The bankruptcy of Colonial Bank (CNB) was the largest bank-bankruptcy in the U.S. since several large, U.S. financial institutions collapsed last year – with the most recent being Washington Mutual, last fall. However, there is one huge difference between the mega-bankruptcies of last year and the collapse of Colonial Bank a week ago.
During the large bank-failures of 2008, the acquiring institutions wrote-down the “assets” on the books of these banks by an average of 18% - according to a Bloomberg article. However, when BB&T Corp purchased Colonial, it immediately wrote-down Colonial's assets by 37%, double the amount of discounting done last year.
What has changed between now and then? The legitimizing of fraudulent accounting, when the supposed “watch-dog” of U.S. accounting, the Financial Accountability Standards Board brought in new “mark-to-fantasy” accounting rules in the U.S. this spring ( see “FASB strong-armed into mark-to-fantasy accounting”).
As the Bloomberg article points out, all U.S. bankers lie about the value of their assets – specifically the quantum of their future losses. The more they underestimate future losses, the less they put aside as “loan-loss reserves”. The less they put aside as reserves, the bigger they can pretend the bank's profits were. The larger the phony “profits”, the more they can give themselves as “performance bonuses”.
This is not a new phenomena. In fact, U.S. bank-lying was found to have severely aggravated their last “banking crisis” in the 1990's through also consistently under-estimating/under-reporting the deterioration of their “assets”.
Given this context, it makes it even more obvious how utterly ludicrous and irresponsible it was for the U.S.'s accounting “cop” to create new rules to greatly facilitate lying about assets. If you want a heroin-addict to stop using heroin, then you shouldn't hand that person a jumbo-pack of syringes. Clearly this politically-motivated change in U.S. accounting rules had nothing to do with “more accurate” accounting – which was the false pretext of the banksters, and the media propaganda-machine which serves them.
The changes had two, and only two goals: allowing the weaker, Wall Street fraud-factories like Citigroup and AIG to pretend to be solvent, while for the slightly stronger members of the U.S. financial crime syndicate it was a “green light” to loot the same corporate treasuries which had just been stuffed full of U.S. taxpayer dollars.
As I have observed previously, the “performance bonuses” which Wall Street hands out are rewarding one aspect of their performance: the ability of these career-criminals to lie. As Bloomberg wrote, the bigger the lies, the bigger the bonuses.
Not surprisingly, bank-fraud rose by double-digits last year in the United States. However, what is a truly remarkable feat for this cast of compulsive liars is that despite the fact there were millions fewer mortgages financed last year, mortgage-fraud jumped 23% from 2007. It takes a truly dedicated group of criminals to achieve that sort of year-over-year gain in a collapsing market.
However, the significance of this new level of lying in the U.S. financial sector goes beyond stealing all of the money from their own corporations – and calling it “performance bonuses” (Goldman Sachs is set to hand out more than 100% of its “profits” as “performance bonuses” this year). It once again raises the issue of bank-solvency for the sector, as a whole, and once again illustrates that the Geithner “stress tests” were nothing but a ludicrous sham.
If the lies which the management of Colonial Bank were telling concerning their “assets” were twice as large as the average magnitude of bank-lying last year, then what does this tell us about the “stress-tested”, Wall Street fraud-factories? Having just finished scamming investors and institutions all over the world for trillions of dollars (leaving many of them in financial ruin), is there the slightest doubt that these champion-liars would be engaging in much greater falsification in their accounting than Colonial Bank?
The difference in the U.S. now from a year ago is that every single category of bank loans are experiencing much higher rates of defaults and much higher rates of delinquencies than a year ago, yet in the fantasy-world of Wall Street accounting, suddenly almost all these banks are “profitable” again?
Previously, critics of the new “mark-to-fantasy” accounting rules in the U.S., had to rely upon only overwhelming logic to discredit the claims of “profitability” from these professional liars. However, Colonial Bank provides us with the much sought-after “smoking gun”.
As I wrote less than a week ago in “U.S. Banking crisis just BEGINNING”, with all categories of delinquencies near or at all-time records, and with a huge spike in mortgage-resets about to kick-in over the next two years, there was never a possibility that the U.S. financial crime syndicate had miraculously returned to “profitability”.
Indeed, as I wrote less than a month ago (“Credit-risk spike means continued collapse for U.S. economy”), credit-reporting agency, TransUnion, recently released a report showing that its “credit risk” index just hit a new, all-time record in July. Much like loan delinquencies are a highly accurate indicator for future defaults, the soaring reading in “credit risk” is a highly accurate indicator of a pending rise in delinquencies.
Thus, despite the constant stream of delusional hype which emanates from the U.S. propaganda-machine, there has never been the slightest doubt that the only possible direction for the U.S. financial sector (and the economy, as a whole) is down.
Throughout this decade, the Wall Street banksters plundered more than $100 BILLION in fantasy “profits” from their global Ponzi-scheme – and then needed roughly twenty times that amount in government hand-outs to avoid a sector-wide collapse last fall. Then, as soon as that crisis (temporarily) passed, they began to immediately loot the taxpayer hand-outs, as well. At the same time, all of these fraud-factories have slashed their dividends to shareholders, adding to the massive losses of these investors from the melt-down in share prices.
One might think that these shareholders might be getting tired of being financially “raped” by these banksters. However, as I pointed out in “Explaining U.S. Market Psychology”, more than 50% of the shares of these fraud-factories are held by the wealthiest 1% of the U.S. population. These ultra-wealthy aristocrats are more out of touch with the real world than was Marie Antoinette – when she offered the starving French masses “cake”, just days before they chopped off her head.
While this is unlikely to occur in the United States (given the acute shortage of guillotines), it might be time for the Wall Street banksters to take heed of history.
They may own the politicians. They may own the regulators. And they may simply own most of America. However, they don't own the billion or so guns currently in the possession of an increasingly angry American population.
Massive economic suffering and a billion guns is a very dangerous mix!
Disclosure: I hold no position in BB&T Corp (BBT), Goldman Sachs (GS), AIG (AIG) or Citigroup (C)
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I'm not sure what the tipping point is or at what point (quite possibly long past) that so much gets funneled into the pockets of criminals that they truly own us. After all, they can always say, martial law and chattel slavery is good for us. As you say, at least all Americans don't have to and won't, roll over.
must be clawed back in future when the truth is made public/
> jack
Keep on truckin'. And oh - on the subject of all those guns - you can be sure that the gov will not be bringing the troops home any time soon in significant numbers. When they find out who and what they've been fighting for, they're likely to be extremely p*ssed off.
Best,
SOB.
On Aug 23 08:12 AM Leftfield wrote:
> Before the market rise I remember commenting about how it should
> make no sense for people to take the word of the suits that the water's
> fine, come on in, again. It seems it's easier to believe blatant
> feel-good lies than to wake up to a real nightmare.
> I'm not sure what the tipping point is or at what point (quite possibly
> long past) that so much gets funneled into the pockets of criminals
> that they truly own us. After all, they can always say, martial
> law and chattel slavery is good for us. As you say, at least all
> Americans don't have to and won't, roll over.
Are you kidding? They ARE the reality. The goose they're always talking about that lays those golden eggs, lays them in their very deep pockets. And there isn't anyone to "claw" them out. The top corporate bureaucrats (they prefer to be called "businessmen") know how to spread the gold around Washington.
Best,
SOB.
Nope, because the propaganda machine won't produce jobs, put food on the table or gas in the truck.
Alea iacta est.
> Are you kidding me? The gun-toters won't level their pistolas at
> the bankers, they'll aim them at the government. Whether one is more
> culpable than the other is difficult to say, since there seems to
> be a revolving door between government and the banks. But the McVeigh
> types never seek retribution from the corporations that outsource
> their jobs, hike their credit card rates, health insurance premiums,
> or seek tax breaks to relocate service-sector jobs in their neighborhood.
> They listen to Rush Limbaugh, and they only get angry at one end
> of the horse that's kicking them (usually the wrong end).
Many Paradigms Are Not The Same As They Were.
The Unemployed Have More Time To Pay Attention. Friends And Family Hold Greater Sway Than "Talking Heads On Television".
> If they own the politicians, they also own the military. Individual
> Americans' muskets will be no match for the training and armament
> of the US military. Marshall law will prevail in turbulent times
> ahead, not the billion or so guns you refer to.
The Military Is Still A Volunteer Service In the US (For Now). There Will Be "Conflict Of Interest" In "Suppressing Rebellion" Unless A "Successful False Flag Event" Occurs.
The Oath Is Still "Protect The Constitution Against ALL ENEMIES Foreign And DOMESTIC". The Marines Hierarchical Servitude Is: God, Core, Country.
Notice That There Has Not Been "Mass Rioting", Yet Gun and Ammo Sales are up 65% Since A Month Before The Presidential Election Was Decided. "Town Halls" Are Not As Civil As They Once Were. Americans Are More Aware Than The Media Gives Credit.
They Are Beginning To Turn The "Rhetoric" To "Veterans" And Those Who "Talk About The Constitution" - Thus Labeled As "Possible Extremists". (Interesting Coincidence?)
What Ever Happens - It Will Be Swift.
Pray That "Bloodless Revolution" Occurs Through Constitutional Amendment 10 Legislation. It is not about "Secession"; it is about "Constitutional Limits On Federal Power".
Other "Options" Will Prove To Be Less Civil.
> What can I do? I'm told to address my concerns with my congress person.
> Well I've got Pelosi, Feinstein and Boxer so that's out.
Tenth Amendment Center
www.tenthamendmentcent.../
Campaignforliberty
www.campaignforliberty.../
There Are Others - Pick Your Rally Point.
Anyone Who Advocates Returning To Constitutional Limits On Federal Power Is An Ally.
Divided We Fall - In Simultaneous Mobilization Success Is Possible.
The Consequences Of Failure Are Dire.
So, on one hand, governments award public funds to banks and then allow these same banks to circumvent accounting rules so that institutions may hand over their public funds to them too.
In so doing, our tax Dollars are looted in the first round and then our savings and insurance is looted in the second round leaving few people unscathed.
I'm wondering if dead bodies won't start turning up here and there. If certain individuals are stealing the national treasure and violating our highest laws, then why shouldn't they be killed ? The actions these individuals have taken will impoverish millions of Americans for decades. Why wouldn't we kill those individuals ?
All it takes, is enough people to say "Enough is enough!"
At present I think one of the major obstacles to change, is people's confusion of Politics with Government, to the extent that too many blame 'the Government'. Politics is all too happy to let Government take the blame, while it has hijacked it and transformed it to 'the Givernment', which is 'giving' them and the people that have our Politicians (Worldwide) bought and paid for, what they seem to feel is a bottomless ATM.
It's Politics over the wide spectrum that is the problem. Politics is just vested interest, and each Political faction has a vested interest in maintaining the Status Quo (corruption and criminality) along with their colleagues in every other Political faction, which are in fact no factions at all, they are the same thing with different labels on it, because they are all 'owned'.
As John Locke put it, "If the Law makes the King, then the King is subject to the Law". Well, if that is so (and it is) then "If the Law makes Government, then Government is subject to the Law" is also true.
We need *urgently* to return to the Rule of Law, and that of itself, will resolve the issues, automatically.
It's just how that inevitable return (and it is inevitable) to the Rule of Law is actually carried out, that is the $64,000 question. Usually it is accompanied with substantial bloodshed, but occasionally, it isn't (such as the Glorious Revolution of 1688, which saw the granting of America's first Bill of Rights, circa 1700, in gratitude for the assistance given).
Notice the performance of the market as the market to fantasy is enacted.
Take notice of the sheer magnitude of losses over at Wells Fargo, as compared to what they actually report: boombustblog.com/Reggi...
PNC is not returning TARP because their option ARM portfolio purchase is rotting: boombustblog.com/Reggi...
Here it is. Bank A is formed by acquiring the required amount of $51mill,however this is borroed money as seed capital money.the seed money collects interest 14-20% interest, for the depositor and the new bank now can loan out $510 million.The initial seed money depositor comes in for a $200million loan at 3.25%. Presto-- some of it is deposited back into the same bank and rest invested to make other banks.
Wake-up America