Karl Denninger

Oh Yeah, The Economy Is Improving

"Cold Fusion" is a farce.

There are many who have peddled violations of the laws of thermodynamics (or quantum mechanics) over the years, but they have all - every one - been scams.

That's because those are laws, not suggestions.

Anyone putting forward such a "solution" has instantly defined themself as a kook.

'Too Big to Exist' Bill Would Impose Market Discipline

Using Sovereign Credit as your own is theft.

That's not the "free market", it is kleptocracy.

'Too Big to Exist' Bill Would Impose Market Discipline

Dollar for dollar for UNSECURED lending.

Loan $200,000 on a $300,000 house, you need hold no capital against it.

Want to lend $200,000 against a $100,000 house? You get to hold $100,000 in capital.

Why? Because otherwise you're lending THE SOVEREIGN'S CAPITAL!

This is THE foundation of sound banking. And, by the way, it is how banking USED TO BE done. For home mortgages it was 20% down in cash, 28% front end ratio, 36% back end. There were darn few defaults too, and those that happened left the bank whole, as it could sell off the asset.


On Nov 10 01:39 PM jamesa40 wrote:

> Dollar for dollar? Are you crazy? Might as well just declare all
> banks insolvent at that point. I'm all for the simple solution of
> imposing stricter capital requirements for banks the more assets
> they accumulate, but your (dare I say it?) "anti-capitalist" approach
> is draconian socialism at it's worst. Banks cannot just make money
> on the margin of buying deposits and selling loans. They have to
> use leverage in order to make enough to cover cost and ensure an
> adequate return to their shareholders. My requiring such a level
> of capital is to force banks out of business. But, if your intention
> is to restrict credit to all but the wealthy, be my guest.

'Fedization': Bear's Rescue Presents a Major Moral Hazard

Well from where I sit this is flatly unlawful.

The Fed has specifically enumerated powers and limitations laid out in The Federal Reserve Act of 1913.

Nowhere do I see the ability to provide what amounts to a bribe (the "backstop", or "no-recourse" loan), nowhere do I see the right to establish fictional persons for the purpose of moving liabilities off balance sheet (the LLC), and on and on and on.

And since Treasury and, if reports are believed, President Bush, signed off on this, they're complicit in a violation of their oaths of office.

Ergo, its time for America to stand up.

financialpetition.org does exactly that. It asks Congress to look into this cluster**** and determine if indeed the Constitution or law was violated and, if so, well, you know what comes next.