By Karl Denninger, The Market Ticker

Does anyone remember me ranting at the time of the TARP’s passage about an obscure little sentence that allowed Bernanke to set the reserve ratio on the banks to zero?

Well, Bernanke’s Congressional testimony yesterday garnered a footnote on the issue, specifically:

Given the very high level of reserve balances currently in the banking system, the Federal Reserve has ample time to consider the best long-run framework for policy implementation. The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.

Right.  The cost is that you have to actually have something called “capital” behind your loan book, and you had a velocity limiter as well.

This is simply unbelievable.  To call such a thing a “distortion” is the worst sort of outrage to come from a central banker.

Reserve requirements have largely become a quaint subject since Greenspan effectively eliminated them by allowing almost-unlimited marketing and use of “sweep accounts.”  But nonetheless they remain one of the checks and balances on potential bank runs destroying a firm’s cash position without warning.

The sheer lack of recognition and understanding that we’re in this mess almost exclusively due to excessive leverage in all parts of our financial system is beyond ridiculous – especially for an agency that now wants to be granted even more power of oversight and “regulation.” 

“I’m sorry” isn’t good enough when you operate from a perspective that someone else (in this case the taxpayer) gets to clean up your messes, and this sort of philosophical idiocy will do nothing but guarantee that we’ll have much bigger banking messes in our future.

More articles from the Market Ticker….

The Post discussed the extent to which banks have repaid their TARP money, noting that small banks have been much slower to pay back the government loans than large banks. At one point the article discusses the sale of warrants on bank stock that the government received as part of the package. It comments that: “the goal of requiring the warrants was to ensure that taxpayers would see a return once the banks recovered.”

It is worth noting that the government lent TARP funds at interest rates that were far below the interest rates prevailing in the market at the time. In many cases these below market loans were needed to allow banks to survive. In all cases, the subsidy provided by these below market loans amounted to a substantial gift to the bank.

For example, Goldman Sachs (one of the more creditworthy banks) had to pay 10 percent interest on the money it borrowed from Warren Buffet at almost the exact same time as it got TARP loans from the government. The interest rate on TARP loans was 5 percent. It also had to provide Buffet far more warrants per dollar of loans. In the case of Goldman, the subsidy from its below market TARP loans almost certainly amounted to more than $1 billion, even if the government still reports a profit on these loans.

It is deceptive to say that the government made a profit on its TARP loans since it could have made a much larger profit if it had lent this money at market rates. Making capital available to favored borrowers at low cost, in the middle of a financial crisis, allowed these favored banks to make enormous profits with the government’s money.

–Dean Baker

Read more….

NEW YORK (CNNMoney.com) — The government’s unprecedented $700 billion economic bailout will actually cost taxpayers just 16% of that total, according to a Congressional Budget Office report released Wednesday.

The Treasury’s losses on the Troubled Asset Relief Program (TARP) will total $109 billion over the program’s lifetime, CBO latest estimates show. That’s up $10 billion from the agency’s last projection, released in January.

Read more….

By Chris Carey, Bailout Sleuth

A
former loan officer at a bank that got federal TARP aid has been banned from the
industry after forging loan paperwork that caused his company to lose nearly
half a million dollars.  

According
to the order from the Federal
Reserve, Adam Benarroch, a former assistant vice president of Midwest Bank and Trust in Elmwood Park, Ill.,
forged documents related to at least 14 loans in 2003 and 2004. 

His
goal was to increase his bonus, which was tied to loan volume, according to the
Fed. 

“Over
a period of eight months (Benarroch) altered the terms of at least 14 loans
totaling $8.6 million, issued two unauthorized commitments letters totaling
$3.71 million and fabricated three legal memoranda in his attempts to rush the
funding of a $3.15 million loan,” wrote administrative law judge C. Richard
Miserendino. 

The
26-branch bank is a wholly-owned subsidiary of Midwest Banc Holdings, Inc. and
is one of the largest independent banks in the Chicago area. In December 2008,
it received an $84.8 million investment from the Treasury Department through the Troubled Asset Relief Program.

Although the charges against Benarroch predate the company’s  involvement in TARP, they nevertheless raise questions about its internal controls and fraud detection systems.

Benarroch,
38, needed approval from one of two committees for loans exceeding $75,000. He
forged signatures and fabricated documents to make it appear as if unapproved
loans were actually approved, or to change the terms of existing loans without
permission to make them less favorable for the bank and more favorable to
customers, according to the Fed. 

His
actions caused the bank to lose $350,000 in interest and fees, and it was
forced to write off an additional $109,000 in principal, according to the Fed.  

Benarroch
was initially banned from banking Oct. 29, 2009. He appealed that decision,
which was upheld by the Federal Reserve Board of Governors last week.  

Benarroch’s
actions “exhibit both personal dishonesty and a willful and continuing
disregard for the safety or soundness of Midwest,” Miserendino wrote last year.
 

John
Pelling, a spokesman for the bank, declined to say whether the bank would
pursue legal action against Benarroch. 

Besides
traffic tickets, Benarroch does not have any criminal or civil cases against
him in Cook County, Ill. – where the bank is based – or two other Illinois
counties where he worked. There also are no criminal or civil cases against him
in federal court. 

According
to a press release, Benarroch, was named assistant
vice president for commercial lending in 2003, and he was tasked with working
with the banks’ commercial clients in McHenry County and Lake County, Ill. 
 

Benarroch
previously worked in commercial lending and credit management at three Illinois
banks before joining Midwest, according to the release.  

Documents
from the Fed’s case against Benarroch in an administrative court detail the
extent of his alleged scam. His first reported foray into fraud occurred
shortly after he was hired, on Dec. 5, 2003, when he forged a vice president’s
signature to lower the interest rate and extend the maturity of a customer’s
$405,000 loan. That effort cost the bank $2,700 in lost interest. 

From
there, Benarroch’s actions became increasingly bold and cost the bank larger
sums. He would regularly forge multiple executives’ signatures to make it
appear as if lending committees had approved loans when they had not. Some of
his forgeries cost the bank more than six-figures. 

Benarroch
was caught May 12, 2004, when he fabricated documents purporting to be memos
from the bank’s outside attorneys concerning a $1.35 million loan. 

He
was suspended that day, and bank executives began investigating his loan
portfolio. They discovered 14 loan files containing either forged signatures or
other discrepancies. Less than two weeks after he raised the bank’s suspicions,
Benarroch was fired.  

According
to administrative records, Benarroch does not deny the allegations. “He
admitted that he falsified legal memoranda to expedite loan closing, and does
not deny that he intentionally and deliberately issued the unauthorized
commitment letters that exposed the Bank to heightened risk,” Miserendino
wrote. Instead, he contended the case against him was jeopardizing his
subsequent employment at another bank, and he pleaded for leniency. 

Benarroch
has an unlisted telephone number, so he could not be reached by phone. He
responded to a Facebook message from BailoutSleuth but did not answer questions
about the case.  

Pelling
did not answer questions how Benarroch was able to repeatedly exploit the bank
without the institution’s knowledge. He also did not answer whether any new
safeguards are in place to prevent similar fraud in the future.  

This
marks the second time this month Midwest Bank and Trust has found itself at the
center of controversy.  

Earlier
this month, BailoutSleuth reported that the Treasury Department had
agreed to a deal to exchange its preferred stock shares in the bank for a new
class of stocks that could result in millions of dollars of losses for
taxpayers. 

The bank
lost $231 million in 2009 and lost $151.1 million in 2008.

More articles from the Bailout Sleuth….

GMAC Inc. hired Citigroup Inc., another bank controlled by the U.S. government, to explore how to repay bailout funds, according to a person briefed on the matter. Goldman Sachs Group Inc. will also help the auto lender examine repayment strategies and both banks will assist GMAC in reviewing options for its money-losing mortgage unit, …

Read more….

By Chris Carey, Bailout Sleuth

The former head of a failed bank was arrested Monday and charged with 10 federal counts including allegations that he tried to fraudulently obtain millions through the TARP program, according to a statement from federal prosecutors.

Federal officials say that Charles Antonucci, former president and chief executive of The Park Avenue Bank, gave false statements as he sought more than $11 million in aid for his bank through the Troubled Asset Relief Program.

Antonucci is the first defendant to be charged with trying to defraud the program.  He also faces a slew of other charges related to his allege use of his position at the bank to enrich himself.

Antonucci paid $2 million bond Monday and surrendered his travel documents; he is not to leave the New York area.

Among the charges Antonucci faces are bank bribery, embezzlement of bank funds and fraud. He faces a maximum of 260 years in prison.

“Lying to financial regulators is the economic equivalent of obstruction of justice,” said U.S. Attorney Preet Bhara in a statement.

Regulators closed Park Avenue Bank on Friday, and the Federal Deposit Insurance Corp. arranged for it to be taken over by Valley National Bank. The four-branch bank, which had $494.5 million in deposits and $520.1 million in assets, primarily served small businesses.

Antonucci was president and CEO from June 2004 to October 2009, and he also served on the bank’s board of directors.

Antonucci is accused of “self dealing” by extending credit to customers to whom he had financial ties; granting overdraft credit to a customer in exchange for the use of his plane; and using the bank to pay expenses on properties he owned.

Prosecutors also say Antonucci used a complicated “round trip” transaction to try to defraud bank regulators into believing he had invested $6.5 million of his own money into the bank to try to increase its capital position and make it eligible for TARP funds. In actually, he had taken those very funds from the bank in the first place.

First, the bank loaned funds to entities tied to Antonucci. Then, those entities transferred the funds to Antonucci. Finally, he invested that money back into the bank – in exchange for common stock representing a 52 percent controlling interest in the bank’s holding company.

As he sought $11 million in TARP funds from the Treasury Department, he “falsely represented that he had made a substantial, personal capital contribution to The Park Avenue Bank,” prosecutors said.

Upon learning that the FDIC would not recommend his bank for TARP, he withdrew his application voluntarily, saying in a press release that the bank was strong and wanted to avoid the stigma of accepting government money.

“This case should stand as a stark warning to would-be wrongdoers that if you attempt to profit criminally from this historic program, SIGTARP and its law enforcement partners will work tirelessly to ensure that you will be caught, you will be charged, and you will be brought to justice,” said Special Inspector General for TARP Neil Barofsky in a statement.

Additionally, an unnamed co-conspirator allegedly told pastors of Calvary Springs Chapel in Coral Springs, Fla. that if they invested $103,940 in the purchase of a bond, he would borrow four times that amount in foreign markets and pay the pastors the full maturity of the bond, $604,848, within weeks.

The co-conspirator simply had the pastors put the money into an account owned Antonucci, prosecutors said. They never received any money bank, and Antonucci and his co-conspirator split the pastors’ money, prosecutors said.

More articles from the Bailout Sleuth….

Zero Hedge

On FDIC Failure Friday, one of the odd names to make the list of bank failures was New York’s very own Park Avenue Bank, whose president Charles Antonucci in March of 2009 was trumpeting the bank’s “resilience” by saying “I don’t need TARP money” and as result declined to accept taxpayer bailouts. Certainly with Friday’s failure, Antonucci’s statement seems a little short-sighted. What is more relevant, is that it was just announced that Antonucci, who was the bank’s president from June 2004 to October 2009 has been arrested on bank bribery, embezzlement and fraud charges. Makes you wonder just how safe the “safe” banks are, if only the bailout recipients are doing so-so in the current environment (presumably, without any outright fraud disclosed just yet among the TBTFs).

From BNO Breaking News:

The former President of The Park Avenue Bank in Manhattan, which was
closed by regulators last Friday, has been arrested on fraud charges,
prosecutors said on Monday.

A spokeswoman for the U.S. Attorney’s Office for the Southern
District of New York said Charles Antonucci was arrested on allegations
of self-dealing, bank bribery, embezzlement, and fraud on the New York
State Banking Department, FDIC and TARP.

And some more from Reuters:

A former president of a privately-held New York bank, Park Avenue Bank, was arrested Monday on charges including bank bribery, embezzlement and fraud, a federal prosecutor said.

A source familiar with the case identified the banker as Charles Antonucci, who was president of the bank from June 2004 to October 2009.

On Friday, state regulators closed Park Avenue Bank, which had assets of $520.1 million and deposits of $494.5 million at the end of 2009, according to the Federal Deposit Insurance Corp.

The charges against the former bank president include self-dealing, bank bribery, embezzlement and fraud on the New York state banking department, FDIC and the Troubled Asset Relief Program (TARP), the statement by Manhattan U.S. Attorney Preet Bharara said.

His office said U.S. officials were to disclose more details at a press conference at 1 p.m. (1700 GMT) on Monday.

In November the bank applied for a bailout of less than $12 million under the TARP program but withdrew its application over concerns about restrictions on banks that receive taxpayer money, bank chairman Donald Glascoff said on March 10.

This is truly not surprising: in the corrupt world of Wall Street banking, it appears that rampant criminality has long since become the norm, with selective enforcement here and there to make it seem that perpetrators get punished. The next question: where’s Fuldo.

More articles from Zero Hedge….

Zero Hedge

It’s Déjà Voodoo Economics… All Over Again

By: Eric Sprott & David Franklin

If you’re of a certain age, chances are you remember exactly where you
were when JFK was  assassinated. Similarly, if you’re from Canada or
the United States and have an even remote interest  in hockey, it’s
highly likely that you remember exactly where you were when ‘Sid the
Kid’ scored the  winning overtime goal in the Olympic gold medal game.
These were both “significant events”, albeit  for different reasons. We
wonder, however, if any of you recall where you were on September
18th,  2008? Do you remember that day? We can’t seem to recall it
either, which is strange, because it was  one of the most important
days of the decade. October 7, 2008 is another day that should stick
out  in our memories, but we’re sure you don’t remember that day either
– and we’re in the same boat.  How is it, then, that we can’t recall
where we were or what we were doing on the two days the entire 
financial system almost collapsed?!? It boggles our mind. These dates
should have been emphasized  in every “review of the decade” written at
the end of 2009, but we’ve been hard pressed to find them  mentioned in
any mainstream publication. This is troubling to us, and makes us
wonder if people are  even aware of the incredible events that took
place on those fateful days only eighteen months ago.

The financial industry often prides itself on the hindsight principle.
We may not predict the future  with great accuracy, but when things
fall apart we’re very quick to explain why and how it happened  with
authoritative aplomb. “Hindsight is 20/20″, as they say. But is it
really? Despite our seemingly  thorough analysis of past failures, the
financial industry seems to have an uncanny ability to make  the same
mistakes over and over again. Perhaps this is due to the fact that we
don’t properly review  events passed. Our obsession with predicting
future results impels them away into oblivion. The fact  remains that a
cursory look back on the last decade reveals an apparent cycle of asset
bubbles that  all grew and burst before our eyes, with little effort
made to actually address the underlying causes  that made them
possible. We have written at length about the next asset bubble now
forming in  government debt and currency. Looking back on the last
decade from 2000 to 2009, are there any  lessons that can provide some
guidance for the next decade? And are there any lessons that can  be
gleaned from September 18th and October 7th, 2008, when we almost lost
the entire financial  system? We certainly hope there are.

The seeds of the financial mess we are currently experiencing began in
the mid-to-late nineties.  As we approached year 2000, the widespread
belief developed that new technology would rewrite  economic rules. The
euphoric years between 1995 and 2000 blew the first asset bubble of the
21st  century in the technology-heavy NASDAQ Index. Alan Greenspan
first uttered his now famous  “irrational exuberance” warning in
December 1996 when describing stock valuations at the time.¹
It  wasn’t until mid-1999, however, that the U.S. Federal Reserve
actually increased interest rates in an  attempt to quell the
overheated stock market. The Fed actually raised rates six times
between June  1999 and January 2000 in an attempt to cool an already
overheated economy. The dot-com euphoria  burst on March 10, 2000, when
the NASDAQ peaked at 5,132, representing more than double its  value
from only a year before. We were watching the bubble closely at the
time, and wrote on March  9th 2000, “In the next few months, if not
weeks, we anticipate that the Nasdaq will capitulate to market 
liquidity. Valuations are screaming at us! Excessive speculation is
running rampant! DON’T BE A  PART OF IT!!!” It was a timely
recommendation.

In many ways, the NASDAQ bubble was somewhat conventional in that it
was born out of over- enthusiasm for the prospects of new technology.
The fact that the Federal Reserve actually tried to  cool the bubble
down, however feebly, in the years before its peak, is really what
differentiates it from  the bubbles that followed. The NASDAQ collapse
is well understood now, ‘in hindsight’. This collapse  compelled Alan
Greenspan and the Federal Reserve to embark on the largest rate cuts in
US history  in an effort to soften its impact. The inability to face
the economic pain of the market crash ultimately  set the stage for the
second bubble of the decade, this time in housing. The key point to
emphasize  here is that the Federal Reserve lowered interest rates thirteen
times between January 3, 2001 and  June 25, 2003 in order to cushion
the economy. These rate cuts allowed for increasingly easy access  to
credit on a worldwide scale. It didn’t take long for the second bubble
to develop, and it wasn’t hard  to see the warning signs. Even The
Economist magazine noticed, stating on June 16, 2005, that “the 
worldwide rise in house prices is the biggest bubble in history.”²
Home prices rose at an annualized  rate of more than 11% from 2000 to
the peak on July 31, 2006 -more than doubling in that time  period.³
The financial sector became the US economy’s central economic driver,
generating up to  41% of all corporate profits and making it the
fastest growing sector of the economy.⁴ In July 2005, 
Greenspan described certain real estate markets as “frothy” and
recommended that the Federal  Reserve rein in lending standards.⁵
We wrote in response at the time that “(Alan Greenspan) should  be
careful what he wishes for… it may come true. It’s like throwing stones
in glass houses. It may  all end with the Federal Reserve having to
bail out the financial system, as it did with the savings  and loan
crisis a decade ago.” We now know what transpired in the years to
follow – we’ve all lived  through it, and it ended with the biggest
bailout in financial history.

So what’s the point, you ask? In hindsight, it’s very safe to argue that the Fed probably shouldn’t 
have lowered rates thirteen times between January 3, 2001 and June 25,
2003. It proved to be an  extremely damaging policy. Artificially low
rates created a lending mania of enormous proportions  which dragged
consumers along for a debt-fueled buying orgy. In our January 2008
commentary,  aptly entitled “Welcome to the 2008 Meltdown”, we opined
that “There are meltdowns occurring  everywhere: commercial real
estate… car loans…credit cards. It was all a massive Ponzi scheme 
sustained by overleverage. Because this has been one of the most
egregious bubbles ever, its impact  is likely to linger longer than
anyone expects. This is more than just a market failure. It’s a
systemic  meltdown.” And it was. But the meltdown happened so fast that
it never seemed to burn into our  collective memory. Everyone remembers
that we went into a severe recession in late 2008, but do  they know
the details of what actually transpired? A quick review is needed to
appreciate how close  we really came to a full shutdown.

It was the Lehman Brothers bankruptcy on Sept. 15th that set everything
in motion. Most market  participants will remember that date – Bank of
America bought Merrill Lynch the very same day, so  it was certainly
memorable. What many people fail to appreciate, however, is the mayhem
that took  place during the following days in the US money markets. The
day after Lehman’s collapse, the  Reserve Fund, one of the oldest and
most high profile US money market funds, began to hemorrhage  money as
investors redeemed in panic. Large institutional investors soon began
pulling money out  of other major US money market funds fearing heavy
losses from Lehman Brothers debt. Almost  $173 billion was pulled from
such funds over the next two days, threatening to collapse the entire 
US financial system.⁶
Two weeks later, on Sept. 29th, investors sent the Dow Jones plummeting
778  points, representing the largest single-day loss in the history of
the index. In hindsight, it was somewhat  of a delayed response,
because the real damage had by then been averted by the Treasury’s
blanket  guarantees on all money market funds.

The fact remains that on Thursday, September 18th, the US financial
system almost completely  collapsed. The details of that day remain
frustratingly murky. The imminence of complete disorder  seemed to
scare Congress into action, but we can only piece the story together
through random  anecdotes that have been partially revealed through
subsequent interviews. In what has been dubbed  ‘the Kanjorski meme’,
Congressman Paul Kanjorski recounts a meeting that was held between
Ben  Bernanke, Henry Paulson and certain members of Congress where the
conception of the “Troubled  Asset Relief Program” (TARP) supposedly
took place. To stem the flow of money out of US-based  money market
funds, Paulson had to provide an almost instant guarantee on all money
market funds  held within the US. Kanjorski recounts, “If they had not
done that, their estimation was that by 2pm that  afternoon (September
18th), $5.5 trillion would have been drawn out of the money market
system of  the United States, [which] would have collapsed the entire
economy of the United States, and within  24 hours the world economy
would have collapsed. We talked at that time about what would happen 
if that happened. It would have been the end of our economic system and
our political system as  we know it.”⁷
Further details of these meetings have been provided by Senator James
Inhofe, who  recounted that Paulson had warned of martial law and civil
unrest if the TARP bill failed.⁸ It is interesting  to note
that while Henry Paulson mentions several meetings that took place on
September 19th in his  book, the discussion of ‘imminent financial
collapse’ and ‘martial law’ was noticeably absent.

The official record of the events of September 18th, 2008 comes from a
research report issued by  the Joint Economic Committee. The reports
states, “On Thursday September 18, 2008, institutional  money managers
sought to redeem another $500 billion, but Secretary Paulson intervened
directly  with these managers to dissuade them from demanding
redemptions. Nevertheless, investors still  redeemed another $105
billion. If the federal government were not to act decisively to check
this  incipient panic, the results for the entire U.S. economy would be
disastrous.”⁹
Between the official  record and the statements by members of congress
and the senate, we can piece together an almost  system-wide collapse
that was potentially hours away.

The second fateful date to remember was October 7, 2008, when the UK
almost collapsed. Bank  of England Governor, Mervyn King, describes the
situation: “Two of our major banks which had had  difficulty in
obtaining funding could raise money only for one week then only for one
day, and then on  that Monday and Tuesday it was not possible even for
those two banks really to be confident they could  get to the end of
the day.”¹⁰
This was the justification given for the Bank of England to provide
secret loans of £61.6 billion to The Royal Bank of Scotland and HBOS to
maintain solvency.¹¹ Amazingly,  news of these loans was
never revealed until November 24, 2009, more than one year later.
Recalling  that fateful day, David Soanes, Managing Director of UBS
Bank, and part of the group assembled  to assist with the UK
government’s crisis response, stated, “We only really knew by probably
about  seven o’clock at night (October 7, 2008), that we, that everyone
was going to get through to the next  day.”¹² These
revelations raise new questions about the true scope of bailouts
undertaken by the  major governments at the time. Lord Myners, the UK
Financial Services Secretary, alluded to similar  covert banking
operations conducted by the European Central Bank and the US Federal
Reserve.13  We have no idea what he is referring to, but we would
certainly be interested to learn more.

This type of activity by the leaders of our financial system certainly
helps to explain why those two dates  are not more ingrained in our
collective memory – strong efforts were obviously made to hide their 
severity. The fact that these details were left out of Henry Paulson’s
memoirs strikes us as astounding.  It also seems incredible that the
best we can do to understand those fateful days is to cobble together 
comments made after the fact. It serves to be reminded that the events
of September and October  2008 had previously been considered
unthinkable, and we must never forget that the ‘unthinkable’ can 
happen again. A complete banking collapse would not be pleasant – and
it’s certainly not an experience  we would ever wish upon ourselves,
but it must be remembered that WE ALMOST WENT THERE.

So where does this leave us for the decade ahead? In bad fiscal shape.
It seems as if we’re just  making the same mistakes over again, and on
a far larger scale. We have passed the debt obligations  of the
financial system onto the governments. We have liquefied the system
beyond any rational  explanation, more than doubling the monetary base
since the collapse of Lehman Brothers. Social  Security, which was in
balance in year 2000, is now underfunded by $15 trillion dollars. Total
unfunded  obligations of the US Government are now $104 trillion. If we
add the $6 trillion of outstanding Fannie  Mae and Freddie Mac debt and
the $12 trillion of outstanding national debt, we arrive at a total US 
government debt obligation of $122 trillion. It’s a truly preposterous
amount of money that will never  be paid off in today’s dollars. As we
wrote in our October 2009 article entitled “Dead Government  Walking”,
the US Government is on a trajectory to default on their obligations,
and the same can  realistically be said for the UK and Japan. The
answer put forward by the US, UK and Japanese  governments? Quantitative Easing and 0% interest rates. Have they learned nothing from the past  decade?!

As our readers know, the flagship funds at Sprott have been managed
with the view that we entered a  long-term secular bear market in year
2000. We have never detracted from this view, and it remains in  place
today. We will not be bears forever, because the cycle will eventually
reverse, but a new secular  bull market will not, and cannot, emerge
until the world solves its debt problems. Our overarching  macro view
is strongly influenced by the Kondratieff Cycles. The ‘winter season’
began in the year  2000 and continues to this day. We have watched this
cycle unfold, and have noted the Kondratieff  Theory’s eery ability to
predict the debt defaults and banking collapses that we witnessed over
the  past two years. Our analysis suggests that we are only half way
through this Kondratieff winter, with  another approximate ten years
remaining. They will undoubtedly be an interesting ten years, and it 
should come as no surprise to our readers that gold is considered the
ultimate asset class to own  during the ‘winter cycle’. It has
certainly served us well up to now.

A review of the last decade would not be complete without our
predictions for the next ten years.  Rather than bore you with
prognostications, we would like to leave you with some titles we are 
considering for future editions of Markets at a Glance:

1. The Federal Reserve Board. Remarks by
Chairman Alan Greenspan (December 5, 1996). The Challenge of Central
Banking in a Democratic Society. Retrieved on March 10, 2009 from:
http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm
2. The Economist. (July 16, 2005) In Come the Waves. Retrieved from:
http://www.economist.com/opinion/displaystory.cfm?story_id=4079027.
3. Bloomberg, S&P/Case –Shiller Composite – 20 Home Price Index Not Seasonally Adjusted
4. Johnson, Simon (May 2009) The Quiet Coup. The Atlantic. Retrieved on
March 10, 2010 from:

http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

5. Andrews, Edmund (May 21, 2005) Greenspan is Concerned About
‘Froth’ in Housing. The New York Times. Retrieved on March 10, 2010
from:

http://www.nytimes.com/2005/05/21/business/21fed.html?_r=2&oref=slogin

6. Henriques, Diana (September 19, 2008) Treasury to Guarantee
Money Market Funds. The New York Times. Retrieved on March 10, 2010
from: http://www.nytimes.com/2008/09/20/business/20moneys.html?em
7. Kanjorski, Paul (January 28, 2009) Kanjorski: We came so close to
complete financial collapse. Pocono Record. Retrieved on March 10, 2010
from:

http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20090128/NEWS04/901280302

8. CNN iReport (November 20, 2008). Paulson Was Behind Bailout
Martial Law Threat. Retrieved on March 10, 2010 from:
http://www.ireport.com/docs/DOC-150837
9. United States Congress, Joint Economic Committee Research Report
#110-25 (September 2008) Financial Meltdown and Policy Response.
Retrieved on March 10,
2010 from: http://www.house.gov/jec/Research%20Reports/2008/rr110-25.pdf
10. BBC (September 24, 2009) Mervyn King and other key players reveal
true extent of financial crisis one year on . Retrieved on March 10,
2010 from:

http://www.bbc.co.uk/pressoffice/pressreleases/stories/2009/09_september/24/money.shtml

11. Conway, Edmund and Monaghan, Angela (November 24, 2009) Bank of
England tells of secret £62bn loan to save RBS and HBOS. Telegraph.
Retrieved on March 10, 2010 from:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6646923/Bank-of-England-tells-of-secret62bn-loan-to-save-RBS-and-HBOS.html

12. BBC (September 24, 2009) Mervyn King and other key players
reveal true extent of financial crisis one year on. Retrieved on March
10, 2010 from:

http://www.bbc.co.uk/pressoffice/pressreleases/stories/2009/09_september/24/money.shtml

13. BBC (November 25, 2009) Alistair Darling defends secret loans
to RBS and HBOS. Retrieved on March 10, 2010 from:
http://news.bbc.co.uk/2/hi/business/8378087.stm

More articles from Zero Hedge….

By Chris Carey, Bailout Sleuth

TARP-recipient West Bancorporation, Inc. has hired a new chief executive
after an eight-month search.

West Bancorporation, parent company of Iowa-based West Bank, appointed
David D. Nelson, former president of Southeast Minnesota business banking for
Wells Fargo Bank Minnesota.

SEC filings show that Nelson’s salary will be 10 percent higher than
that of his predecessor, Thomas E. Stanberry, who resigned just before the
company announced a loss of $5.3 million for the second quarter of 2009.

West Bank reported a net loss of $16.9 million last year, compared with a
profit of $7.6 million in 2008. The company had  earnings of $2.2 million
for the fourth quarter of last year, but noted that its nonperforming assets rose $1.2 million to $52.9 million and that its provision for loan losses as a percentage of total loans also was up from the same period in 2008.

West Bancorporation got $36 million through the Troubled Asset Relief
Program on the final day of 2008.

According to the company’s SEC filing on Nelson’s appointment, the new
CEO will receive a cash salary of $275,000 with a potential yearly incentive
bonus of as much as 50 percent of that amount. Performance bonuses, if any,
will be paid in long-term restricted stock.

Nelso also received a $125,000 restricted stock grant as a signing
bonus, and will get the same perquisites as other senior executives.

Thomas E. Stanberry, the former chairman and chief executive, resigned
in July 2009, in a move that the company described in its SEC filings as
involuntary. Stanberry had a base salary of $250,000, with additional cash and
stock incentives.

Because of TARP restrictions, Mr. Stanberry did not receive severance
package.

Jack Wahlig, West Bancorporation’s current chairman, noted that the
selection process was a thorough one. 
He praised Nelson for his more than 25 years of experience and his
strong background in credit administration.  He also pointed to Nelson’s ability to build relationships
as a deciding factor in his hiring.

More articles from the Bailout Sleuth….

Zero Hedge

82% of the American public wants tougher regulation of Wall Street.

Most top independent financial experts say that we need to break up the big banks and otherwise rein in the financial giants in order to save the economy.

But Summers, Geithner, Bernanke and Congress like things just the way they are.

Of course they do … they’re bought and paid for:

• Lobbyists
  from the financial industry have paid hundreds of millions to Congress
  and the Obama administration. They have bought virtually all of the key
  congress members and senators on committees overseeing finances and
  banking. The Congress people who receive the most money from lobbyists
  are the most opposed to regulation. See this, this, this, this, this, this, and this.

• Obama received more donations from Goldman Sachs and the rest of the financial industry than almost anyone else

• Summers and the rest of Obama’s economic team have made many millions – even in the first few months of being appointed, or right beforehand – from the financial industry

• Two powerful congressmen said that banks run Congress

• Two leading IMF officials, the former Vice President of the Dallas Federal Reserve, and the the head of the Federal Reserve Bank of Kansas City have all said that the United States is controlled by an oligarchy

The chairman of the Department of Economics at George Mason University
(Donald J. Boudreaux) says that it is inaccurate to call politicians
prostitutes. Specifically, he says that they are more correct to call
them “pimps”, since they are pimping out the American people to the
financial giants:

Real whores, after
all, personally supply the services their customers seek. Prostitutes
do not steal; their customers pay them voluntarily. And their customers
pay only with money belonging to these customers.

In contrast, members of Congress routinely truck and barter with other people’s property…

Members
of Congress are less like whores than they are like pimps for persons
unwillingly conscripted to perform unpleasant services.

 

***

 

Politicians
force taxpayers to pony it up — just as the services rendered for a
pimp’s customers are rendered not by that pimp personally, but by the
ladies under his charge. The pimp pockets the bulk of each payment;
he’s pleased with the transaction. His customer gets serviced well in
return; he’s pleased with the transaction. The only loser is
the prostitute forced to share her precious assets with strangers whom
she doesn’t particularly care for and who care nothing for her.

 

Also
like the ladies under pimps’ power, taxpayers who resist being
exploited risk serious consequences to their persons and pocketbooks.
Uncle Sam doesn’t treat kindly taxpayers who try to avoid the
obligations that he assigns to them. Government is a great deal more
powerful, and often nastier, than is the typical taxpayer. Practically
speaking, the taxpayer has little choice but to perform as government
demands.

So to call politicians “whores” is to unduly insult
women who either choose or who are forced into the profession of
prostitution. These women aggress against no one; like all other
respectable human beings, they do their best to get by as well as they
can without violating other people’s rights.

 

The real villains
in the prostitution arena are those pimps who coerce women into
satisfying the lusts of strangers. Such pimps pocket most of the gains
earned by the toil and risks involuntarily imposed upon the prostitutes
they control. No one thinks this arrangement is fair or justified. No
one gives pimps the title of “Honorable.” Decent people don’t care what
pimps think or suppose that pimps have any special insights into what
is good or bad for the women under their command. Decent people don’t
pretend that pimps act chiefly for the benefit of their prostitutes.
Decent people believe that pimps should be in prison.

 

Yet
Americans continue to imagine that the typical representative or
senator is an upstanding citizen, a human being worthy of being feted
and listened to as if he or she possesses some unusually high moral or
intellectual stature.

 

It’s closer to the truth to see
politicians as pimps who force ordinary men and women to pony up
freedoms and assets for the benefit of clients we call
“special-interest groups.”

 

More articles from Zero Hedge….