BankofAmericasuck.com, Central Banks Galore, and How Much Charlie Sheen Spends on Coke and Hookers

Today was the big day as Operation LeakS revealed an anonymous tip by a former Bank of America employee on how some of the (former) big mortgage companies hid information from federal regulators.  Zerohedge reports:

"Balboa Insurance/Countrywide knowingly hiding foreclosure information from federal auditors during the federal takeovers of IndyMac Federal (a subsidiary of OneWest) and Aurora Loan Services (a subsidiary of Lehman Bros Holdings), falsifying loan documentation in order to proceed with foreclosures by fixing letter cycles in the system, reporting incorrect volumes to all of their lenders and to the federal auditors to avoid fines for falling behind on Loan Modifications, purposefully and knowingly adjusting premiums for REO insurance for their corporate clients while denying forebearances for individual borrowers, etc, etc, etc.

Many of the leaked e-mails are still being sorted through, but you can read everything at Operation LeakS official site, the fantastically titled "BankofAmericasuck.com"

Staying on course with the banks, today saw a great deal of writing on our very own Federal Reserve.  Robert Murphy had a great Mises Daily in which he goes over the three options Bernanke has in winding down the Fed's balance sheet before excess inflation.  To summarize: it won't happen without a great deal of pain and suffering.

In regard to Option 1 of having the Fed pay higher interest rates on reserves:

In any event, Bernanke's favored "tool" of raising the interest rate on excess reserves is the epitome of kicking the can down the road. In the beginning, the higher payments would simply reduce the Fed's net earnings, meaning that it would remit less money to the Treasury. Thus, the federal deficit would grow larger, meaning that taxpayers would ultimately be the ones paying bankers to not give them loans.

Option 2 of pulling reserves out of the system:

In that environment, if Bernanke started selling off hundreds of billions worth of Fed assets (consisting of Treasury debt, Freddie and Fannie debt, and mortgage-backed securities), it would cause a sharp spike in interest rates, and would devastate the real-estate and financial sectors. Just as Bernanke's original interventions obviously helped the major players in these fields, the reverse of those interventions would obviously hurt them. The enormous federal deficit would no longer seem so innocuous once interest rates on even short-term Treasuries began rising.

To add yet another twist, we should point out that if the price inflation or the financial crashes (or both) were severe enough, the Fed's assets might drop significantly before Bernanke could sell them back to the market. In that case, even if he wanted to, Bernanke couldn't suck out all of the $1.2 trillion in excess reserves, because he would be selling the assets for less than he originally paid to acquire them.

Option 3 of raising the reserve requirement:

If the Fed were to raise reserve requirements, the money that commercial bankers currently view as a hoard of cash would lose its economic significance. It would be equivalent to the Fed simply seizing the funds. This is why raising the reserve requirements would devastate the banks even more than selling off assets: At least if the Fed destroys reserves by selling assets, the commercial banks voluntarily make the trade, and end up with something valuable.

Basically, we are pretty much screwed.  As for Japan, they are pretty screwed now.  Here is an aerial photo courtesy of the BBC which shows the explosion results of reactor 1 and 3 of the Fukushima Daiichi plant:

Apparently nuclear rods are exposed in reactor 2 and only a containment dome is preventing massive inflation from leaking.  And now government and regulatory agencies are prevented from speaking on the matter.  Only senior government officials may speak on the matter.  Why save a few thousand lives when you could cause a panic?  No worries, the Bank of Japan (Japan's Federal Reserve) has just adjusted how much it plans to provide in liquidity for the crisis.  Bloomberg reports that officials at the Bank of Japan have just they have revised their initial estimate to provide $15 trillion ($183 billion) for disaster relief in addition to purchasing $3 trillion in government bonds.  Looks like Bernanke is at the reigns over there.

On the good news front, some Congressmen are finally beginning to understand how destructive Central Banks really are.  Take California Rep. John Campbell:

Treasury Bonds: I learned something last week. I learned that fully 40% of the over $9 trillion in Treasury debt currently outstanding to the public has a maturity of 3 years or less. Put another way, it means that we are rapidly approaching $4 trillion in U.S. debt that matures by 2014 or sooner. As I write this, the yield (interest rate paid) on a 2-year Treasury note is 0.645% or about 2/3 of one percent. The yield, at the same time, on a 10 year Treasury note is 3.4%, and on a 30 year is 4.55%. In bond parlance, this is called a "steep yield curve" where interest rates get much higher as you go farther out in time.
It's pretty clear why the Treasury is doing this. By issuing mostly short-term notes, the Treasury is paying less interest, thereby keeping interest costs and, consequently, the deficit down. In addition, the Federal Reserve is in the middle of its "quantitative easing #2" (QE2) under which it is buying $600 billion of our own Treasury debt over about a 6 month period. The Fed is not buying the short-term notes, but is buying 10 year maturities and longer in order to hold those rates down. And, since the Fed is earning the interest thereon (paid by the U.S. Treasury), it is improving its yield. We are currently running a deficit of about $130 billion per month, so the Fed is basically buying all of the new bond issuance from the deficit for almost 5 months.
What does this all mean? I understand that the Fed and the Treasury are trying to keep interest rates low and improve the economy and the deficit. But, when coupled with the huge deficits, these moves look a bit like a Ponzi scheme that will soon unravel.

Hallelujah, he has seen the light.  A group called AmpedStatus is planning to "siege" the Fed on March 28, 2011:

These protests are in solidarity with our brothers and sisters in the UK and all those fighting for their economic and physical freedom in the world. The United States is need of a vocal and physical front. A demonstration that is too broad will fall short. Target the Federal Reserve. Organize protests at the 12 Federal Reserve banks. Our goal is to picket the Fed so that there is no movement into the building, and thus to paralyze their operations. We are under siege by the banks and their cohorts; we are entrapped in moats of debt, and they have turned our government against us. Democracy and liberty erode in the face of their assault.

I doubt this will amount to anything, but at least someone out there is trying.  I prefer the path of educating others.  Wanna know why banks are keeping their excess reserves at the Fed rather than buy treasury bonds are lend them out?  Robert Wenzel explains:

The key really is the interest rate the Fed pays on excess reserves, currently 0.25%. At this rate, there is no incentive for banks to buy short-term Treasury bills and put the money into the system, with one month T-bills yielding 0.07%. It makes more sense for banks to just keep it out of the economy at the Fed at 0.25%, if they are looking for absolute, short-term, safety.

I hasten to add that the importance of the interest rate on excess reserves only came about because of the introduction by Fed Chairman Bernanke, as one of his new "tools", the payment of interest on excess reserves. Before the introduction of this tool, the Fed always acted directly on Fed funds by draining or adding funds via the purchase or sale of Treasury securities

Now for what you all have been waiting for: How much Charlie Sheen spends on coke and hookers!!!  It was a long post today, so I will just provide the link.