- Americans are confronted with what appears to be the
worse economic situation since the Great Depression. What will history
say about the U.S. credit crisis turned global financial crisis? At every
turn investors are faced with new problems, new crises, and less than desirable
solutions which include debt, deflation and a transfer of wealth.
- With regard to debt, the American taxpayer has been made
the lender of last resort for international bank Bear Stearns and now the
two Government-sponsored Enterprises-GSEs, Fannie Mae and Freddie Mac.
On top of the $29B for Bear Stearns, Fannie and Freddie's debt of $5.4T
has been effectively transferred to the balance sheet of the USA. This
is equal to the entire publicly traded debt of the U.S. which is also the
same as the total of America's mortgage-related assets. In addition to
personal debt, every American now has a financial responsibility for Bear
Stearns and Fannie and Freddie.
- We, the people, have saved the foreign investors such
as China which owns $376B, Japan which owns $228B, South Korea which owns
$65B, Taiwan which owns $55B, and Australia which owns $33B, from losing
faith in America. It is the stockholders, both common and preferred, that
have been given the raw end of the deal. While large financial institutions
such as JP Morgan, which owns $1.2B of Freddie and Fannie stock, said a
complete loss would only erase one or two months of profits, contrast this
to smaller banks such as the Central Virginia Bank in Richmond which has
$20M in shares of Freddie and Fannie. That type of loss will put them in
the same kind of trouble as Lehman Brothers, not enough capitalization.
There are 15 other banks that hold 10% or more of their capital in shares
of Freddie and Fannie.
- The Federal Accounting Standards Board is requiring more
stringent standards for banks and savings and loans to maintain a certain
amount of capital to protect against insolvency. Those rules are in the
process of being changed to conform to international rules issued by the
Bank for International Settlements in Basel, Switzerland which Congress
has voted on. These rules which were only to pertain to international banks
are now being applied to national banks.
- Furthermore those in retirement who thought their money
was safe-invested in the highest ranked bonds in the country are going
to lose their dividends. Depending on the price they invested, they could
have principal losses of up to 80 or 90% of their investment. Ouch.
- The credit crunch began a year ago when the various investment
banks both here and abroad stopped buying each others paper, a very uncommon
practice between them. As a result of no liquidity for mortgage paper caused
by their decision, we have the most serious slowdown in real estate in
decades. The decision to not buy mortgage paper includes the sub-prime
loans made to home buyers that had no down payment. To relate, I recently
met a young Latino who is worried about her home. Five years ago she bought
a $370,000 townhouse with $14,000 down. Her interest rate varies causing
her monthly payment to jump from $2700 per month to $3500. She cleans houses
for a living.
- Freddie and Fannie decided they could make more money
by buying subprime mortgage paper. Today there is an eleven month inventory
of unsold homes. Higher interest rates as a result of the hidden clauses
on floating interest rates have put many people in jeopardy of foreclosure.
All of these problems have given the Federal Reserve the opportunity to
seize total control of powers they did not oversee in order to protect
our economy. Perhaps we should ask where the desire to put poor people
into homes came from? It was part of the Bush Administration's policy to
conform to the United Nations' Millennium Development Goals unveiled in
the year 2000.
- Exacerbating the credit crunch have been the historically
high oil prices which have caused pain at the gas pumps and a weak dollar
which has made imports more expensive. To counter high oil prices, Americans
have drastically reduced how many miles they drive and a number of buying
habits. In light of a tight job market and job losses in housing and the
automotive industries, we are confronted with higher energy costs to heat
and cool our homes, increased costs for food, and the inability to refinance
mortgages. Basically the economy is now in deflation. When people stop
spending, it moves from deflation to stagflation-no matter how cheap an
item becomes, people can't afford to buy. All this without knowing what
the real fall out will be from the bailout of Freddie and Fannie.
- The situation we are confronted with did not happen in
the last few years, but began in 1913 when a group of cunningly deceitful
legislators passed the Federal Reserve Act on December 24 at 11:45 p.m.,
after those who were opposed went home for Christmas. The entire financial
system of the U.S. was transferred from Congress to a private corporation
that is NOT accountable to Congress. They create and destroy the business
cycle by various means: raising and lowering interest rates. The government
of the United States is in bondage to a group of individuals who own the
Federal Reserve. The reason why the American people cannot forgive themselves
the interest on our debt is because we do not owe it to ourselves we owe
it to the Federal Reserve! Every single time since then that the Federal
Reserve Act was amended, over 195 times, the Federal Reserve gathered more
power over various aspects of our economy. However, they are in the final
throes of stripping America of any remaining vestiges of sovereignty as
has been laid out in the Treasury "Blueprint for a Modernized Financial
- The Blueprint was written under the watchful eye of one
of America's most successful international bankers, former Goldman Sachs
CEO Hank Paulson, who is now our illustrious Treasury Secretary. Is this
not a case of the fox in the chicken coup? Long time investment sage Marty
Whitman commented on his actions, "Paulson thinks he is in Russia
and is not giving any value to stockholders. It is outrageous that the
Treasury Secretary is not giving any consideration to the shareholders."
- The Blueprint calls for key components of our financial
system, not currently under Federal Reserve control, to be transferred
to them. In order to do this, a number of changes will be necessary which
Congress will have to approve. First, it recommends changing the banking
charter to include all financial institutions, thus effectively transferring
control over "national banks, federal savings associations, and federal
[and state] credit union charters." For your information, Washington
Mutual is a savings and loan while Lehman Brothers is and Bear Stearns
was an international bank. The Fed is to be given authority over the U.S.
Payment and Settlement System thereby controlling the settlement process
for securities. It will be given the role of Market Stability Regulator
and it will have total control over the market. The Blueprint provides
for the entire mortgage system of the U.S. to be federalized and to be
under the control of the Mortgage Origination Commission. The Federal Reserve
will be part of the Commission. Additionally the Federal Reserve will be
given a say in the insurance industry which will be federalized and a new
Office of Insurance Oversight will oversee its activities. The Federal
Reserve will have a place on the Insurance Oversight commission.
- By the time Congress votes on the Blueprint, there will
be so many reasons for them to transfer the last vestiges of our financial
sovereignty to the Federal Reserve that they will not even have to read
the prepared legislation. So far, we have the bailout of Freddie and Fannie
by giving Treasury a blank check to act; the Federal Reserve worked all
weekend to find a buyer to Lehman, another international bank, their next
project might be to rescue Washington Mutual, a savings and loan, and the
Fed has been given initial powers to act as the Market Stability Regulator.
The only component that is missing is the demise of an insurance company,
- For the record, at the heart of the Blueprint is changing
our financial/banking and securities regulatory system from a national
system to an international system to bring America into the world governmental
system that functions above the nation-states. I have maintained that in
order to get Congress to go along, we would have to have a huge problem
which would allow Congress to be convinced that they need to act, however,
the truth of the matter is they no longer have the power they once had
because the majority has been transferred to the Federal Reserve.
- History will determine how the final stage was set but
I believe it started in 2000 with the Crash of the Nasdaq. Who would have
ever thought that a stock would drop 90% in value? About $7T vanished from
the balance sheets of investors. But we did not have to worry, as a result
of 9/11, the Federal Reserve started to reduce interest rates to 45 year
lows to get Americans to support the economy by buying the dream home.
We bit the bait. It was the Roaring 20s all over again. At one point in
the housing boom, one out of four jobs was created by the housing industry.
No one asked if they could afford the debt, they only asked if they could
afford the payment: a big difference. They did not ask the right questions
about their mortgage because the mortgage industry was not required to
disclose to them, when it should have. At one time the mortgage industry
was run on honesty and integrity, but that changed too and people have
been caught in a terrible snare.
- The Bailout of Freddie and Fannie provide us with the
latest excitement in the diabolical saga of the raping, robbing, and pillaging
of America. Interestingly enough it took place 13 months after the beginning
of the credit crunch. Lastly, I have maintained since the beginning of
the credit crunch last August that it was planned and managed destruction
in order to accomplish the final transfer of America's financial sovereignty.
All of the above only confirms my original suspicion. Sadly, only the strong
will survive, only those who did not use their house as a checking account
will survive, only those who turn to the Creator of the Universe, the Lord
God who created heaven and earth, and His Son, Jesus, will survive in the
midst of the Great 2008 Transfer of Wealth.
- © 2008 Joan Veon - All Rights Reserved