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To Preserve…
Although the US Treasury Debt ceiling was recently raised to $14.3 trillion, now larger than the contracting Gross Domestic Product GDP, not many know the US Treasury, headed by a man who did not pay his taxes until nominated for public office, now also supports the $5 Trillion obligations of Fannie Mae and Freddie Mac mortgage guarantees.
US Taxpayers are also on the hook for another $104 Trillion in unfunded agency obligations, plus some $204 Trillion in derivatives held by US commercial banks also obligated to return depositor monies with just one dollar of reserve for each $10 of loans.
That’s a total of $337.3 Trillion dollars of IOUSA, inflationary on the way up and deflationary on the way down.
84% of these $204 Trillion in US derivatives reported by the US Treasury were interest rate sensitive in the most recent Third Quarter of 2009. Net credit risk model calculations of $484 Billion tend to understate the risk when unexpected defaults hammer the financial system. It is most quiet before the storm.
Although 1065 US Commercial banks used derivatives in the most recent third quarter of 2009, five large commercial banks had 97% of the derivatives and 88% of the theoretical credit risk.
The $484 Billion of expected risk compares to $5.7 Billion of Q3 Trading Revenues and is over one and a half times Bank collateral. Charge-offs for bad Commercial and Industrial loans were $7.8 Billion in Q3 2009. In other words, banks may be still losing more than they make, and still do not have to mark all their bad loan assets to market, so it is fair to say the biggest banks may be upside down, holding interest rate sensitive securities or owing more than they are worth.
Recall it was interest rate sensitive derivatives that precipitated the Crash of 2008 and 2009. And interest rates may go higher.
The average maturity of US debt last Fall was a 26-year record low of 49 months.
Treasury Secretary Geithner hopes to extend the average due date of US Treasury Debt to 72 months in 2010 to lock in lower yields longer.
Generally, increased debt supply and lower demand from creditor surplus nations means higher interest rates.
http://www.dallasfed.org/news/speeches/fisher/2010/fs100112.cfm
http://www.occ.treas.gov/ftp/release/2009-161a.pdf
http://www.bloomberg.com/apps/news?pid=20670001&sid=astqQ3k2_OJs
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February 2nd, 2010 at 4:29 am
Holy Smokes Rich….
Now that was a handful.
This article should be published in the NY Times.
Certainly we are seeing a ground swell in this country stirred by an irate citizenry.
Perhaps it is not to late to take our country back.
God have Mercy.
Keep up the good work Rich, you are a true Patriot.
Thank you. Richard
February 2nd, 2010 at 4:35 pm
Mahalo Richard:
Henry Paulson acknowledged 93% of Americans opposed TARP and he did it anyway, bailing out himself and his firm Goldman Sachs with Ben Bernanke and Timothy Geithner’s help.
No wonder the majority of Americans want a full Audit of the Fed and Treasury, including the Mints and Bullion Vaults.
If we:
A) turn off government monopoly media making heroes out of bums,
B) share the truth which sets us free,
C) help family friends and neighbors vote for Patriotic Constitutional Independents who truly serve US this Fall,
then we may in fact take our country back from bonus banksters and their government corporate welfare pimps.
The alternative is watching the Jericho Wall of debt crush our country and lives like Financial Armageddon.
Uncle Sam owes more than we own. That cannot last much longer.
We must pay down or forgive our debts with a spending freeze on deficits and earmarks and the 1% Transaction Tax on a quadrillion in voluntary transactions.
Andrew Jackson paid off the public debt in 1835. So can we…
Regards*Rich
February 4th, 2010 at 5:03 pm
Rich,
Like the website and all, but a reader needs to click 22 separate times simply to read the content of this entry. Perhaps a different format would be better?
Cheers.
February 24th, 2010 at 6:15 pm
Thanks clicks.
Took it up with the management.
Regards*Rich