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Imminent Big Bank
Death Spiral

By: Jim Willie
CB, GoldenJackass.com

-- Posted
Wednesday, 27 October 2010 | Digg
This Article |

| Source: GoldSeek.com

The
mortgage & foreclosure scandal runs so deep that ordinary
observers can conclude the US financial
foundation is laced with a cancer detectable by ordinary
people. The metastasis is visible from the distribution of
mortgage bonds into the commercial paper market, money market
funds, the bank balance sheets, pension funds under
management, foreign central banks, and countless financial
funds across the globe. Some primary features of the cancerous
tissue material are mortgage bond fraud, major securities
violations, absent linkage to property title, income tax
evasion, forged foreclosure documents, duplicate property
linkage to single mortgage bonds, NINJA (no income, no job or
assets) loans to unqualified buyers, and more. In fact, more
is revealed it seeems each passing week toward additional
facie to high level and systemic fraud. The world is watching.
The growing international reaction will be amplified demand
for Gold, from recognition that the USDollar & USEconomy
have RICO racketeering components extending to Wall Street
banks and Fannie Mae mortgage repositories.

The
centerpiece question, when the US bond fraud is
coupled with European sovereign debt distress, comes down to
WHAT IS MONEY? The
answer is Gold & Silver and not much of anything else.
Other assets like crude oil or farmland are effective hedges
against tainted money, but when they contain debt tethers,
they too are vulnerable. Huge flows of funds are fleeing
traditional asset groups. Some mistakenly still believe the
USTreasurys to be a safe haven. A shock of cold water comes to
them when that bubble goes into reverse perhaps several months
later after reaching 2% yields. The big magnificent
epiphany in the last couple years has been that a house is not
a hard asset, but rather a debt instrument extension.
Important questions have arisen as to what assets are free
from counter-party debt risk. The grand demands for physical
gold prove that the futures gold contracts are not money
either, but tainted Wall Street and London
securities contracts that keep the system
going.

The
big banks have been called too big to fail. What a ruse! They
are too big to plow under without removal from power of the
bankers themselves. They are too big to permit their balance
sheets to be liquidated without a US banking system
seizure together, and a 30% to 50% additional housing market
price decline. They are too big to send into receivership
without igniting a credit derivative sequence of explosions.
They are too big to block the widespread practice of fraud and
enforcement of law of regulations. However, a wondrous
spectacle has begun to shine light. The mortgage &
foreclosure scandal could turn out to be the big US Bank
tombstone epitaph, as bank revenues from mortgages halt, as
home owners refuse to make mortgage payments, as court cases
unfold in full view, as class action lawsuits prove
racketeering at a systemic level, as MERS and REMICs are
frozen by the courts from further activity. Time will
tell. Time will reveal extraordinary efforts by the USCongress
to pass ex-post facto laws that legalize the bond fraud and
contract violations from the past. Remember back in July 2007
when Bernanke claimed this was just a subprime mortgage
problem. The Jackass called it an absolute bond
crisis.

THE
GIGANTIC ACHILLES HEEL EXPOSED

Two
critical elements have been identified. The MERS electronic
title registry system was designed to facilitate recording of
property titles as associated mortgage bonds traded freely and
changed ownership hands. Unfortunately, the title
database has no legal standing, as declared by several state
courts, including some supreme courts. Banks or financial
firms holding the mortgage notes cannot team with the title
database and force eviction during the home foreclosure
process. That is the first gaping flaw. The second is the
REMIC funding facility. The Real Estate Mortgage Investment
Conduit was designed to facilitate funding mortgages, in
particular Fannie Mae mortgages. Unfortunately, the conduit
funding vehicle intentionally omitted citation of the mortgage
income stream owner, so as to avoid income taxes. The lack of
identification means that the Fannie Mae asset backed
securities might lack any legal tie to the mortgage loan
income stream.

If
the casual observer concludes that Fannie Mae mortgage bonds
have no value, then that observer matches the same thought
pattern of the Jackass, and the same as an increasing number
of financial experts.
The mortgage finance boom was more a racketeering scheme to
send financial products through the pipeline, earn fees, set
up arbitrage, enable leveraged schemes, and justify executive
bonuses. At the same time, the scheme had the perceived
benefit of putting money in people's hands to spend when their
jobs were shanghaied on a ship to China. It concealed
the destruction of the USEconomy. It made homes very
convenient piggy banks to abuse in consumer binges, as people
eagerly burned their furniture. Harken back to the Great Macro
Asset Economy, a slippery chapter scripted by Greenspan, one
of several heretical chapters. Many citizens were turned into
paupers who lost all their home equity, while 22% of the
nation today lives in homes bearing negative equity overhead.
To claim an elaborate Ponzi Scheme seems a fair
characterization. The USGovt hands are dirty. The reflection
on USTreasurys is filled with risk of a popped bubble. The
reflection on the USDollar is filled with risk of downdrafts
since a corrosive currency.

The
Europeans have their damaged sovereign debt, but the Americans can boast
twin beasts in the USTreasury Bond bubble and the USAgency
Mortgage Bond scam. The scam involves mortgage bond fraud
from improper perfection of property title that ensures
revenue stream. The scam involves securities violations from
usage of the MERS title database, duplicate properties in
multiple bonds, and forged documents. The scam involves faulty
finance vehicles (REMIC) with deep intractible flaws in the
structure of funding the loans, whose remedy would come with a
$1 trillion tax bill due (estimated by bank analysts). Just
last weekend, the state of California demanded as part
of a class action lawsuit, with MERS at the center, between
$60 and $120 billion in unpaid property title recording fees.
One might wonder if any potential criminal fraud was avoided
in the mortgage industry during the last decade that saved a
few bucks and added to bank profit. The MERS & REMIC
twins represent the two unfixable banking Achilles Heels.
Can the USCongress forgive the fraud with a fresh piece of
supercharged legislation?? If they do, then civil disobedience
will blossom across the land, in the form of public
demonstrations, marches on Washington, non-payment of
monthly mortgage bills, and demands to prove property title.
The global response will be to sell any bonds with a
US$
denomination.

The
fallout comes as shattered integrity of the USDollar after
broken credibility of the USFed and ruined prestige of Wall
Street, all while a sanctioned USTreasury Bond bubble puffs.
The full USGovt guarantee of the Fannie Mae clearinghouse
cesspool contents bridges the gap between USTBonds and
USAgency Mortgage Bonds. One might argue that Agency Bonds
differ from USTBonds only in the claim of linkage to mortgage
income and ultimately home seizure, except that linkage is
being removed in plain view to the public. The USDollar will suffer.
Rather than fall versus other major currencies, the wrecked
monetary system will take down all major currencies.
Each fiat paper currency is being exposed as illegitimate in
different ways. The consequences will
be:

All
cost structures will rise, causing a worse global recession,
a very heavy painful consequence.

Income
levels will not rise to meet the challenge, since monetary
inflation destroys capital and erodes wealth engines in
corporate structures.

The
US$-based bond
markets take on a racketeering glow in global
view.

The
vast monetization schemes are set to come into motion for the
bond market in general. The objects are hardly just USGovt
debt securities, not even just Fannie Mae mortgage securities,
but big bank Corporate Bonds as well. The scheme will paint
the USDollar in a light with a RICO tint, as in racketeering,
sanctioned by the US finance ministry and shielded from
prosecution by US legal authorities and regulatory bodies.
Worse still, the Financial Accounting Standards Board has
permitted accounting fraud to the big dead US banks. Since
April 2009, they have been permitted to declare any value they
wish on their toxic balance sheets. That has enabled them to
take advantage of USGovt largesse, direct USFed redemption of
toxic bonds, called widely banker welfare. That has enabled
them to tap the 0% money tree that produces carry trade
profits. The only stipulation was the banks were required to
place their excess cash at the USFed itself, which thereby hid
the central bank's insolvency, and distracted attention from
the absence of Loan Loss Reserves for the banks. Details on
the USFed balance sheet, and big bank vulnerability to further
losses, are provided in the October Hat Trick Letter. Toss in
the High Frequency Trading schemes, and the US financial
markets look to contain more crooked venues than the Las Vegas
casinos. The USDollar lies at great risk in the
process.

BIG
BANK VULNERABLES AGAIN

The
next QE2 is a done deal but with the details missing. The next
TARP-2 bailout package is having its justification and
foundation fashioned from the building blocks of need and
desperation, along with the cement provided by banking
lobbies. The two initiatives will likely meld paths. A
disorderly condition comes. An armada of lawyers is on the job
ready to challenge mortgage securities, foreclosure orders,
and much more. Class action lawsuits are on the docket. The US
financial platforms are unraveling. The USDollar will follow a
path to oblivion, locked in a destructive spiral. The
Competing Currency War assures that other major nations will
undermine, debase, and devalue their currencies rather than
seek out, plan, and establish a new monetary system. The
investment in a broken system will soon be realized as
infinite, with unchecked aid, even $trillions tossed in Black
Holes. The sound money experts have always argued that
accelerated funds are required to maintain a bubble. Gold will therefore
skyrocket in price, as the monetary system will be actively
ruined from unchecked money creation. The silver price
gains will be at least double the gold gains. Markets are
beginning to take control, and kick aside the corrupt control
levers. The horizon features a big US bank on death watch. The
ripple effects will be shocking even to those who expect it.
Other big banks will be dragged down in a chain reaction,
while illicit control in certain key markets will be stripped
away. Control will be lost by the Powerz. Confusion will rein.
The bank stock
index BKX signals an imminent breakdown. The dustbin
awaits!!

The
pressured bank stock index breakdown will be led by Bank of
America, HSBC, and Wells Fargo. The Wall Street firms remain
protected bastions. The comprehensive fraud in a chain link,
from home loan origination to bond securitization to debt
ratings to ultimate foreclosure, reveals a corrupt protected
broken bankrupt system. Its financial status will be clearly
broken soon in full view. Further accounting fraud sanctioned
by the FASB might come about, but the date with the destiny of
failure is assured. My
best source from the banking world believes the wheels come
completely off the renegade wagon train that blocks the free
market for determining a fair gold price when HSBC fails, and
that event is imminent. That renegade wagon train has
trademarks bearing the name USGovt and Wall Street nameplates,
a merged enterprise. A chain reaction will follow. HSBC
manages the SPDR gold exchange traded fund for its gold
bullion inventory (symbol GLD). To those who were shocked by
the mortgage fraud, wait until they witness the broken
suppression levers and devices holding down the gold market.
An estimated 50 to 60 thousand tonnes of gold bullion have
been naked shorted by the biggest banks. Its value is worth
between $2.16 and $2.60 trillion. Wait until the GLD fund
lawsuits line up, since most of their gold has been leased by
the COMEX and LBMA, since many of its shares have been used to
cover short gold contracts.

PERHAPS JUST
LAUNCH QE2 AT NIGHT

The USFed is
showing some reluctance, remorse, or second thoughts about
launching a gigantic second Quantitative Easing ship loaded
with acid into icy waters. John Hilsenrath has reported the
hesitation in the Wall Street Journal, claiming only a few
hundred $100 billion of bond debt might be monetized. The prevailing sentiment
is that QE2 might not succeed in reviving the USEconomy and
not might succeed in clearing the sclerotic condition in the
banks. Whether wrenching constipation or multiple
sclerosis in the banking channels and arteries, what
difference!! My main question is WHEN DID 'QE1' EVER
END??  The grand
bond monetization is mostly hidden from view for USTreasurys,
since almost every auction is a failure. The grand bond
monetization is mostly hidden from view for USAgency Bonds,
since mammoth activity in Fannie Mae basements keeps the lid
on evidence that their bonds have gone worthless, and contains
the acidic spillover. Watch the backdoor bank welfare in a
TARP-2 package soon to be tossed into QE2. Watch the overall
debt monetization be kept much more hidden from view, a new
national priority. The USDept Treasury and the USFed do care
what the world thinks, when the threat of them pulling the
global plug on the United States seems a viable option to stop
the cancer from spreading even more on a global scale. A
cancer has been exposed in the global reserve currency. Reaction should be much
more evident in the Gold price than in currency exchange
rates. They move relative to each
other.

An enormous
pressure point in the legal process right here, right now is
the threat of Put-Backs. A mortgage security is put back to
the bank that packaged the securities from a portfolio neatly
arranged in tranches of loans, when the mortgage backed bond
is forced by the courts to be bought back by the bank, after
fraud or negligence or contractual defects were demonstrated.
A fiduciary responsibility is enforced in the bond
securitization process. Estimates wildly have
come forth that $2 trillion, give or take a few hundred
$billion, in mortgage bonds will be put back to the big
banks. They are scrambling to win support from the
USCongress for quick action. The TARP-1 package worth almost
$800 billion was motivated by declines in the housing market.
To be sure, plenty of Bait & Switch was evident, but leave
that aside. The TARP-2 package might be required at least $1.5
trillion, motivated this time by securities violations,
defective fraudulent MERS & REMIC devices, and contract
fraud, when the specter of class action lawsuits, even with
RICO claims, hangs overhead. These are felony crimes, a far
cry from a declining market.

The second round
of big bank TARP bailouts certainly has come in a vastly
different light. To solve the challenge, look for the USDept
Treasury (controlled by Goldman Sachs) and the USFed
(controlled by godfathers to Wall Street banks) to conduct a
more secretive monetization of the big bank bond exposure.
THEY WILL MONETIZE THE PUTBACKS IN THE DEAD OF NIGHT, DONE IN
SECRET, WITHOUT FANFARE, IN A MORE DIRECT CABAL EXERCISE. They
will use Fannie Mae as a bad bank, a bond garbage can, its
reason for being, its raison d'être. When caught, they will
claim they did it to avoid a USEconomic Depression. The truth
is more that they will conceal their activity in order to
retain power, to enable much more banker welfare courtesy of
the captured USGovt, even to prevent a collapse on US
soil.

GLOBAL BANKERS
ANGRY & FEISTY & DEMANDING

The
G-20 ministers have come forth with a vacant pledge as a
working theme. Regard it as the billboard message of crisis.
Ignore the words, but take serious note of the theme, since it
wraps words around the alarm. The competitive currency
devaluations will be devastating, even as fast moving trade
deficits will be the visible outcome. National trade gaps will
go out of control. The G-20 finance ministers issued an
opening preliminary statement, a working theme. They will
pledge to refrain from competitive devaluations and endorse
market based exchange rates, whatever that means. Of course,
the silent vote is not made by nations that shun attendance,
like Brazil. They decided not to attend, due to stated
concerns over growing hostility in competitive currency
policy. China might have pulled that cord, as Brazil earned a
favor. A US proposal was evaluated to set targets for current
account gaps on the pathway to rebalancing global growth and
realigning exchange rates. The United States will surely be
kept exempt, causing more friction. The G-20 Meeting is
telling of the crippling devastation coming in the Competing
Currency War, which will take down the entire monetary system.
And furthermore, the evidence will be seen in the trade
deficits. For instance, even Turkey is setting record
deficits. Large deficits will be unavoidable. The obvious outcome of
the G-20 Meeting was a sharp pullback in the US
monetization project planning, but it will be
temporary.

Talk
of a Plaza-2 Accord has begun, but it will find zero traction.
Unfortunately, any such accord requires nations to take the
lead in sacrificing their domestic economies and banking
systems. Such nations would have to agree to higher
currencies, which harm their economies. Not gonna happen!!
Instead, expect conflict, disruption, and chaos to grow. What
is needed is consensus and order to depreciate the USDollar in
relation to the other major world currencies by direct
intervention. The
present day environment has no maturity, no cooperation, and
no order. It is loaded with resentment, animosity, and a
desire to topple the horribly corrupt and recognized villains
in Wall Street and London, where power is wielded without
respect and thefts are perpetrated without conscience. In
fact, a spirit of retribution and deserved vengeance permeates
the FOREX winds. Witness the Competing Currency Wars soon in
full glory, which have moved past first gear, and are well
into second gear. USFed Chairman Bernanke
has in essence threatened to inflate with QE2 to infinity in
order to support a system that cannot any longer be supported,
a rickety US$-centric system. Commodity prices are
surging, and emerging economies are battling against fast
rising price inflation. The USEconomy operates under 7% to 8%
annual price inflation, but emerging nations have it a bit
worse. Currency
appreciation is a necessary tool to keep prices under control
for other nations. The BIG problem here is that they are
reluctant to allow significant currency appreciation as long
as the Chinese Yuan remains static and fixed. The key is
China. No nation will agree to a currency rise without China
doing so first, and doing so with some magnitude to matter.
Emerging nations are cutting deals, even with non-Anglo
industrial nations, to avoid usage of the USDollar in trade
settlement. If Plaza-2 happens, it will have China as its
champion.

The Yen Carry
Trade has a vast hidden doorway. Japan has revealed a hidden pressure
point. It is the unwind of the great Yen Carry Trade. It was
the greatest financial engineering project in modern history.
The Jackass found it utterly amazing that the venerable Kurt
Richebacher had no idea what it was, and his popular acclaimed
newsletter had a moniker devoted to credit and currency
markets. Its unwind is coming to an end finally with a climax
upward thrust in the Yen, amidst clouding factors like the
rise of China. In fact, China is diversifying its FOREX
reserves to some extent by using USTreasurys to purchase
Japanese Govt Bonds, which has drawn great anger from Tokyo.
Witness more currency war battles, bigger than skirmishes.

The
climax chapter of the USTreasury Bond bubble, with its
benchmark 0% label, removes the Yen Carry Trade since both
sovereign bonds offer near 0% yield. The yield differential is
eliminated. The end of
the great carry trade signals a monetary system breakdown and
finally a USGovt debt default. The carry trade provided
tremendous demand for the USTreasurys, which has been replaced
by the Printing Pre$$. The Yen currency is the quiet litmus
index of the competing currency war, its turbo-charge. It
remains hidden from view and free from discussion. Details are
provided on it in the October issue of the Hat Trick Letter,
along with many implications of the bank condition on the gold
price.

GOLD
CONSOLIDATES BIG GAINS

The gold price
rose almost 200 points from the beginning of August to the
first week of October. It is consolidating the gains, a
digestion process. The resistance was broken. More
importantly, the big US bank chokehold of the gold market was
somewhat broken. A bull market remains, and the strong
seasonal months of December and January lie around the corner.
The effect of a seasonally strong September has been seen. The Competing Currency
War, the deadly round robin exercise to devaluate currencies,
feeds the gold bull in magnificent style. The G-20
platitudes will be brushed aside. The gold bull is given a
rich diet in huge volumes of fiat money from strained monetary
presses, justified to protect export trade, committed to serve
the broken banks. In the middle of the sovereign debt crisis
and the mortgage bond eruption and the insolvent bank
condition, GOLD IS REGARDED AS THE SAFER HAVEN, since not tied
to debt and not associated with counter-party risk. Gold has
emerged as a global reserve asset, a competing
currency!!

Expect a
consolidation in the gold price while the USDollar attempts to
bounce up. The Euro currency defense is only beginning. The
Euro hit 140 per US$, and has come down with a mild selloff.
The damage to be done to the European Economy is being
evaluated. The 78 level on the US$ DX index was not defended.
A bounce was made possible at 77 instead, a firmer support
level. The monetary system is crumbling. All attention is on
the USDollar, especially after the mortgage foreclosure
scandal erupted. Pay
note to the bearish crossover of the 20-week MA below the
50-week MA. It signals a test of the 75 critical support,
which will bring about a thrust move in Gold past $1400.
Notice how the bullish MA crossover in March signaled a test
of the upside resistance. A full 800 basis point run-up
followed the reliable sentinel signal. My expected 78 to 84
range was blown out. An eerie calm does not seem likely, not
with the mortgage bond fraud and home foreclosure scandal in
full blossom. The United States financial structures have
never looked more corrupt or broken in the national history.
As the US$ standard bearer of the monetary system takes severe
damage, look for the Gold price to march toward $1500 and the
Silver price to march toward $30. It is written; it will be
done. The bankers in the temple will eventually be placed in
their deserved domicile or find themselves on the
run.

THE
HAT TRICK LETTER PROFITS IN THE CURRENT
CRISIS.

home:  Golden Jackass
website

subscribe:  Hat Trick
Letter

Jim Willie CB,
editor of the “HAT TRICK LETTER”

Use the above
link to subscribe to the paid research reports, which include
coverage of critically important factors at work during the
ongoing panicky attempt to sustain an unsustainable system
burdened by numerous imbalances aggravated by global village
forces. An historically unprecedented mess has been created by
compromised central bankers and inept economic advisors, whose
interference has irreversibly altered and damaged the world
financial system, urgently pushed after the removed anchor of
money to gold. Analysis features Gold, Crude Oil, USDollar,
Treasury bonds, and inter-market dynamics with the US Economy
and US Federal Reserve monetary
policy.

From subscribers
and readers:

At least 30
recently on correct forecasts regarding the bailout parade,
numerous nationalization deals such as for Fannie Mae and the
grand Mortgage Rescue.

"As for your
financial and economic analysis, I appreciate your
contemptuous style and how you bring facts and commentary to
your readers before most of the alternative media and light
years ahead of the mainstream press. You are a beacon in a
dangerous storm."

(DanC in
Washington)

"You have the
unique ability to sift through the mountains of disparate
economic data and hearsay and weave them into a coherent
compelling storyline. The amount of unbiased factual
information you provide is unparalleled in the industry (and
desperately needed in these scary times). I love your no holds
barred approach to dealing with the narrow minded purveyors of
dis-information in the industry."

(BobA in North
Carolina)

"I think that
your newsletter is brilliant. It will also be an excellent
chronicle of these times for future
researchers."

(PeterC in
England)

Jim Willie CB is
a statistical analyst in marketing research and retail
forecasting.
He holds a PhD in Statistics. His career has stretched
over 25 years. He aspires to thrive in the financial editor
world, unencumbered by the limitations of economic
credentials. Visit his free website to find articles from
topflight authors at
http://www.goldenjackass.com/.
For personal questions about subscriptions, contact him
at  [email-masked]

-- Posted
Wednesday, 27 October 2010 | Digg
This Article | Source:
GoldSeek.com

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