Really Scary Fed Charts: NOV, US Bankrupt?

Fed Defies Transparency Aim in Refusal to Disclose (Update1): “The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

“The collateral is not being adequately disclosed, and that's a big problem,” said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. “In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.”

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.”

While the Fed may be refusing to name individual firms, we can just look at the data from the Federal Reserve Bank of St. Louis to pin down exactly where the $2 trillion of emergency loans went. We can also determine how that in turn was deployed.

Total Borrowings of Depository Institutions from the Federal Reserve (BORROW) went from $290.105 billion in September to $648.319 billion in October. That is a 123.50% increase in just one month or a 1481.73% annualized increase. That is also 4.7% of GDP (2007). Currently, there is no evidence at all that the pace of borrowing is slowing down. Obviously, there is an upper limit somewhere.

Non-Borrowed Reserves of Depository Institutions (BOBNONBR) went from -$187.305 billion in September to -$332.750 billion in October. That is a 77.65% increase in just one month or a 931.82% annualized increase. That is also 2.4% of GDP (2007). In plain simple English: Banks are insolvent as a group. The money coming out of the ATM is money borrowed from the Fed. Currently, there is no evidence at all that the health of banks is improving.

Total Borrowing (BORROW) and Non-Borrowed Reserves (BOBNONBR) have clearly blown past each other as the ponzi scheme that was the US financial system finally and suddenly unraveled. This is EXACTLY what happened in Japan. This is EXACTLY how Japan ‘liquefied’ it’s overleveraged, overextended and insolvent banks. Creating the infamous Japanese ‘zombie’ banks resulted in deflation and economic stagnation that is now referred to as the Lost Decade.

Total Borrowings (BORROW) can be broken down into its various sources. Discount Window Borrowings of Depository Institutions from the Federal Reserve (DISCBORR) are one such source. Discount Window Borrows went from $140.291 billion in September to $403.541 billion in October. That is a 187.65% increase in just one month or a 2251.75% annualized increase. Interestingly enough, the discount window wasn’t really tapped until September, with borrowings in August only being $18.078 billion. Clearly, this is a new source of funds for financial firms and may have to do with the fact that Bernanke has removed the negative stigma of tapping the window. He has also made almost everybody and his mamma eligible. Collateral requirements have also been severely degraded to the point where a dead donkey would probably qualify.

Federal Reserve Discount Window:
FAQs
Collateral Margin Table

Term Auction Credit (TERMAUC) is just one of the many facilities desperately created by Bernanke. Borrowings went from $149.814 billion in September to $244.778 billion in October. That is a 63.39% increase in just one month or a 760.66% annualized increase. That is also 1.8% of GDP (2007).

Term Auction Facility:
FAQs
Terms and Conditions fro Term Auction Facility
Term Auction Facility Schedule

Excess Reserves of Depository Institutions (EXCRESNS) went from $60.051 billion in September to $267.902 billion in October. That is a 346.13% increase in just one month or a 4153.49% annualized increase. That is also 1.9% of GDP (2007). From June up to September, Excess Reserves hovered around the $2 billion mark. This rather large and sudden jump can signify only one thing: BANK HOARDING. Having completely ‘done their asses’ by extending cheap and easy credit to anybody and anything that could fog a mirror, these super-star banksters are now sitting on their cash, paralyzed by fear. They also know that their sham accounting can only postpone the inevitable and they are clearly gearing up to take further significant losses on their balance sheets. Eventually that CDO made up of dead MBS’s, made up of dead condo loans now sitting in a Level 3 Asset Bucket is going to be marked to market. The banksters must hoard desperately…

The Board of Governors Monetary Base (BOGAMBNS) went from $900.672 billion in September to $1126.244 billion in October. That is 25.04% increase in just one month or a 300.54% annualized increase. For all you gold-bug hyper inflationistas that are drooling over this chart: This is NOT, I repeat, NOT inflationary. This is in fact EVIDENCE of DEFLATION! (Ha! They don’t teach that in school.) First, see the EXCRESNS chart for evidence of bank hoarding behavior. Second, debts AND assets are being liquidated. This results in a massive increase of cash and cash equivalents. However, this process destroys both debt and assets values. Simplified, money is being destroyed on a grand scale. What BOGAMBNS is measuring is but a small component of what qualifies as ‘money’ that HAPPENS to wildly increase as ‘money’ in the broader sense is annihilated.

Reserve Balances with Federal Reserve Banks (WRESBAL) jumped from $260.924 billion in September to $493.633 in October. That is a 89.19% increase in just one month or a 1070.24% annualized increase. That is also 3.6% of GDP (2007). This is the result of a fancy new rule that Bernanke stuck into the TARP rescue package legislation. The Federal Reserve now pays interest on deposits. Since the banksters don’t trust each other anymore they take that hoarded cash and dump it on the Fed. The Fed then turns around and dumps it back on them thru the various facilities. The entire circle jerk is paid for by the US taxpayer. By paying interest on the reserve balances, the Fed is effectively recapitalizing the banks by stealth. The money for the interest of course comes straight out of your pocket. (To pay the interest, the Treasury issues more debt which you pay for thru increased taxes… later. Don’t worry though; a re-run of American Idol is probably on tonight. So everything will be just fine. Just don’t get off the couch you complacent fat bastards. Don’t you dare rock the boat; especially now that it’s sinking.)

Reserve Bank Credit (RSBKCRNS) has jumped from $1054.506 billion in September to $1740.17 in October. That is a 65.02 % increase in just one month or a 780.27% annualized increase. That is also 12.6% of GDP (2007). To pay for all these fun facilities and to create these ‘zombie’ banks, the reserve bank credit now sits at $1.7 trillion. Don’t worry though, wards of the state such as Fannie Mae (FNM) and AIG (AIG) are doing just fine…

Fannie Mae Reports Record Loss After Asset Writedowns (Update3): “Fannie Mae posted a record quarterly loss as new Chief Executive Officer Herbert Allison slashed the value of the mortgage-finance provider's assets by at least $21.4 billion and said it may need to tap federal funds next year.

In its first report since being seized by the U.S. government in September, Washington-based Fannie said its third- quarter net loss widened to $29 billion, or $13 a share, the largest for any U.S. company this year.
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Treasury Secretary Henry Paulson pledged to invest as much as $100 billion in each company as needed to keep their net worth positive.
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Fannie's financing agreement with the Treasury constrains its ability to issue debt, capping the total outstanding amount at 110 percent of the balance as of June 30. Fannie estimates that limit as $892 billion. As of Oct. 31, Fannie had $880 billion in total debt outstanding.”

Worried yet? You should be. Weep for the shortest lived super power ever. Weep for your country, for it has quickly and quietly imploded. The United States of America is bankrupt.

Don’t believe me? Read the paper title Is the United States Bankrupt? by Laurence J. Kotlikoff of the FEDERAL RESERVE BANK OF ST. LOUIS. (The paper may be somewhat complex for the laymen. I will post a simplification of the arguments and math in another post.)

The Really Scary Fed Charts Series:
1) Really Scary Fed Charts, Why Bernanke Will Furiously Cut
2) Fed CHANGES Really Scary Fed Charts
3) Really Scary Fed Charts: MARCH
4) Really Scary Fed Charts: APRIL
5) Really Scary Fed Charts: MAY, False Alarm?
6) Really Scary Fed Charts: JUNE, ‘Just’ 1% of GDP Now
7) Really Scary Fed Charts: JULY, More of the Same
8) Really Scary Fed Charts About to Get Crazy Scary
9) Really Scary Fad Charts: OCT, Now Crazy Scary