The real reason behind the U.S. fed gov huge deficits, that main stream news isn't telling us.

I stumbled across this doing research on another thread. It started with a statement by JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon.

www.bloomberg.com...

“There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Dimon said during a conference call today. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.”

Here is the real clue to the problem.

“The private-label stuff will probably go up a little bit,” Dimon said when asked about future expenses to resolve disputes tied to the securities. “But I doubt it will go up more than the reserves we’re going to have to take down in the next 12 months.”

The litigation reserves aren’t earmarked for liabilities tied to Washington Mutual, the lender that JPMorgan acquired after it collapsed during the financial crisis in 2008. JPMorgan said those are the responsibility of the Federal Deposit Insurance Corp., adding that the “FDIC has contested this position.”
The outstanding balance of the Washington Mutual loans was approximately $70 billion as of March 31, with about $24 billion overdue by 60 days or more, according to JPMorgan’s first- quarter regulatory filing.

This leads to research into how much the FDIC is adding to our current deficit woes, and chances are high that is the biggest reason deficit spending jumped so high in 2009.


imarketnews.com...

CBO estimates that the government recorded a deficit of $973 billion for the first nine months of fiscal year 2011, $31 billion less than the deficit recorded during the same period last year. Outlays climbed by $104 billion while revenues increased by $136 billion.

The real info on the current cause of our deficit problems.

Outlays through June were $104 billion above those through June 2010, CBO estimates. That difference stems mainly from large downward adjustments in 2010 to the estimated cost of credit programs (mainly the Troubled Asset Relief Program) and prepayments in 2010 of premiums to the Federal Deposit Insurance Corporation. Other spending, in total, changed little.

Net interest on the public debt grew the most, rising by $31 billion (or 18 percent) above the outlays recorded through June 2010, primarily because of the large increase in the public debt during the past year. In contrast, defense spending increased by 1 percent through June, considerably below the three-quarter average of 9 percent experienced over the past 10 years.

This explains why a government shutdown at this time is being hyped as such a huge disaster. The fed shut down in 95 and 96 when Clinton stood up to the republican controlled congress over the budget, and it wasn't made into such a big deal. Why is it different this time? Why are they talking about catastrophic default?

Could it be that if the fed government stopped sending huge amounts of freshly printed money to the banks, the whole ponzi scheme, fractional reserve money supply might collapse, and huge amounts of wealth will go down the drain?

We are still paying the price of Newt Gingrich's repeal of Glass-Steagal.

We are still paying the huge price of attempting to establish the unrealistic fantasy of free market deregulation, and for some reason people are on here calling for more of the same.

Actually, we aren't paying anything, we are selling our children's future down the drain.

I'm sick of the government b.s. about the debt ceiling. Whatever reason it is, it's just an excuse to bring in more taxes.

Its criminal behavior! I am of the belief the government is nothing more than a large criminal organization at this point and don't even get me started with Chase!

The absolute saddest part of a US Gov't default is that while social security, welfare cheques, military paychecks, and medicare/medicaid payments likely won't be honored, the salary of Congressman, Senators, and The President are protected by the Constitution, while those salaries of their staffers are NOT protected either.

For some time now I have wondered at the significance of our financial crisis. Why would a government allow such travesties to occur? Perhaps there is a much more grandiose scheme at play than we realize.

In a world where money determines the power of an individual, it is ever more difficult for those who are not in power to attain any semblance of power. This is being accomplished through the bankers of all major banking systems.

These bankers are the puppeteers behind the curtains, who pull upon the strings of our politicians and judges – making them dance like Pinocchio on Stromboli’s stage. The federal reserve is a private bank, which collects interest from the money we borrow from them – money which we gave them. We are being charged interest to use our own resources….

As I have stated in another thread – I am not a financial or economic professional, but a lowly computer technician working from the southern United States. If I can figure out what the true cause to our economic problems are, there is no reason that government officials who are much smarter than I am can’t figure out the cause to our woes. So using that logic, it stands to reason that what is occurring within our nation – and other nations – is a planned event. What the endgame is to the planned event is up for anybody’s guess.

Perhaps they, the bankers – those in true power – wish to make the citizens of the world into peasant. That way they can rule their kingdom from their throne, and eat hearty while their subjects starve….

Perhaps they are moving the nations of the world into position, like a grandiose game of chess, for the final checkmate….

Whatever the reason, we can only theorize and make educated guesses.

But we are not unified enough in our thinking, or actions, to stand up to these puppeteers and cut the strings by which they control us.

We divide ourselves through political factions, religions, and other means of distractions that keep us from realizing the one simple truth – We all desire happiness. We all desire the same thing: peace, unity, and harmony in the world around us….

I think I saw it on Businessinsider or something but there was an article about how under Obama defense spending was now the highest it's been since World War II.

Not sure if it was in proportion to GDP, or just the overall dollar amount but that Nobel Peace Prize needs to be shoved up his 'where the sun don't shine'.

Plain and simple fix.

Stop ALLOWING a private bank to control our money and credit.

reply to post by americanbuffalo1


My beef has less to do with the government, and far more to do with Wall Street, the finance markets, and the International Corporations that they control.

This problem is much bigger than the deficit issue, but from the way mainstream media makes it out, the problems all lie with the federal government, but all the evidence points to the bankers and the ICs.

The media is trying to distract you from the real problem, which is that through fraudulent means, the banking ICs fabricated a whole lot of wealth, by greatly over rating home prices, and the ability of people to pay for those homes, and now that all that magic money disappeared, they want future tax payers to foot the bill, so they can keep their fabricated bonuses.

That is the reality that people need to focus on.

reply to post by poet1b


The entire business is and always has been a corrupt house of cards - attempting to float social outcomes via an opaque manipulation of the free market.

Its not over. Distressed that poor and minority communities are not receiving adequate credit (as if anyone is getting credit today), the Obama administration has begun to push banks to create more engineered loans and relax capital requirements to expand credit in those communities.

www.abovetopsecret.com...

I guess we did not learn that giving loans to folks who can not afford them and forcing banks to do so is a problem

reply to post by poet1b


we here in America have put ourselves into this position of having a ganster style, aristocratic powerhungruy tyranous government. The mere fact that every last position from our local ify government all the way up to the traitor president we have know, what their personal agendas are not reflecting the better of Americans or the world peoples. And until we stop voting for Republican because your Republican or Democrat because you're Democrat we will continue to fall down their unamerican holes, and hence taking down many if not all world economy. I say its time to impeach the whole system.

reply to post by dolphinfan


Nobody forced the banks to inflate house prices by loaning people money when the banks knew those people could not afford those loans.

It is like saying the government forced Wall Street execs to give themselves those huge bonuses.

Stop blaming government for the actions of Bankers. The reality is just the opposite. The bankers are the ones pulling the strings.

The real problem is the debt based money system. By proxy, the only real way that wealth can be built is through the issuance of more debt by the government or the banks. It is also created artificially by inflation. Thus no matter how high our production is or how much resources our land holds all the populance is still fighting over the same wealth that existed when the federal reserve was first created. Sure that wealth has inflated, but it has stayed in basically the same hands. Thus we have three hundred million people fighting for the same crumbs that only 100 million people were fighting for back in 1913.

Originally posted by poet1b
reply to post by dolphinfan

 

Nobody forced the banks to inflate house prices by loaning people money when the banks knew those people could not afford those loans.

It is like saying the government forced Wall Street execs to give themselves those huge bonuses.

Stop blaming government for the actions of Bankers. The reality is just the opposite. The bankers are the ones pulling the strings.

But ... but isn't that is what capitalism is all about -- the markets will filter out the greed and the dishonesty because that is what strong markets do -- if the weak are trampled upon it is best to blame the government and allow the stronger to profit, then in their infinite wisdom they will create jobs, and rehabilitate the infrastructure that they so depend on, we will all share in the crumbs from their table. Yes now I see the unicorns.

www.news.com.au...

news.yahoo.com...

reply to post by poet1b


There are too many quality threads on here to go into the details in specificity. Here's the nut of it

In the 1970s Jimmy Carter and the Congress passed the Community Reinvestment Act. This law was to remedy the fact that poor and minorities were not getting access to credit and thus were unable to purchase homes. The CRA stipulated that banks had to issue a percentage of loans in all areas of their coverage and instituted a 40% threshold for bank loans that had to be made in poor and minority communities. If the banks failed to meet that threshold they would be red-lined which prevented them from being in the lending business at all until the threshold was met. Banks sent out local bankers, found credit worthy buyers and issued the loans.

In the 1990s, Janet Reno the attorney general raised the threshold to over 50%. Despite complaints from the banking community, she did not relax the capital or credit standards for banks which is directly related to their ratings. the banks were forced to make the loans, with the capital/credit standards not relaxed they had to create a host of loans, 0 down, interest only, etc. They stopped really doing adequate credit checks because frankly per the government regulations credit was immaterial - poor and minorities in homes were the priority.

Having a loan portfolio full of bad loans and Wall Street recognizing that there was money to be made in getting these loans off the bank's books they bought the loans up, sliced and diced them and created debt securities which through pressure placed on the rating agencies were rated based on the best debt in the security, neglecting the poor quality debt. Banks were making serious cash on these CDOs so other banks and institutional investors like pension funds bought tons of them.

With so many folks now able to buy homes due to the easy credit, folks bought homes driving the prices up, basic economics. That someone was making $40K/year did not matter, they went in for the $500K loan because with housing prices going up like they were, due to folks like them buying homes they too could not afford they could refinance and pull cash out or simply sell the house and take out the dough.

The economy soured and folks were unable to make their payments. The bank, sitting on a growing portfolio of debt coupled with the existing capital requirements was unable to refinance and the homes were foreclosed on. The foreclosures mounted and moved up to the middle tier of debt and now noone onces to buy and trade the CDOs which were based on home loans that market folds and banks, unable to meet their credit requirements causes the counter party chain on Wall Street to break. By By Bear Stearns, Lehman Brothers, Merril Lynch and the rest of them.

This problem was caused by the government who attempted to manipulate the economy for a social outcome. It was caused by overly creative bankers who created trash securities and sold them knowing they were trash. It was created by the ratings agencies which were (are) corrupt entities with massive conflicts of interest. It was created by the gent who bought a home he knew he could not afford to purchase.

All are at fault and it is absurd to assign blame based on the wealth of the party in this fiasco.

And not the Obama Department of Justice wants to do it all over again.

reply to post by dolphinfan


Thats just pure bs. Community reinvestment loans are a small % of the loans that went bad. They were also the loans with the lowest average principal value. Your ignorance overwhelms me.

reply to post by MentorsRiddle


Much as in biology, in politics we see the illusion of design. In politics, the outside observer sees... things happening. Some are rational, many are irrational, but it all seems to fit some sort of pattern. So it's not difficult to come up with the notion that there are one or more "masterminds" sitting in smoky offices or sparkling high-rises somewhere, giving marching orders to the whole thing.

In a way, it's comforting.

Because the alternative - the truth - is that it's basically a herd of individuals meandering around blindly, without any communication or planning, and forming something that our minds - hard-wired to find patterns in just about anything - perceive as a cohesive purpose, some grand design. When in fact it's just a bunch of schmucks milling around with just enough self-awareness to not crash into one another.

Basically politics is the art of creating the illusion of united purpose while seeking only individual goals.

Here in the Netherlands we have a declining housing market, if people pay their mortgage this is not such a big problem.
And most are able to do so, and have enough overvalue on their house.
But there have been some changes in mortgages, a type of mortgage on which only the interest has to be paid, and therefore the loan capacity rose quite a bit.
Not only that, but also the safety ratio of loaning no more then 4 times the gross salery earned in a year was swept aside.
In fact, people could lend up to 8 times that ammount and up to 125% of the worth on a house.
This made the housing market go sky high here to, and now for nearly the past 3 years it is slowly deflating.
People who bought a house in the last 5 years with such a mortgage are in trouble.
The house has declined in value and if they want to sell it, they still have debt on that mortgage.

We can blame the bankers, but as long as we loan on such a irresponsible way, we are as much to blame as the bankers.
If we didn't lend on that base, they would not be able to make such loans.
In 1995 i bought my house for FL75000.- in euro that is €34000, i sold that house for €100.000 8 years later.
€100.000 in the dutch gulden is FL220.000,- that was great profit
I wondered how it could be that such an old pile of stones could rise in value so quickly?
And that was because of the new policy, less regulation, less oversight, mortgage constructions, and people willing to accept those kind of mortgages.
Our wages stayed the same, but houses rose sharply in price which indicated a booming market,
The widening gap between house prices and gross salery was a good signal that it would not last forever.

reply to post by poet1b


I agree with what your saying entirely.

reply to post by sligtlyskeptical


That is simply innaccurate. Who do you suppose defaulted on their loans, the high end of the market? Of course not, it was the low end and when housing prices began to drop and the folks on the low end could no longer pull equity out of their homes to pay the loans, the loans went under. Once that happened, the middle tier of debt began to falter largely for the same reason, notably the upward pressure on home prices was no longer there because the clerk could not flip his house and buy up market again.

There are community reinvestment loans and there are loans that banks are required to make under federal law under the Community Reinvestment Act. Those, beginning in the Clinton years are over 50% of a bank's loan portfolio. To suggest that it was the top tier of the loans that defaulted, creating the problem is absurd. It was the gent making $40K buying a $400K house and betting that he could pull cash out of it each year to pay the loan and when the housing market stopped going up there was no dough to pull out and he defaulted. Who forced the banks to make those loans? The government. Did the banks make a lot of money making those loans? yes. Were the folks who got into homes they knew they could not afford greedy and foolish? absolutely.

If nobody wanted to get into homes they could not afford this problem never would have happened because there would have been no massive increase in debt to package, slice and dice and sell. If there was no demand for trash loans, the borrorowers and governent creating that demand on both ends of the curve, the banks would have no incentive to sell trash securities. basic supply and demand

reply to post by poet1b


Yes the Bankster mobsters are responsibe for the real estate market, your right, but, the government is responsible for bailing them out only to end in these same banks needing more money. Therefore with the realestate market if the government loans more to them, then it is the governments fault. all other deficit and ceiling increases are solely on the governments backs.
As for the real estate loans, what happen is, sadam hussein had declared economic war on america right after he started being threatened by the first bush. WHat occured, (in my opinion) all these bad loans given out in the real estate rush era was given dominately by middle eastern banksters, whoooo, did no back ground checks on any of their loans, giving ARM loans, thennnnn, they bundled the loans and sold them to...Our americans banks, i.e. bank of america, morgan stanley just for a few, then what happens when 3/4th a countries goes into bankruptcy, declinquancies, all other of economies aspects, food prices, gas, clothing, LIFE ITSELF start teetering downard, ( at first) then suddenly the downward flow starts gaining pace and next thing you know your country has a C rating from the world ratings....interesting right. PEACE TO US ALL E NEED IT