by Shelby Moore III
Starting with Wachovia, the FDIC is forcing the taxpayers take the loss on toxic debt and enrich the bankers who created it.
FDIC brokered a deal where Citigroup paid $2 billion to take over Wachovia. FDIC agreed to "loss sharing", specifically to pay for any losses on the estimated $312 billion in bad Wachovia debt, beyond an initial $42 billion in losses.
Wachovia had 62% of $398 billion of domestic deposits FDIC insured, i.e. $247 billion, and about $35 billion of cash. The legal role of FDIC is to liquidate, pay off preferred creditors, then apply the balance of any assets to make insured deposits whole. But in this case, FDIC has apparently taken on an estimated $312 - $42 = $270 billion in potential toxic debt losses, in addition to covering $247 - $35 = $212 billion for reserves deficit. FDIC is supposed to insure deposits, not loans!
There appears to be an "Enron-like" accounting gimick here. Apparently the toxic debts are valued on Wachovia's balance sheet as part of +$406 billion in positive loan assets (ah the liar magic of "off-book accounting"). Yet we see the potential losses are estimated negative -$312 billion on those loans. FDIC has agreed to take losses on those loans (which are not it's legal responsibility nor mandate!), and still has the liability of the insured deposits if ever Citigroup were to become insolvent. So that is $270 billion in potential bad debt, above and beyond the $247 billion for the insured deposits (I think Citigroup gets the $35 billion in cash), that has been foisted on the taxpayers.
It is indicative to note that most of that negative -$312 billion in potential losses, was originally purchased for a positive +$25 billion, thus giving some indication of the insanity of assigning any positive value to any of these industry-wide toxic gambling derivative spagetti.
FDIC is supposed to be self-funded by the banks who pay for the insurance. However, the premiums that FDIC is collecting from the banks is not any where near adequate to cover the potential losses for insured deposits, and now FDIC (illegally?) added $270 billion in future loan losses, and probably many more such (illegal?) bad loan bailouts to come. FDIC is supposed to insure deposits, not loans! When FDIC soon goes bankrupt, the taxpayers will have no choice but to bailout FDIC, because all our deposits are insured by FDIC. And today, FDIC made a request to Congress to allow it to increase the size of the deposits it can insure. This is sold to the people as a benefit, but actually it is the means by which FDIC can funnel more taxpayer money to the bankers via this (illegal?) method of agreeing to insure bad loans.
Ultimately the money for all of this will have to come from the Federal Reserve (a private corporation owned by the bankers), which will create the dollars out of thin air to buy US treasury bonds (debt). The Fed could buy these bad debts directly if it wanted to, printing the dollars out of thin air just the same, but Fed wants the bad debt to be on taxpayers balance sheet and not on it's own balance sheet. Why? What difference does it make whose balance sheet the bad debts will be on, since the dollar will be destroyed any way with $trillions created out of thin air?
The reason is because the world bankers' plan is to destroy the national governments, in order to reach the bankers' long sought goal of a world government. The bankers detest local government and a House of Representatives, where the constituents can fight back. The bankers want a world where the government is in some ivory tower in some far away place, and people enslaved.
If the bad debt goes on the Fed's (the bankers') balance sheet, then as the bankers carry out their plan to destroy the dollar, then the people and the national government can simply buy gold and silver with their dollars and laugh as the bankers destroy themselves. But if the bankers can succeed in putting the bad debts on the taxpayers balance sheet, then if the people buy gold and silver, we will destroy the solvency of our own national government.
The freedom of every living human on the planet is at stake. What can YOU do? Simple. As I explained in my prior article, if even a small percent of the people buy physical gold and silver now (asap!!), then game over for the bankers' plans, before they get the chance to put their bad debt on our federal balance sheet. Buy only physical gold and silver, not ETFs because they are run by the same bankers (the detailed risks are explained at my website).
Expect the bankers to try many different tricks to hoodwink the naive people into preventing the collapse of the bankers' bad debts, and to trick the people into taking the bad debts on the federal balance sheet. Most of the people may not be wise enough to resist these tricks; however, if just 1% of the people move their portion of the $60 trillion in net worth (i.e. $600 billion) into physical gold, and especially silver, then the bankers are toast, because the total value of all silver ever mined in history of world is only $500 billion (and most of that is in landfills as industrial scrap). And annual mining only produces $7 billion of silver, with annual demand for silver exceeding supply by $5 billion.
Physical silver is the most powerful political action any one can do, as it is by far the achilles heal of the bankers. If the current physical silver shortage manifests in a rapidly rising physical silver price (which is highly likely, nearly a certainty), then a stampede out of dollars will ensue, thus destroying the bankers' charade and plans. I can't explain the entire silver story here, but I urge you to visit my website (linked in my bio below), where I explain it and have numerous links about the subject.
Disclaimer: The above are my personal opinions. I seek safe harbor. I am not a professional advisor. I am not responsible for anything anyone does after reading this. Seek your own counsel on all matters.
Shelby Moore [Send him email] has been a commercial software developer since late 1980s (including was one of first 3 programmers of what is now Corel Painter), and occasionally writes economic commentary that has been published by SilverStockReport, FinancialSense.com and Gold-Eagle.com. He recently completed Miningpedia.com and his current development project is GoldWeTrust.com, also known as SilverWeTrust.com.