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Regime change Regime change Document Transcript

  • The “New Normal” which completes the regulatory “Regime change” that Normal” change” started November 9, 2007 Re media question Government or BP to blame: Answer: Government’ political agenda to blame BP is part of a broader goal to “Regime change” With all the solutions available from the Private Sector and from around the world since day one, Obama has stalled on allowing any of these going forward for 3 reasons 1) To increase the power of government over the private sector. To allow Private Sector to solve the problem would defeat and undermine Obama’s assertion that only government and government owned companies, bureaucracies and labor can provide the solution to a Private Sector he sees as inherently evil, given that he refused to meet with BP to sort out a working relationship to cut through all bureaucratic red tape and political opposition of Big Labor, environmentalists, etc. to solve the spreading oil spill, while BP attempts to cap the Deep Water Horizon well, the government forcing BP to drill in 5,000 feet, one of the deepest wells ever drilled, when BP wanted to drill in 500 feet. However, the result of the blow out has been that the government, Obama and Congressional Democrats have threatened and talked down BP and its efforts, on the one side requiring BP to obtain approvals from the Admiralty, while on the other vilifying the BP President and CEO during Congressional hearings, due to government’s own delays. BP’s expertise is in the assembling of subcontractors and the expediting of their management, which the Administration has to a large extent blocked. Instead of working with BP, the Obama Administration failed to grant requested wavers to the 1920 Jones Act that would have allowed foreign ships and Dutch skimmers to enter US water, refused international assistance from 33 countries, stalled and minimized Louisiana’s creation of sand barriers, and refused to heed numerous private sector solutions. One of these, offered May 3rd was from Dr. Henry Crichlow, the leading blowout specialist worldwide, who developed the blow out engineering after Gulf War I for 800(+) wells in Kuwait, provided quick relatively inexpensive solutions to either recover the oil with the Crichlow connector from the pipe a mile down or Kill the Spill completely. Orchestrating a crisis, Congress threatening to put BP into receivership, with Obama playing to the radical left that a takeover BP’s assets was an option, if they could not force BP to allocate $20 billion in an escrow for a government appointee to administer (Agreed). The result was that the US government has succeeded to cause a FITCH downgrade BP’s unsecured debt from AA to BBB, with BP shares loosing $90 billion market cap BP despite BP’s balance sheet of $70 million liquid assets, $240 billion total assets, $104 billion equity creating a crisis for BP. The Obama Administration demanding that it make payments it had already agreed to make, thus financially weakening the very company the government asserts it wants to be able to shoulder the burden of the fines, the oil cleanup and claims of lost revenues for the Gulf States. After meeting BP’s executives, Obama talked up BP as a solid company. 2) Force Obama’s cap & trade bill and energy tax through Congress. Under the Obama policy of “don’t let a good crisis go to waste,” the crisis had to get bad
  • enough that Obama had the “audacity” in his Oval Office speech to the nation to come contrive and justify Cap & Trade. Since the beginning of the blow out, the Private Sector and States have been fighting with the Administration to get approvals to take action. However, the longer the Administration could stall, the worse the situation would become for BP, the States and Gulf coast businesses, exacerbating a crisis further by creating a moratorium on current and new shallow water drilling threatening hundreds of thousands of jobs Cap & trade, involving a Chicago carbon exchange and other companies that Obama and/or his associates may have financial interests in, was all but dead in the water until the BP oil blow out crisis renewed “hope” that he could revive it again. Cap & Trade is designed to increase the cost of energy to the private sector by more than 10 percent, lowering GDP in the process. Organization for Economic Cooperation and Development (OECD) studies have demonstrated that, for every 1% reduction in the cost of energy there will be a 3% increase in manufacturing and industrial output. This occurred when President Reagan deregulated the oil industry, creating an economic boom. Obama is moving in the opposite direction, i.e., that of higher taxes and a more permanent federal government control. 3) To affect “regime change” toward statism. Why would the Administration willfully let the Coastal region be damaged, destroying revenues and lives to create a crisis, as an “end justifies the means” call for Cap & Trade? The answer is that we just need to look at the cause of the systemic financial crisis itself, which was intended to achieve, as Mohamed El Erian CEO PIMCO on CNBC Squawk yesterday himself called it: “Regime change” in the US and globally. This “Regime change” is momentum towards the “New Normal” he estimated 4 years to complete. This crisis was caused by a single stealth regulatory change, which collapsed over $10 Trillion in Private Sector value between December 2007 and now. In short, by Regime change is meant an inexorable shift of control and ownership of Private Sector capital and productivity of the populous to the Federal government and Federal Reserve. It was imposed on the Private Sector and implemented through FASB 157 November 9, 2007, a foreign directive from the Bank of International Settlements (“BIS”), the Central Bank to Central Banks, initialed 15 years ago through the Basel II Accord was intended to force Private Sector banks and financial institutions to mark to market all their assets. Since bank price mortgages and loans based on formulas of affordability or debt service coverage rations, it meant that with changes in mortgage and loan affordability, the value of bank and insurance company assets would have to be re-priced and any losses immediately deducted against the value of bank capital, the implications of which and comparisons related to hold to maturity accounting provided here below Economists were paid to present a vision that this would create economic stability, but leaving out that it would require the stealth shift of all Private Sector wealth to the government and Federal Reserve. The intent, regardless of the loss of wealth and prosperity to the Private sector was to affect “Regime change” to result in the “New Normal” where all wealth is
  • consolidated under the ownership, control and guarantee programs of the Federal government and Federal Reserve, which alone retain the right hold to maturity accounting valuation. The result of the imposition of FASB 157 was 1/ to end the regulatory basis for diversified Private sector free enterprise Capitalism intended by Americas Founding Fathers encoded in US Constitution, 2/ to collapse Private Sector capital formation and access to credit throughout 2008 and 2009, unless covered by government ownership (such as AIG) or guarantees that allow such assets (Private Sector debt) to be reclassified under the government’s sole right hold to maturity valuation, thus 3/ shift ownership and control of Private Sector capital and human capital inexorably to the government and Federal Reserve requiring an orchestration of month by month steady issue and printing of new Treasuries and government and Fed guarantee programs to cover Private Sector assets and thereby 4/ take control or ownership of Private Sector debt and revalue mark to market losses into hold to maturity values (gains). For example, the $1.6 Trillion in AAA rated MBS purchased by the Fed at 70% face value was revalued to $2 Trillion, with the Federal Reserve and government having no compunction to the loss to the Private Sector that resulted in the Fed’s gain due to a stealth regulatory change November 9, 2007 intended to affect a “Regime change” to result in the “New Normal” over a 4 to 6 year period. The government is now trying to achieve the same shift from hold to maturity valuations for the States and Municipalities to mark to market, the effect of which will be to collapse their access to credit and their value on the books of pension funds, bond funds and Sovereign funds, as well, resulting in 30% to 50% value losses to investors, unless covered by a government guarantee. Already PIMCO, Warren Buffet and others that understand this are bailing out of these assets with States already pressed to access credit to be forced to accept the Federal government guaranties and become compliant and subservient to the Federal government. “Regime change” Already, due to mark to market accounting limited to the Private Sector (and soon the States and Municipalities), banks no longer place funds overnight with other banks, whose assets on a mark to market basis have a perceived nebulous value and instead place the funds in what are effectively short term Federal Reserve CDs, which carry a hold to maturity valuation versus a mark to market valuation of Private Sector banks. “Regime change” Understanding the economics of the bank regulatory mechanism (or cycle) as it pertains to diversified free enterprise Capitalist operating system and the Socialist operating system: Capitalism: Private sector ownership and control of Capital with government as referee. Under hold to maturity accounting FASB 115 from 1938 until November 9, 2007, loan loss provisions were made based on a projected loss recovery calculation of one off loans of individuals and their companies, easy for banks to manage, where a bank would make a provisioning against its View slide
  • capital of an anticipated loss recovery that protected the value of the bank’s assets and capital so long as loans were not impaired. (Please grasp and understand this.) Typically, under tightening markets borrowers would cut costs to improve their cash flows, while banks would make greater spreads to add to the profitability effectively offsetting losses, until borrowers returned to the market to take loans at lower interest rates, which in turn improved the value of the bank assets much as a lowering of interest rates by the Federal Reserve improves the principal value of an asset. This is best called the bank regulatory cycle, which is the mechanism for diversified Private Sector free enterprise Capitalism. You can think of this regulatory underpinning, like a computer’s operating system, or the 90% of an iceberg below water relative to the 10% above based more on interpretation of empirical data. Without the stealth change from hold to maturity in the Private Sector to mark to market in the private sector with the government and Federal Reserve retaining the sole right to hold to maturity accounting, i.e., had the Private sector retained hold to maturity accounting, the regulatory basis for Capitalism, the markets could not have collapsed and would have continued to be booming today, with widespread access to credit and enormous capital formation, no need for TARP, no default or failure of any banks or insurance companies, higher wages, etc. Socialism: Government ownership & control of capital & human resources, resulting in economic distribution through Patronage and control of socio-political outcomes. “Regime change” However, under mark to market accounting rule, FASB 157, a slight change in the affordability of loans directly affect the change in debt service coverage (“DSC”) or affordability ratio relative to original mortgage or loan affordability or DSC ratio, devaluing all assets, with losses of the whole range of assets, whether performing or non-performing being booked against bank capital, collapsing lending liquidity as the bank falls out of regulatory compliance. Under mark to market accounting 4 changes emerge that force banks to shift lending from Private Sector 100% and 50% risk weighted assets, such as consumer, business and commercial loans, devalued on a mark to market basis, over to zero percent risk weighted assets, such as Treasuries and unconditional guarantee coverage from the Federal government or Federal Reserve, revalued on a hold to maturity basis (as well as for a while State and Municipal bonds). The result is a coup of Private Sector wealth and productivity by the government and Federal Reserve. These 4 changes in the way markets price assets under “Regime change” are as follows a) An end to “predominant market pricing.” Formerly, under FASB 115 hold to maturity accounting, banks priced cash flows for a company, based on formulas including ratios of debt service coverage of projected underwriting cash flows derived from revenues and expenses from operations and sales, and formulas of mortgage and loan affordability for private persons’ net disposable income. Once these cash flows came under a “financial contract” and held to maturity, as 70% of bank assets typically were, market pricing View slide
  • stability that resulted prevented wild speculation and severe losses in Private Sector equity values, to sustain the economy through what are better called regulatory cycles. However, with the advent of the imposition of mark to market accounting on the Private Sector, the market pricing stability inherent in these financial contracts was obviated, rendered inconsequential, thus destroying a pricing force that prevented speculation of a property or commodity upwards, because the predominant market price based on the financing of log term cash flow contracts would bring in short sellers that returned the pricing to the predominant contract levels. This is the same for speculators shorting any market, when the predominant market of depositors’ cash supporting long term cash flows replaces any withdrawal of deposits, because of the stabilizing force of predominant markets. b) The emergence of a “tipping point:” Because every bank would have to book losses related to changes in loan affordability (i.e., debt service coverage) against the totality of assets and that loss in asset value then booked against bank capital, all banks are instantly put outside of regulatory compliance, thus collapsing lending liquidity. With the slightest change in net disposable income from changing oil prices, higher taxes, higher costs for energy, such as Cap & Trade, booking provisions for Obamacare, the bank tax, and other bureaucratic costs, (understand this) the affordability of loans declines, and loan losses have to be booked immediately against bank capital forcing banks to shift lending from Private Sector 100% and 50% risk weighted assets valued on a mark to market basis over to government and Federal Reserve zero % weighted assets valued on a hold to maturity basis. The first example of this was that, after FASB 157 was imposed on the Private Sector November 9, 2007, in the single month of December 2007, 2 years of solid growth in every market (all booming) retracted in the single month of December 2007, the designated start of the Bush Recession. To remain in regulatory compliance, banks were forced to shift their assets from Private Sector lending (100% and 50% risk weighted assets, valued under mark to market accounting, meaning capital has to be at least 8% or 4% of total assets) to government Treasuries and unconditionally guaranteed government and Federal Reserve debt (zero % risk weighted assets valued under hold to maturity accounting, i.e., the asset retains its original cash flow based value, unlimited leverage, where Tier-1 equity capital cannot exceed 4% of total assets). This was due to the loss in mortgage and loan affordability across the board due to manipulation of oil prices upward by proprietary funds, such as Goldman Sachs, and oil traders, possibly the Clinton Pardoned Mark Rich & Co., experienced at hoarding oil, creating a price rise from a stabilized $60/brl May 2007 to $95/brl November 2007 sharply reducing mortgage and loan affordability, their ratios and asset values. Damage done, this “financial terrorism” continued through July 2008 at $147/brl. Wide spread shorting of markets, which due to mark to market, had no
  • predominant market pricing protection caused both debt capital values and equity capital values to plummet and implode. Thereafter, even with TARP funding Private Sector capital formation and access to credit was impossible. Banks were maligned by the government for not lending, even though the accusers knew that without some government guarantee program to allow the loan to be booked on a hold to maturity valuation basis, any new loan would result in a loss. Such crisis has justified the creation by the government and Federal Reserve of many loan guarantee programs, including many programs built into the Financial Reform Act under reconciliation by the Senate and House is intended to provide, resulting in the “New Normal” which completes the “Regime change” that started November 9, 2007. c) The protection of depositor’s cash: Without hold to maturity accounting, and the imposition of mark to market valuations on Private Sector assets, the slightest change in loan affordability will pierce the “tipping point” collapsing bank lending liquidity. The result of this is that the only cash remaining in the market is with the capital markets, typically 20% of all cash, as the rest was lent out into mortgages, loans and securities. Thus, when banks lose their lending liquidity, this tipping point comes into effect and the value of financial contracts between borrowers and lenders is obviated, voiding the implicit of banks to depositors that its asset values will remain stable, to protect the cash value of their deposits. In effect, unless banks are able to shift their mark to market assets valuations from the Private Sector to the government and Federal Reserve hold to maturity valuations, upon a sharp widespread change to mortgage and loan affordability of banks with Private Sector assets, when the bank’s capital falls below regulatory compliance without TARP money to offset the loss, the value of their assets will trade at the percent cash value in the market, e.g., 20% face value, until most of the banks have covered themselves under one or another ownership, regulatory control (like a utility) or loan guarantee program of the government and Federal Reserve, the “New Normal” which completes the “Regime change” that started November 9, 2007. d) The conclusion is clear that had mark to market regulatory change not been imposed on the Private Sector on November 9, 2007, the booming markets would have continued to today. Instead, the stabilization of the markets occurred only after April 2nd 2009, resulting in the 2nd biggest one day percentage stock market gain in history, after FASB made a slight alteration allowing refinanced assets to be valued on a hold to maturity basis as long as there are no major changes in loan affordability values, such as will occur after December 31, 2010, when the end of the 10 year Bush tax cut will result in a major tax increase, Obama care provisioning kicks in, Cap & Trade kicks in, taxes on banks kick in, possible uncontrolled spike in oil prices again. Thus, clearly, if the government and “special interests” are willing to orchestrate an unmitigated economic collapse allowing over $10 Trillion in Private Sector savings to be lost to affect a Regime change to a New Normal culminating in their total ownership and control of financial and human recourses, then government stalling in its response to the oil spill to create a crisis to justify the resurrection of
  • Cap & Trade to further such Regime change is small potatoes by comparison. 4) To start the nationalization of oil and other major industries. An outright government takeover of BP and other oil companies could be the next phase of Obama’s “regime change” policy. When you consider that, prior to Reagan’s deregulation of oil when he took office, high priced oil from the West subsidized virtually the entire Soviet Union Planned economy and War machine, it’s easy to surmise that government assuming ownership of oil properties and oil production could be on the horizon for BP and others, again under the guise of exacerbate crisis. The conclusion, as to why the Obama Administration, Democrat Congress have no compunction to maligning and degrading BP as part of a greatly exasperated oil clean up crisis as part of their efforts based on the November 9, 2007 stealth regulatory change to launch “Regime change”: When you understand that the Democrats and Bush/Paulson Administration instituted mark to market accounting, then incurred help of Goldman Sachs the other “special interests” – the former fund managers that shorted MBS, who set up proprietary funds to drive oil prices up to collapse mortgage and loan affordability, knowing through Paulson that mark to market accounting would be imposed on the Private Sector. When you understand that these political and special interests, knowing the history of mark to market accounting behind both the Hoover/FDR 1929-1938 Depression and rise of the Third Reich in Europe, had no qualms at the loss of more than $10 trillion in Private Sector wealth. When you understand that this same regulatory policy is supported by Obama, when Wilson/FDR of our Era, supporting the same policies and intent at “Regime change.” Then it’s also easy to understand that there is a strong potential that Obama and/or the Democrat Congress, having driven down the value of BP shares and bonds, where even now Bank of America is saying that they will restrict credit to BP in 2011, could start the process to seizing and/or nationalization of oil and other major industry. The above outline and understanding of the economics of the bank regulatory mechanism relates 1) to the affordability of the monthly mortgage and loan payment and 2) how changes in such affordability affect the value of bank assets and the shifting of risk weights towards government and Fed guaranteed debt in order to maintain capital compliance and lending liquidity, and 3) how hold to maturity accounting is the regulatory basis for Capitalism and mark to market accounting with the government and Federal Reserve having the sole right to value on a hold to maturity basis is the regulatory basis for Socialism, and 4) how by Private Sector ownership and control of capital with the government and Federal Reserve acting as referee we mean Capitalism and 5) how by ownership and control of capital through government and Federal Reserve guarantees we mean Socialism, we can see that 6) without a reversal of FASB 157 mark to market accounting to FASB 115 hold to maturity accounting, in 2011
  • 7) those banks and financial institutions not owned and controlled by or covered under a government or Federal Reserve guarantee program, will collapse and implode into government and Federal Reserve control and ownership, 8) due to the 10 year end of Bush tax cuts reduces mortgage and loan affordability on more than 70% of all bank assets, provisioning for Obamacare begins, Cap & Trade (if passed), the Financial Reform Act and related taxes and squeeze on capital requirements, the proposed oil tax, possible renewed oil price manipulation. Curiously, this “Regime change” process to the “New Normal” seems to read from the same game book as Germany, which used the same regulation change of mark to market accounting to collapse and nationalize German banks a year after Hitler, the Chancellor of the German Socialist Republic gave an executive order to the Minister of Finance in 1935 to take over weak banks, and then revalue all their assets to a hold to maturity basis retained by the government, then to take Germanys’ auto and other major German industries in the 1930’s. Alternatively, we can understand the current effort at “Regime change” as an attempt to succeed through the same regulatory change as Hoover in 1929, who imposed mark to market accounting on the Private Sector (as Bush November 9, 2007), then FDR (as Obama now) continued, both trying unsuccessfully to achieve the same “Regime change” shift of all Private Sector banks and business to the government. But under the better educated populous, main street banks and business of the 30’s, FDR was finally forced to reinstate hold to maturity accounting in 1938, the regulatory basis to diversified free enterprise Capitalism, resulting in the biggest one day percentage stock market gain in history. The clear objective of the Obama Administration in every action is to exacerbate any situation into a crisis in order to impose higher costs with the intention that mortgage and loan affordability is reduced so that under mark to market accounting, as happened the month after mark to market accounting was imposed, Private sector loan values will collapse, imploding the remaining banks, financial institutions and companies no longer able to access Private sector credit into the ownership and control of the government and Federal Reserve. The intent is clearly to affect “Regime change” to a “New Normal” or Clinton/Blair New Wave, where, as in Germany’s 1930’s, all Private Sector banks and companies, their assets and productivity will be owned and controlled by the government and Central Bank(s). FASB is now planning to reinstate completely the FASB 157 of November 9, 2007 within a couple of years complete the “Regime change” making it forever impossible for the Private Sector to again reinstate free enterprise Capitalist system, as every political and social act will be dictated by the elite in Washington. For more in depth articles on this matter of Regime change and the economics of the bank regulatory mechanism, a subject no longer taught with US history, open the following weblink: Related articles Arthur Laffer: Tax Hikes and the 2011 Economic Collapse http://online.wsj.com/article/SB10001424052748704113504575264513748386610.h tml
  • Steve Forbes on Mark-to-Market Steve Forbes, president and CEO of Forbes, discusses why we should suspend mark-to-market http://video.foxbusiness.com/v/3882887/steve-forbes-on-mark-to-market marktomarketdebate April 9, 2009. This is after the April 2nd change by FASB that allowed banks to hold assets on their books until there would be a change in loan affordability. http://www.youtube.com/watch?v=ksoe1JTYpJg Here are my CV’s that support for my knowledge in this (what Steve Forbes calls “Arcane”) economics: Company Profile (53 KB) (my banking background) http://admc24-7city.com/files/N/aaac_profile_bank_concepts_strategies_thru_2002. pdf Personal and Family CV 061010 (135 KB) (includes my father’s history hosting Conservative TV) http://admc24-7city.com/files/N/rijk_pieter_schoonheim_samara_061010_w- family.doc Rijk Pieter Schoonheim Samara - CV April 27 2009 (93 KB) (career) http://admc24-7city.com/files/N/rijk_pieter_schoonheim_samara_- _cv_april_27_2009.pdf Regime change articles: Articles: “The Theory of Baking Economics (Short)” 10/29/08 [best to start with this article, then the Q&A below, etc.) http://admc24-7city.com/TheoryBankingEconomicsShort/The_Theory_of_Banking_Econo mics_Short.pdf Q&A re the after effect of MTM FASB 157 extending from November 9, 2007 and its implications for 2011 (222 KB) http://www.worldviewweekend.com/worldview- times/article.php?articleid=6147 Capitalism's economic mechanism, versus Socialism's economic mechanism: Part One 05/25/10 http://www.worldviewweekend.com/worldview-times/article.php? articleid=6133 Goldman Sachs Short Sales Based on Insider Information That The Banking Sector Would Collapse In November 2007 05/24/10 http://www.worldviewweekend.com/worldview-times/article.php? articleid=6127 The Myth that the subprime market caused the collapse of 2007 and 2008: Part Two 05/25/10 http://www.worldviewweekend.com/worldview-times/article.php? articleid=6132 Empowering the Private Sector and Restoring wealth creation through the reversal of one stealth regulatory change made November 9, 2007 http://admc24-7city.com/files/V/empowering_the_private_sector_and_restoring_wealth_creation_through_the_reversal_of _one_stealth_regulatory_cha.pdf Freedom versus Enslavement 05/19/10 http://www.worldviewweekend.com/worldview-times/article.php?articleid=6108 The real cause for the economic collapse: (a 56 page economic thesis) http://www.admc24-7city.com/files/V/the_financial_crisis_-_the_real_causes_050409.pdf The Secret of Capitalism - 1996: http://www.admc24-7city.com/The_Secret_of_Capitalism/The_Secret_Of_Capitalism.pdf Related Capitalism Diagrams: http://admc24-7city.com/TheoryBankingEconomicsDiagrams Pieter Samara pietersa@loxinfo.co.th +66898199980 June 18, 2010, 4,478 words