Housing Market Wiping OUT, Stock Market CRASHING, Banks FAILING – Wall Street Underground

By Nick Guarino | July 16, 2008

I think it’s safe to say the shit is hitting the fan. My warnings of doom and gloom are coming true despite the incredible disinformation campaign being waged by the government and Wall Street bankers.

As I have been telling you, these SOBs will tell you how great things are and blow blue sky up your butt until one day you wake up to discover that your money is gone. The 10,000 depositors at IndyMac now wish they had listened to me.

Like a bolt of lightening out of a clear blue sky, they woke up one fine day to find out that a billion dollars of their money has been frozen — and in reality, lost — when their bank was nationalized by Federal regulators. What’s worse, the government has admitted there are over 90 banks on their short list tittering on the edge of the same abyss. And that is only a tiny part of the story.

I am sure you have heard all the hullabaloo about Fannie May and Freddie Mac. At one time, their shares were the hot stock of Wall Street. People were urged to scoop up shares with both hands because they carried a government guarantee. Well, once again the trusting masses who bought that line of bull are standing back in horror as another “sure fire” Wall Street investment is now a single-digit stock and soon to be a penny stock. But get this: Even as these bundlers and guaranteers of 6 billion dollars in home mortgages swear that they are solvent and don’t need any money, government regulators are tripping all over themselves to shore them up with trillions of tax payer dollars.

They are the latest financial entities being wheeled into the Federal Reserve critical care unit as they are given access to emergency funds through the discount window. Remember, the financial institution critical care unit at the Fed is a LOAN facility. That means the money the Fed hands out to these desperate banks must be paid back. But in this case, the bail out promises are nothing short of astonishing. The government says it will buy shares of stock of these dead broke home mortgage companies some day real soon. Make no mistake. This is nothing short of a Communist-style nationalization scheme designed to try to hide the fact that these mega-banks are broke. Of course, by the time they do all this it will be too late for shareholders.

What amazes me is how easily people are fooled. These government flunkies tell us everything is fine and the banks don’t need any money but, just in case, here is a spare trillion dollars and all sorts of government guarantees, Comrade. Do these people think we’re stupid? How can these banks not be in trouble? With real estate prices continuing to crash and foreclosures continuing to soar, tell me how the largest holders and guarantors of home mortgages in the world cannot be on their way to being flat-out busted?

The truth is they are beyond broke. Fannie Mae and Freddie Mac have guaranteed home mortgage loans to the tune of 100 times their capital. Talk about spinning the wheel in the derivatives casino. Bear Stearns would be proud. Those New York Ivy Leaguers in the now insolvent investment banks have nothing on government bureaucrats when it comes to creating soon-to-be-worthless derivatives. Funny how they forget to mention the out of control leverage that is behind the Fed’s derivatives casino – leverage that will eventually wipe out the rest of the mortgage market, government guarantees and all.

Let me tell you, the Federal Reserve is scared to death. You could see the desperation on the bureaucrats’ faces when the Fed and the Treasury met in emergency session last Sunday when they announced their latest bail-out plan. The bail-out announcement came within hours of the start of trading in Asia. Their hope was that their latest spin job would fool the markets as they continue to deny the growing wipe-out. Remember, there is not enough money in the entire world to bail out the $800 trillion in derivatives that are wiping out. People are starting to figure it out – at least those people standing in 8-hour lines at IndyMac bank are, waiting to get a portion of their savings out of their frozen accounts.

Now you might ask: Why did Federal Reserve officials need to assure Asian investors before the start of their trading that Fannie Mae and Freddie Mac are solvent? Well, that is because governments from Japan to Korea hold a trillion or more dollars in mortgage debt issued by these soon-o-be insolvent mortgage companies.

And here is the best part of all. Government bail-outs like the ones we’re seeing are only a temporary fix. They don’t provide sufficient capital to cover the mortgages going bad. That’s because the derivatives are eating capital faster than it can be replaced. It’s the same grand scheme of more chewing gum and bailing wire that is holding together the nation’s biggest banks and brokers that are also on the Fed’s discount window life support.

Bottom line: We have just added yet another member to the list of insolvent financial institutions the government thinks are too big to fail and must be placed on life support. Unfortunately, what the politicians and Wall Street have not figured out yet is the fact these companies are also too big to bail out. The money does not exist to save even a fraction of these walking dead.

I have prepared my analysis of these latest desperate attempts at saving the dead broke financial system. You need to pay attention to the death throws of these mega institutions. I realize it’s a little technical and arcane, but you have two very good reasons for paying extra attention to what’s going on right now:

Reason #1: Your savings really are at risk, even in “FDIC-insured” institutions – as the depositors at IndyMac bank are now discovering; and

Reason #2: If I’m right and this banking crisis is only the tip of the ice berg, you could potentially make a tremendous amount of money by investing in options on financial and real estate-oriented Exchange Traded Funds.

The truth is the latest news about desperate banks is finally starting to wake up the sleeping masses — and soon there will be panic. More and more people are figuring out there is something desperately wrong here.

There are some things you must do right away to make sure you don’t wake up one day very soon stone cold broke. There are some extraordinary events taking place as the Federal government trashes the free enterprise system.

These Federal Reserve bureaucrats mistakenly believe that the current crisis is a matter of liquidity. It’s not. It’s a matter of solvency. In other words, these banks are not facing a temporary cash flow crisis that can be fixed by a few temporary loans. They are facing the total elimination of their underlying assets through the derivatives wipe-out. That’s a horse of a much different color. That’s why providing the banks massive loans from the Fed’s discount window does not solve the problem. In fact, it makes it worse. Loans from the Fed only increases the amount of money these banks will lose. And creates the temporary illusion of solvency.

My friend, what you need to understand is that the game has changed. The old rules don’t apply. Federal bureaucrats will do anything to save their banker buddies on Wall Street, including loaning out trillions of dollars of your money. In the chilling aftermath of the new powers that the Fed, Treasury and the SEC have taken on, it’s a brand-new game. No one’s money is safe any longer.

I can tell you from personal experience. America is inching closer and closer to a police state. These federal bureaucrats can do anything they want to you and your money. In the name of fighting “terrorism” and battling “fraud,” the Feds can swoop in and confiscate trillions – and arrest anyone who questions what they’re doing. The FDIC officials in Pasadena had squad cars parked outside the bank’s doors this week, ready to arrest any depositor who didn’t meekly wait in line and dared question the FDIC. It’s a Brave New World out there.


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