by Graham Summers
The financial markets are currently waiting for the Fed to announce QE 3 or
Operation Twist 2 either today or tomorrow. I don’t think either of these are
coming. In fact, I think they’re not even on the table.
For starters, QE 3 is off the table unless we see a market collapse or a
major bank go under. That’s the truth, though the financial media refuses to
accept it.
The reasons for this are both political and financial. From a political
standpoint, the Fed particularly Ben Bernanke, has become politically toxic
Indeed, Bernanke and his loose money policies are now virtually synonymous
with current President Barrack Obama’s spending and stimulus programs. Neither
of these men or their policies are popular with the American people today. And
it’s clear that both will be campaign issues going forward into the 2012
Presidential election.
Indeed, we’ve already seen one round of spending conflicts between the GOP
and the President. True, it was mainly smoke and mirrors. However, the fact that
the topic of Government spending is now being debated at all indicates that the
political environment has shifted from one in which the Government was seen as
the savior of the economy (as it was from March 2009 to the end of 2010) to one
in which Government spending and deficits are perceived as a problem/ campaign
issue.
That is a massive shift in political perspective. Only two years ago the
Federal Reserve and Obama were thought to have saved capitalism and the US
economy. Today Obama’s polls are at new lows and the Fed has been openly
criticized by three of the Republican frontrunners for the 2012 Presidential
election (Perry, Bachmann, and Paul).
This is hardly a climate in which the Fed can unveil QE 3 without some
catastrophe striking first. On top of this, the Fed is also going to be facing
increased political and likely even legal pressure from Wall Street in
the near future.
First off, Goldman Sachs CEO Lloyd Blankfein has hired a criminal defense
attorney… and not just any attorney, but Reid Weingarten. I’ll let the following
portion of a Bloomberg article speak for this man and his track record.
Weingarten won the acquittal in May of Lauren
Stevens, a former GlaxoSmithKline Plc (GSK) attorney accused of impeding a U.S.
Food and Drug Administration investigation. He also represented Elizabeth
Monrad, the former chief financial officer at General Reinsurance Corp. who was
convicted in an accounting fraud scandal. She won a retrial earlier this
month.
Weingarten previously represented former WorldCom
CEO Bernard Ebbers, who was sentenced to 25 years in prison after he was
convicted of an $11 billion fraud. He defended former Enron Chief Accounting
Officer Richard Causey, who was sentenced to 5 1/2 years in prison.
If Blankfein is under investigation and hiring someone of Weingarten’s
caliber, a massive legal storm is about to begin on Wall Street. These lawsuits
will involve the US Federal Reserve. And when push comes to shove,
Blankfein (and other Wall Street executives who broke the law) will be blaming
Bernanke and the Fed.
After all, the easiest defense is for Blankfein and his kind to simply say
that they were pressured into defrauding investors and the public by Bernanke
and the Fed when the financial system imploded in 2008.
Given that the Fed is run by spineless academics while Goldman Sachs and
other Wall Street firms are run by those who make a career out of profiting at
other’s expense, who do you think will be going down when the legal dust
settles?
Bernanke and the Fed.
The Fed already senses this and is moving to defend itself and shift the
blame for the Financial Crisis to Wall Street. Consider that not long after
Blankfein hired Weingarten, the Fed actually sued Goldman Sachs:
The Federal Reserve announced an enforcement action against Goldman Sachs
Group Inc., saying the company’s mortgage-servicing unit had engaged in “a
pattern of misconduct and negligence” in its handling of home-mortgage
loans.
The Fed’s action on Thursday seeks changes in mortgage-servicing practices
and unspecified monetary damages. It came as Goldman reached an agreement with
New York state banking regulators over wrongful foreclosures, allowing it to
complete the Sept. 1 sale of its Litton Loan Servicing unit to Ocwen Financial
Corp.
The significance of this development cannot be overstated. Goldman Sachs used
to be one of the Fed’s favorite firms. Indeed, it could easily be argued that
Goldman received the most preferential treatment from the Fed during the
Financial Crisis.
Given just how close Goldman was to the Fed previously, the Fed/ Goldman
relationship would only breakdown if an external threat meant that either group
is going to be in MAJOR legal trouble (possible jail time). In light of
Blankfein’s recent moves as well as the Fed’s lawsuit against Goldman, I fully
believe that this is the case and that the relationship between the Fed and Wall
Street will be deteriorating further in the coming months.
In a climate of increased legal pressure such as this, the bar for QE 3 is
going to be much, much higher. It’s one thing if the Fed and Goldman Sachs were
simply making critical statements about one another in public. But lawsuits/
legal actions are a totally different matter. In plain terms things are
now getting very serious behind the scenes. And Bernanke will not be able to
simply do as he pleases without consequence.
For this reason, it will take another catastrophe for the Fed to implement QE
3. The days of the Fed implementing QE just for the sake of raising the stock
market or affecting a “recovery” are over. It is clear now, even to those who
have little financial understanding that Obama and Bernanke have essentially
spent trillions of Dollars and accomplished next to nothing.
As a result of this, the Fed will be implementing large-scale moves ONLY in
reaction to crises. Imagine the political impact it would have if the Fed were
to unveil QE 3 today or tomorrow two with Oil already at $86 a barrel and food
prices skyrocketing.
Indeed, I fully believe the Fed will disappoint in a BIG way today and
tomorrow. With every one and their mother expecting QE 3 or some other major
program today and tomorrow, the potential for MAJOR market upset is higher than
ever before.
Indeed, I fully believe that we may be on the verge of a market Crash. Behind
the scenes, the market is on DEFCON Red Alert. Ignore what the mainstream media
and White House are saying, we are in BIG TROUBLE.
So if you’ve not already take steps to prepare for what’s coming, you need to
do so NOW while the markets are still holding up.
Because once the selling pressure comes back into the markets… it’s going to
be far FAR too late.
To take action to insure you don’t get crushed in the coming Collapse…
No comments:
Post a Comment