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Enabled By ZIRP and QE, Banksters Continue Looting Instead of Building Capital

The following is an extended excerpt from this week’s Fed Report. Suscribers may click here to download complete report in pdf format (Professional Edition Subscribers) including 36 pages of charts and clear, cutting edge analysis that you can use to gain an edge in the market. 

One of the purposes of ZIRP was ostensibly so that banks could rebuild their balance sheets through suppressed funding costs allowing them to earn a wider spread and increased profits. Theoretically that would add to their capital.

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But in this chart we see that over the past month the growth rate of bank capital has fallen to zero. Either banks aren’t really making the profits they are reporting or they are paying out 100% of them in dividends and share buybacks from executives who had received the shares in stock option grants. This is looting, pure and simple. When no bank executives are held responsible and punished for causing the endemic wave of control fraud that caused the crash, the looting of the system will just go on and on. Worse than that, it’s a virtual financial rape of the savers who should be getting that income.

The Fed’s H8 weekly statement on the aggregate balance sheet of US commercial banks reflects the trend of bank capital via the Residual line item, which is the difference between assets and liabilities. The growth rate of bank capital has been trending down since 2007 in spite of a zero cost of funds, which is supposed to boost profits. Obviously, it’s not working.

Bank Capital- Click to enlarge

Bank Capital- Click to enlarge

While the Fed has been cashing out the banks week after week, month after month; while they have access to limitless amounts of free cash; while their balance sheets continue to expand exponentially, the US commercial banksters have not added one red cent to bank equity over the past year. They continue to bleed the system while the Fed and the US Government stand idly by allowing, promoting, and subsidizing this legalized but morally criminal skimming of the system.

Meanwhile, your grandmother’s life savings have been wiped out by the same ZIRP that supports the banksters. It forced her to spend down her principal instead of the interest income she should be earning.

This is why I call ZIRP “Bernankecide.” It is the mass financial murder of America’s middle class elderly who had saved all their lives. Instead their savings are confiscated to support the criminal masterminds who run the world banking system. This hideous policy first rapes the victims repeatedly over a long period, and then it leaves them for dead, often on financial life support paid for by their fellow taxpayers.

This crime against humanity will only end when interest rates are allowed to rise to levels that provide a reasonable return for low risk savings accounts and when the criminal masterminds who ran the massive frauds that led to the crash are ultimately forced to bear responsibility for it. Allowing interest rates to rise would also allow a return to rational investment decision making, where instead of mindless speculation on the direction of Fed money printing, investors could make rational decisions based on real risk and real rates of return.

I have no faith that those steps will be take in time to make a difference. Instead the system will again hurtle towards another massive collapse, further damaging the US economy’s ability to ever fully recover. We would be on a long term downward spiral that would have no happy ending.

Table of Contents

Macroliquidity Component Indicators
Fed Cash to Primary Dealers
Foreign central bank purchases
US commercial bank deposit flows
Bank Treasury purchases
Bank Trading Accounts
Bank reserve deposits
Treasury Auctions, Federal Revenues and Supply Impact, and Treasury Yields
Open Market Operations (OMO) and Monetary Policy Actions
Primary Dealers
Other Policy Tools and Total Fed Credit
Other Fed Balance Sheet Items – Liabilities
Bank Loans Outstanding
Foreign Central Banks
The Dollar
Commercial Paper
Fannie and Freddie
Money Supply and Fund Flows
Bank Holdings of Treasuries
Bank Capital Trend

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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