Exposure of MASSIVE foreclosure fraud continues, accelerates; Patterns of fraudulent mortgages emerge; Title insurance fraud ramifications balloon

This is a must-read article via Zero Hedge:

"The biggest fraud in the history of capital markets."

These days are looking more and more like August 2008, as this foreclosure/mortgage fraud crisis is getting more and more severe by the day. Bankster Report's favorite, Catherine Austin Fitts, has been saying since at least 1995 that many of the "houses" to which MBS are supposed to be value-linked don't exist, and never did. In 1995, she confronted a Clinton administration official with the fact that "the Administration was planning on issuing more mortgages than there were houses or residents," to which she was told "Shut up, this is none of your business."

It's our business now, and it's the business of at least 40 attorneys general and hundreds of fraud investigators.

The mortgage market, from the most fundamental perspective, is in fact based on fraud, because mortgages themselves in our financial system are based on non-existent money. But Ms Fitts (and me too) think that the fraud is much less "abstract," but literally involves not only non-existent money, but non-existant houses. This latest robo-signing debacle only more clearly exposes that no one--not regulators, not bankers, not the market, and not even market participants and the people buying this crap--are even concerned with the legitimacy of the documenting paperwork: this current, rapidly expanding foreclosure fraud crisis is the obvious result of the underlying mortgage fraud crisis. Investigators are finally working it backwards: when a good doctor sees certain symptons--that is, banks having using illegal practices during foreclosure proceedings--he can works it back to determine the specific disease causing these symptons--that is, the banks using illegal practices to get the mortgages in the first place!

The events of this last month, thanks to judges and lawyers courageous enough to challenge the banks as well as some whistleblowers from the banks themselves, are making it clear that the largest US banks have absolutely no qualms about submitting fraudulent documents, suborning their employees to commit perjury, and outright circumventing the law. As Bloomberg reports today, Wells Fargo, JPMorgan Chase, and Ally Bank (the post-TARP name of GMAC) have admitted submitting fraudulent documents in hundreds of thousands of court cases. Would it be such a big jump to simply fabricate some mortgages, securitize them, and submit some nice, new, shiny tranches of "AAA" MBS to the market? If the banks are committing such crimes today in this "new age of increased regulation," how much more would they have been tempted to do when regulation was "more lax"?

From the above Bloomberg article:

"In a lawsuit filed on behalf of Kentucky homeowners last week, plaintiffs claimed banks, MERS [the Virginia-based Mortgage Electronic Registration Systems, which handles mortgage transfers between member banks] and loan servicers filed mortgages with forged signatures, submitted foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages."

If true, all of the above are serious cases of mortgage and foreclosure fraud, and perhaps more complexly, title fraud and title insurance fraud. For example: JPM forecloses on a house it claims to own because the current occupant is not making mortgage payments. JPM and the occupant go through the court proceeding, and despite the occupants protestations that JPM is not following the law, the occupant can't prove his claims and JPM doesn't admit to having done anything wrong, and so the judge grants JPM possession of the house. The occupant, who had purchased title insurance along with his now-doomed mortgage, loses the house. JPM resells the house to a new person and also sells that person a matching loan. The new occupant is current on payments, and himself has title insurance. The non-paying occupant has been removed, JPM was able to recover losses, and a new occupant is in the home: the system has "worked." Right?

He he he .... One year later (ie: today), JPM is sued by the attorney general of the State for fraud after the AG discovers patterns of document fraud and falsified court documents and gather testimony from JPM employee who state that they were told to robo-sign documents, which both the employees and supervisors knew was illegal, but did anyway. JPM admits that it "may" have used robo-signers for the documents, and perhaps even forged a few signatures, and is "having trouble" producing the title in some of the foreclosures cases in the AG's State. The original occupant sees this story about JPM--the bank that he claimed was up to something fishy during the foreclosure proceedings---and calls a lawyer. He asks a simple question: "Mr Lawyer, does my title insurance cover fraud?" The lawyer says, obviously, "Of course. Why?"

Meanwhile, the second occupant is still faithfully paying JPM for his loan, and hasn't missed a payment. Of course, he might be paying JPM, but JPM doesn't really own the title anymore, because JPM has pledged it as collateral for some other loans from another bank, and has also securitized the original loan into several tranches of "AAA" MBS and sold them. MERS is holding the title as the middleman between the banks. The lawyer for the first occupant of the house calls the AG to report his client's case. The AG adds the case to his successful fraud suit against JPM, and JPM is found guilty of filing fraudulent documents and falsifying court records.

Upon the conviction, the lawyer calls his client's (the original occupant) title insurance company. Like all insurance companies, ABC Title Co is just another financial institution, and the company has been not only watching the JPM cases closely, but has been suffering itself due to the rulings. As an insurer against fraud, ABC Title is now finding itself liable for thousands of payouts to the mortgage holders that JPM fraudulently foreclosed upon. ABC Title can't keep up, of course, and so ABC itself sues JPM. Meanwhile, the original occupant is also fighting to recover the title itself, which JPM has fronted as collateral and which is in the supposedly in the possession of the MERS middleman, and which another person entirely--the second occupant--has an seperate independent title insurance claim on. So, there are two individuals with two different insurance claims on the same title, a title that is pledged as collateral to a second bank, a third party title holder who has no idea who really owns the title, and a group of MBS holders expecting their money from JPM, which JPM is expecting from the second occupant! See what a mess fraud makes!

How does a judge settle this--and how do the title insurance companies survive (never mind the people)? They don't: there is not enough to go around. If JPM committed fraud, and the first occupant had title insurance for fraudulent claims against the property, then the title company owes the first occupant compensation. If JPM committed fraud that impacted the title company, then JPM owes the title company compensation, too. And then there's the guy who bought title insurance on a title that had a latent fraud claims against it and that happens to be the title for the house he's living in and financing. This is not even to mention anything about the second bank which is now legally entitled to the title as collateral if JPM itself starts missing payments to the second bank! This why analysts are calling the foreclosure fraud mess a "hydra": there are too many different faces on one single house, and one of the ugliest faces is the title insurance problem.

We know that we have people in houses paying mortgages to banks who claim to own the loan or the title, but cannot prove either. We also know that we have former loan-owners who are now home-owners because no mortgage company or creditor could produce the title in court. We also know that Bank of America has "foreclosed" on houses which the bank doesn't even own. The opposite of this--that side that I think will be exposed especially through title fraud/title insurance fraud--are the creditors with claims to houses that don't exist, and banks with "assets" on their balance sheets based on ghost houses that even a ghost could live in. We know that there is more debt than money on the planet, and more money than real assets, as the derivatives market is a $1.5 QUADRILLION "market" of promises and exposures, or...

$1,500,000,000,000,000 of promises that will never be fulfilled.

Fifteen thousand Trillion promises. We can't even imagine these numbers. How people can look at a number like that and claim that the global economy is "fixed" and what happened in September 2008 was a once-in-a-lifetime market crash is totally beyond me. Two years after being saved by the master heister Mr Paulson, we have banks admitting that they basically used taxpayer money to fund their massive mortgage fraud operations. Of course, we "conspiracy theorists" knew that there was incessant fraud all along which is exactly why Mr Paulson heisted America to save the banks in the first place. But now this is mainstream news, and attorneys general in 40 States are investigating banks, and the Wells Fargo, Ally (GMAC), JPM, and PNC have all suspended foreclosures until further notice. Its not a "conspiracy theory" anymore.

So, to recap: two years ago, the American taxpayer was heisted by a consortium of banksters, including master heister Mr Hank Goldman Sachs Paulson, which dropped the DJIA by 777 point in a single day, and threatened Congress with martial law lest it authorize a $700 Billion transfer of wealth from the people of the United States to the banksters' group of fraud-laced, immoral, corrupt banks that are themselves so incapable of operating responsibly that without such a transfer they would have gone bankrupt within weeks. The weak, corrupt Congress authorized the restriction-free transfer, and within two days of the bill becoming law, master hiester Paulson completely abandoned the "we must buy the toxic assets!" that lie he had previously concocted and vigorously repeated for the purposes of fear-mongering the entire planet into believing that an absolutely certain "complete global economic meltdown" would ensue if we didn't "buy the toxic assets." Once he had the money in hand, this mantra was abandoned, and suddenly Mr Paulson revealed an entirely new plan to, literally, deliver the money directly to the banks and hope they pay some of it back--the very banks that cannot even handle their own money responsibly nor that of their clients. Fast-forward two years, and these same banks are now admitting to massive and systemic foreclosure fraud, even to the point of forging signature, falsifying court documents, and intentionally and knowingly breaking the law.

But that's not all--because guess what? If these banks get financially hit because of this, the American taxpayer is going to be the one to pay. Not because of any new program that might be concocted to "save" them lest the Moon explode, but because of one that already exists: remember the FDIC's Temporary Liquidity Guarantee Program? Its the one were you get to back about half a TRILLION dollars in private bank paper? Yeah---what happens if JPM ($39.6 Billion in TLGP paper) and BofA ($44.5 Billion) get crimped for cash again due to their multi-year foreclosure fraud operation and the ramification? Who covers the payments to $95 Billion-worth of their creditors?

Who? We do, of course.

So--so much for that "crime doesn't pay" business, kids. Actually, crime really does pay, and pays really, really, really, really well if you do it in an Armani suit. I'm talking BILLIONS "well"---TRILLIONS "well." Plus, there's a great medical plan, solid benefits, and you might even get to visit the White House.

JPM's Jamie Dimond and Goldman's Lloyd Blankfein did!

PHOTO: Getty Images,
"Wall Street Backs Barack Obama's Toxic Asset Plan",
UK Telegraph. Editorial and news use.

And they will be back.

Currency Manipulation: World's largest Pot calls world's largest Kettle "black" as Fed races to devalue dollar faster than China devalues yuan

China has been a popular conversation topic in Washington lately, and an even more popular conversation in the chambers of the House and Senate. Last week, the House passed a bill authorizing tariffs against China in retaliation for China's continued "devaluation" of the yuan. Ironically, Congress also applauded the Federal Reserve's latest sure-to-lead-to-certain-doom plan to do what only the Federal Reserve does best: to accelerate the fantastic devaluation of the US dollar.

Talk about the pot calling the kettle "black."

The Senate has yet to debate the bill, and of course, the Congress has no control over the Federal Reserve, so Mr Bernanke will turn up the press without the input of Congress (which is lovin' it anyway). Neither the House nor the Senate are attempting to do anything whatsoever about China's two master accomplices, the individuals enabling China to accomplish its goal of "yuan devaluation." You know these people, Congress loves them and the president appointed them: they are Ben Bernanke at the Federal Reserve and his FRBNY buddy Timothy Geithner at Treasury.

If Congress genuinely wanted to stop yuan devaluation, it would stop dollar devaluation. The yuan is pegged to the dollar: 100% of the devaluation evident in the yuan is equally occurring in the dollar. Instead, Congress just calls China a currency manipulator without even bothering to lookin the mirror. The United States is the world's largest currency manipulator, and has been since the incipience of Bretton Woods. Yet the story for the past year has been how horrible it is that China (which is evil, but for different reasons) is for intentionally "devaluing" the yuan and thus effectively creating a 20/20 import-export manipulation through which US exports are effectively 20% more expensive to Chinese consumers while Chinese exports are 20% cheaper to US consumers. The poor little United States just cannot do anything about it except blame China, because it is certainly not Mr Bernanke's fault--and former FRBNY president Timothy Geithner, who happens to be fluent in Mandarin, as one could have ever possibly foreseen China doing such a thing, and just because the US is devaluing its currency doesn't mean that China can, too!

Yeah, right. What few in Congress, no one at the Federal Reserve or Treasury, and certainly not the president, are admitting is that the only way China has been able to accomplish yuan devaluation is through its choice to peg the yuan to the US dollar in summer of 2008. This means that 100% of the "devaluation" that has hit the yuan has also hit to the dollar. Are these politicians and "policy makers" complaining about the fact that USDX has lost 36% since 2002?! Do they care that they have contributed to the reducing by over one third the purchasing power of every American through their compliance and embrace of a decade of ridiculously loose monetary policy, insanely low interest rates, and a 36% devaluation of the dollar?! Of course not. Now stop complaining about the deteriorating dollar and the evil Federal Reserve, and be a patriotic American and blame China.

The yuan "devalution" of the past two years is not due to some magical powers that China has: it is due to the magical unicorn fairy dust powers of the Federal Reserve to print up money ex nihilo and carte blanche. Yuan devaluation is due to dollar devaluation, and dollar devaluation is the only possible impact that can occur to currency controlled by a Federal Reserve who has no problem with printing up over $2 Trillion in dollars and who just announced plans to print more, and a Treasury that has no problem auctioning off record amounts of debt every week despite having no increase in revenue to cover interest payments, and two Congresses with their two presidents who have no qualms about either outright authorizing or gleefully endorsing $24.7 Trillion in bailout guarantees in less than 2 years. What currency can survive being shot fifteen times, stabbed fifty-three times, rolled down a hill, run over by a Pete 379, and lit on fire?! According to Mr Bernanke and Congress, the almighty dollar can!

Well it can't, and this is evident manifestly by the fact that the US dollar is worth 4 cents against its original pre-Fed value. But forget about 1913, as we have even more dramatic evidence from just this last decade. See for yourself below. This chart shows USDX from 1985 to 2009 (source):

The steep decline at the left from 1985 to 1987 is the intentional result of the Plaza Accord, an announced conspiracy by the Treasury Department, Federal Reserve, and German and Japanese finance ministers to devalue USD against the yen and the deutchemark. As you can see, it was "success": the Plaza Accord resulting in a resulted in a 52% devaluation of the US dollar in two years, a crash that was only stopped by another international currency manipulation conspiracy, the Lourve Accord. The right-most peak of about 120 occurred in 2002. In the eight years since, USDX has dropped 36%, to a level which is near the lowest part of this chart (all time low from March 2008, which is the lowest dip on the chart, is 71.18. USDX today sits at 77).

So, once again, if anyone knows anything about currency manipulation, it is the United States government and Federal Reserve. If a nation wants to devalue a currency, all they have to do is peg to the dollar. The yuan situation is about to get worse, too, because the chronically irresponsible Fed has announced that a $2 Trillion balance sheet (a balance sheet that includes monetization) is just not enough. Apparently, we know need super Ben to jump on his unicorn, ride it to his helicopter, talc up his hands, and start QE2.

Oh yeah, this is going very well: two years after TARP and the height of the credit crisis, and the Federal Reserve still thinks there are "liquidity" issues. There is again renewed talk of a "second Plaza Accord" to steal yet more spending power from Americans. This appears to some to be the beginning of the first currency wars of the new century. And how do we prevent a currency war? We call in the creation of the world's largest currency manipulator, the IMF, to "stop" it, of course. As Peter Schiff explains in this video, currency wars are won by the nation which is "successful" in devaluing the currency of its own citizens the most, and stealing as much spending power as possible, or, in his words:

"You know, most wars, the object is to kill the enemy. Well, in the currency war, the object is to kill your know troops. Because in a currency war, its a nation's own citizens that suffer, because they're the ones that are being made poorer. Well, of course, you know, unfortunately, America is going to win the the currency war, so our citizens have the most to lose. Because we are going to be the greatest casualities in the currency war--its going to be American retirees, people living on fixed income,because, unfortunately, that's how you win the currency war: whichever country succeeds in making its citizens the poorest is the winner."

We do not want a currency war. As mentioned above, USD has already been shot fifteen times, stabbed fifty-three times, rolled down a hill, run over by a Pete 379, and lit on fire. We don't exactly need to USD to slit its own throat.

Watch commodities, and this vastly expanding foreclosure fraud crisis, along with the massive intervention of various nations in FOREX, because it is almost beginning to look like summer 2008 again.

Bankster Report's Eagle mascot gains 30.5% in 6 weeks while Bankster Reporter's savings lose 8% of purchasing power

In case you haven't noticed, silver has been on a tear this past month. Check out the graph below, courtesy of StockCharts (to which we are permanently linked on the left of this page under "Silver (chart)"):

Silver up $5.5/oz over the last 35 trading days: f(x) = 5.5/35X ?

If you cannot see the numbers, please click on the link, because StockCharts does a great job with their graphics and you will be able to see everything you need to in good contrast. Even without clearly seeing the numbers, however, you certainly cannot miss the near linear increase on the right of the image. Looks like y = 5.5/35x to me. This covers a roughly six week period from the last week to August through today. The late August price was about $18.00/oz, and silver moved up a massive $5.50 since, or 30.5% (silver hit $23.50/oz, and closed today at $23.22). It is a huge move, no doubt, and is a 13% larger move than the less-huge-but-still-nice spike in gold. See for yourself the gold chart, also from StockCharts:

As you can see, gold is up $200 over the same period, from $1160/oz to over $1360/oz, and closed today at $1347/oz, thus giving gold a gain of over 17% in since the end of August. Of course, silver is quite prone to runs-up, and runs-down. Between mid-March and mid-April of 2006, silver shot up 43%--and then sunk 45% from May to June. Silver also dropped 31% in the month between mid-September and mid-October 2008 during the tumult of the credit crisis, and did this after having dropped from over $21/oz just six months previously. Silver recorded two 30%-plus rallies in the first half of 2009: one, from mid-January to mid-February registered nearly 35%, and the other, from May 2009 to June 2009, registered 33%. The first rally moved silver out of the $11/oz range, and the metal has not returned to that level since. However, the second price rally of 33% from May to June was promptly following by a 28% crash from June to July 2009. Digging back further than 2006 reveals more examples of silver's notorious volatility, especially 2001 and 2004. As for gold, during the above-mentioned 2006 silver rally-top-crash, gold rallied as well, though less aggressively, and also erased it's gains the following month. Likewise, during the fall 2008 credit crisis peak, gold dropped over 25% and traded briefly below $700/oz after having that summer broken $1048/oz. So, all that said, I know that I am not only one who is just a little concerned with this current move. (More on this later.) We've looked at the charts for gold and silver over the last six weeks, so the next obvious question would, of course, be "What about the USDX?" Well, c'mon--what do you think? Here's the US Dollar Index, from StockCharts:
Ouch. That was predictable, unfortunately. While gold-bugs and silver eagles are jazzed at the rallies in precious metals (I know I am, as well as very apprehensive), we also have to look especially closely at that last chart, the USDX. You might have some investments in commodities, gold, and silver, and are therefore pleased with these moves. You might have already figured out that the US economy is in an utter unsustainable path towards disaster, and you've made yourself mentally prepared to shovel dollar bills into the fireplace in Wiemar America, if need be. You might be totally psychologically ready for whatever comes. But are your financially prepared for it? No one is: a dollar collapse would be completely unprecedented and there is no telling what would happen: violence, wars, totalitarianism, or "benevolent" property seizure, illegalization of gold and silver, account confiscation, bank holidays, devaluations. No one knows. For the record, I don't know if any of these things will ever happen, and I hope they do not, but I personally think that the dollar is not built to last and never was. And that dollar connects us all. Look at that USDX chart again: I'm guessing that you are not paid in commodities, and if you are, please don't tell the IRS. You are paid in dollars, and your checking account is in dollars, and your savings account is in dollars, and your retirement plans in dollar-denominated assets (equities or bonds), and your house which you might one day like to sell is in dollars. The only good thing about it is that your debt is in dollars, too. USDX is a measure of value against six other major currencies, and as the dollar falls against these other currencies, import prices increase. Correspondingly, the relative price of US exports falls, which would perhaps be beneficial if the US actually exported anything! To the contrary--the US economy is, quite literally, based on consumer spending, and consumer spending, and consumer spending. You and I spending money is what makes our "economy" work, and is what dominates almost 65% of the national GDP. That in mind,USDX is down nearly 13% since the recent high in June of over 87. Over the last six weeks, USDX is down almost 8%. That means we are out 13% of our spending power in the last four months: are you thinking that all of the sudden, silver and gold continuing up doesn't seem so nice?

In September 22 article, Bob Chapman had this to say on the issue of the USDX: "The dollar, now at 81.32 on the USDX, will fall to 74, then to 71.18, and eventually to 40 to 45...". Since he wrote that, USDX has moved from 81.32 to 77.26 today. Mr Chapman cites two specific levels--74 and 71.18--because these are the two very important support levels: if USDX breaks these levels, then we could be sliding into the long term scenario that Mr Chapman thinks will take USDX "to 40 to 45." Others disagree greatly with him. Here are USDX data going back to 1986, and if you take a few minutes to view them, you'll see what has happened to the relative value of the dollar over, especially over the last year fews of the Fed's loose/cheap-money policy. Mr Chapman specifically cites the 71.18 level on USDX because it was the 14-day relative average of the USDX during the two weeks which bracketed the all time low in USDX, hit in March 2008.

So let's recollect March 2008, shall we? Pretty uneventful, really, expect for the collapse of Bear Stears! Of course, Bear didn't collapse because of the dollar; it collapsed because it was a reckless investment bank that attempted to play $13 TRILLION in games with $11 Billion in chips. Another relevant event which occurred in March 2008 was silver hitting its previous post-1980 high of over $21/oz. The events of the last week include silver eclipsing even that mark, and the metal now sits a 30-year high. Gold, of course, has hit all-time highs several days in a row, and it up week-over-week since the end of August.

It is a bitter pill: as my headline states, one is up and the other is down. Gold and silver strengthen because the dollar deteriorates. But that is the purpose of fiat money--to destroy wealth and annihilate savings and capital. The tables may be set to turn, however. I have no clue--I'd trust Bob Chapman's opinion over my own any day. However, silver and gold look overbought to me, and dollar looks oversold. This is not uniquely my observation, but some say, including myself, that it appears in the very charts I posted on this page. I could be completely wrong, of course, and totally misinterpreting the data.

Below the main price charts above, you'll see a second, smaller box. These are the MACD charts. MACD stands for "moving average convergence-divergence" data. Here they are again from, from silver, gold and USDX, respectively:

Look at the right-most trend. The MACD is a momentum indicator, and like all technicals, it doesn't matter if you believe if everyone else does--particularly when that "everyone else" includes computers in high-frequency trading (HFT) modules that are programmed to buy/sell when certain statistical or technical events occur. Commodities are less subject to HFT, but gold is not a commodity, and both gold and silver are covered by several ETF's and thus have significant exposure to HFT's. I have no idea how much further the MACD can move in gold, silver, or USDX, but in my very humble opinion, gold looks overbought, silver looks overbought, and USDX looks over sold. And that is NOT investment advice!

Here are someone who happens to agree, as well as someone who doesn't, and Dennis Gartman, who is a long term gold bug who thinks gold is not only currently overbought, but "hyper-overbought," and who says he just doesn't "get" silver at all. If anything, in more of my still humble opinion, a pull-back in silver would be great, as it would give me a chance to move in on a dip! I think it would only be a temporary move, because I think both silver, gold, and all "things" on the planet are set to increase in price as all currencies decrease due to central bank theivery, and I think gold and silver are the long term belt and suspenders. That is not investment advice either, but I'd certainly rather have silver than dollars--no contest. The dollars I do have I ought to convert to Arrowhead jugs full of pre-1982 pennies, as with copper at $3.77/lb, penny arbitrage is the perfect dollar hedge as far as I'm concerned.

And yeah, I'm that crazy: you can imagine me a bunker with Arrowhead jars of pennies all around. I'd rather have copper than paper any time.

Two banks still net short 24% of total COMEX O-I silver

Silver is knocking on $21.00/oz, up a clean 15% over the last three weeks. This is happening despite the continued operations of two "undisclosed" commercial banks (ach-hoo! JPMorgan and HSBC!) which are still holding onto documented massive short positions. As Harvey Organ points out, last month's (July 2010) Bank Participation Report revealed that these two banks continue to stubbornly maintain their massive positions. How massive? How about an amazing 31,803 contracts, or 26.5% of the entire COMEX open interest on silver, massive?

And what direction massive? Well, you know the answer--26.5% of the entire COMEX OI silver in short positions--the shining relic of Bear Stearns' March 2008 position. This is just some of the valuable and perhaps frustrating information we can extract from the BPRs which the CFTC still (relunctantly?) releases. But, of course, this is old news--its from July! Things are totally different now! Since this last BPR, silver is up over 15%. These banks can see that as clearly as you and I--they're losing dough shorting contracts! They must be onto this, too---right? So what are these banks doing this month?

Well, of course--they're increasing their short positions!

That's right--the JPM-led duo (JPM likely holds 90% of these shorts with the balance in the hands of HSBC) increased its short positions by over 5% from 31, 803 to 33,431 contracts in the face of this 15% move up. Here's the BPR, see for yourself. And if you're not clear about the historical continuity of the JPM/Bear Stearns COMEX silver story, here's a previous post on the subject.

Not surprisingly, overall OI has increased since the July report to a current 139,522 contracts, as the rather small silver market has gained considerable attention lately. Therefore, while the JPM-led short position has increased 5% to 33,431 contracts, it actually represents a slightly smaller chunk of the OI pie: it is now "just" 24% of the entire COMEX OI! (Yo, CFTC: why are we paying you, anyway?) Of course, if JPM would not have increased the short position by 5%, this overall increase in OI would have further reduced their presence: in fact, if they would have just held the previous month's amount of 31,803 contracts steady, their chuck of overall OI would have been reduced to under 23% (which is still ridiculously large, granted). It doesn't look like there is an easy way out of this massive short position for JPM, and that should make us all very uncomfortable.

Don't trust these rascal for a femtosecond. We really do not know what is going on right now. Things are rarely as they seem, especially in rigged economies like ours.

Where are we gonna get $5.2 Trillion in 36 months?

An excellent and disturbing article surfaced Friday in the Wall Street Journal, titled "Treasurys and the Danger of Short-term Debt." It is an essential read to understand how bad things get when a body (the United States federal government) buys things it can't afford.

The author is Jason Trennert of Strategas Research Partners. As the title suggests, Mr Trennert details the super massive, incredibly huge, stunningly irresponsible Geithner strategy of short-term funding. To be "precise," Mr Trennert states:

"One wonders how Treasury Secretary Timothy Geithner can sleep soundly at night with the knowledge that more than 60% of America's sovereign debt is set to mature within the next three years. To be precise, $5.2 trillion of U.S debt comes due in the next three years out of $8.3 trillion outstanding."

So, exactly where are we gonna get $5,200,000,000,000 in the next 36 months? Don't ask Mr Geithner--he's too busy sleeping!

We should all wonder how Mr Geithner sleeps at night, even for reasons other than those mentioned by Mr Trennet. But, of course, I think he sleeps just fine, because I do not for one femtosecond believe that anything in the interest of US sovereignty and free enterprise, the rule of law or economic integrity is of any concern whatsoever to former FRBNY-head-turned-Treasury-Secretary Mr Geithner. Interestingly, this is consistent with a trend of recent Treasury Secretaries, as none of the above-listed jewels were of any concern to his predecessor Mr Paulson, which, of course, was a trait Mr Paulson had in common with his predecessor, Mr John Snow, and of course which his predecessors also shared, especially Mssrs Summers and Rubin. This very manifest trait is attention-worthy as we discuss short-sightedness, and can perhaps best be summarized by former president Bush's second Treasury Secretary, Mr Snow, who stated to the NY Times in December 2008 the following remarkable and completely insane admission:

“The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house."

(Pause. Blink twice. Re-read.)

This is coming from the TREASURY SECRETARY of the UNITED STATES of AMERICA!

Oh heavens. So, of course Mr Geithner sleeps like a baby. In fact, word at the Bankster Report is that "jobs" funding from the American Economic Recovery and Reinvestment Act of 2009 actually including a project to retrofit the walls of the US Treasury building with the latest space-age sound-dampening technology to make certain that they are utterly and completely incapable of being penetrated by any noise, static, or information whatsoever from the outside real world, particularly the deep, rumbling groans of the international debt market or incessant clamour of the bond vigilantes as they chisel away at their chains!

Nevermind the tick, tick, ticking of the clock as this Ponzi scheme's lifespan grows ever shorter. The revolving door of debt-financed-by-more-debt is the only option for Treasury. Repeat: more debt is the only option. The huge problem here is, of course, that with the Fed funds rate at effectively 0% (officially zero to 0.25%), the price of money will only increase. The Treasury will be forced to buy money at a higher price--but that's not all. Remember how Treasuries work: besides the fact that debt eventually matures over a specific time frame (3-months, 5-years, 10-years, whatever), there are also coupon (interest) payments that must be made periodically. Currently, the strategy for satisfying these coupon payments is largely to--you guessed it!--borrow yet more money. But as rates rise, which is an absolutely and indisputably inevitable reality, so will the coupon payments and yield of this US debt also rise.

If you have time for only one link in this post, make it this one: US Treasury: Monthly Treasury Statement. This is the August 2010 checkbook of the US government. Its very nicely put together, excluding the choice of Treasury to actually denote surpluses with a "-" mark (yeah, a minus mark for surpluses), as surpluses are so rare. Scroll to page 4, however, and you'll see the importance of this report in the discussion of the cost of the funding spending and making interest payments. Firstly, note that these figures are in Billions. Next, scroll down to the line titled "Department of the Treasury." Here's what you'll see:

"Department of the Treasury:
Interest on Treasury Debt Securities (Gross):
1.) This month: 20,521
2.) Current fiscal year to date: 395,769
3.) Comparable prior period year to date: 367,839
4.) Budget estimates for full fiscal year: 419,732"

Translation:
1.) In the month of August alone, the Treasury paid $20,521,000,000 in interest payments.
2.) From January 1 through August 31, the Treasury has paid $395,769,000,000 in interest payments.
3.) Compared to this time last year, the Treasury has paid 7.5% more in interest payments.
4.) Treasury is expecting to fork over $419,732,000,000 in interest payments for the year 2010.

This is not good.

Here is another great page for seeing this horrible fiscal recklessness in glaringly full color: www.federalbudget.com. From the homepage:

"Suppose you want to spend more money this month than your income. This situation is called a "budget deficit". So you borrow (ie; use your credit card). The amount you borrowed (and now owe) is called your debt. You have to pay interest on your debt. If next month you don't have enough money to cover your spending (another deficit), you must borrow some more, and you'll still have to pay the interest on the loan. If you have a deficit every month, you keep borrowing and your debt grows. Soon the interest payment on your loan is bigger than any other item in your budget. Eventually, all you can do is pay the interest payment, and you don't have any money left over for anything else. This situation is known as bankruptcy."

And this is nicely and appropriately demonstrated with very alarming colors and tons of data from the Treasury itself. If you can look at these facts that not become alarmed, then congratulations, you are officially qualified to enter the pool of potential future Treasury secretary candidates! For the rest of us--you know, people who actually understand the financial, political, and moral gravity of debt--this is just horrible! So lets pick at this wound some more.

According to the US Treasury, the 2010 estimate for total interest payment outlay is inching closer to half a trillion dollars, at $419,732,000,000. Another way to look at this is:

$1,149,950,684 per day
$47,914,611 per hour
$789,576 per minute
$13,309 per second

In the time it takes you to make a pot of coffee, your government's interest bill has increased by nearly $8 Million dollars, a total which 95% of Americans will never make in their entire lifetimes. But this is, of course, not anything new, as the US government has been spending more that it recieves for 41 years. What Mr Trennert is drawing attention to is that $5.2 Trillion in maturities is coming due over the next 36 months--on top of this $1.15 Billion of interest due each day.

So what is that $5.2 Trillion over 36 months, excluding interest? Try $144.4 Billion per month: yeah--that huge $20.5 Billion paid in interest in August 2010 alone will be dwarfed by the $144.4 Billion in principal payments due per month for the next three years! We obviously do not have the money for this, so that leaves us one option: borrow more. And more. And more....

...and at higher, and higher, and higher rates.

Ever hear the one about the camel and the straws?

Yeah, COT's matter: Visualizing the silver short

Many of us will never forget that crazy, foreboding weekend in March 2008 when the cards began to fall. In a matter of weeks, the mighty Bear Stearns had metamorphosed from a perceived Wall Street giant to a pulsating pile of toxic waste, and the legendary investment bank's share price had fallen from $93 per share to $2. Whatever really happened on that weekend in March, we may never fully know: information from the same source (ah-eh, Mr Paulson) conflicts even with itself. All we can say is that our wonderfully shortsighted Mr Geithner and his utterly corrupt FRBNY, along with the aforementioned Treasury Department head crook Mr Paulson, arranged for the orchestrated insta-bankruptcy and massive firesale of Bear Stearns and its non-toxic assets to JPMorgan Chase. The balance--that is, the remaining fantastically toxic debt--was jammed down the throat of the US taxpayer, first via the Fed's Maiden Lane LLC, and later via the inevitable bailout of zombie bank JPM. It is a long story that has been covered here before, but the reason this move from over two years ago remains important--beside the BILLIONS in debt that the taxpayer will be stuck with and massive payoff to JPM that the taxpayer footed--is because of the silver mystery embedded within it.

Full disclosure: I think the crime against the American taxpayer committed in the bailout of Bear/JPM is something that far surpasses in both gravity and significance the possible side-line manipulation of silver which I am about to mention. Besides the mere scale of this grand larceny (in Billions) being larger than the entire silver market, the utter disgracefulness that the US government and its so-called officials demonstrated in "saving" these fraud-laced institutions is what did cement the path upon which all of the subsequent bailouts and financial bloodletting travelling, the path straight to the pocket of taxpaying, dollar-using Americans. The silver story is important, but I do not personally think that the JPM-Bear bailout happened because of silver manipulation. Unfortunately, I have no confidence in this government or the one before it, and I believe it would have happened with or without any interest in a shiny white metal.

That said, something very, very big in silver happen during those hectic weeks in March 2008, and we cannot be sure just what. Somebody knows (okay, more than one somebody: I would guess Mr Paulson, Mr Geithner, Mr Kohn and Mr Dimond, oh--and can't forget Mr Bernanke and, of course, Mr Cayne, and Mr Schwartz), but no one is saying. That leaves plenty of room for speculation, and given these last two and a half years, plenty of time, too.

The Bankster Report frequently harps on the paper positions in gold and silver and the CFTC's refusal to address them, but here I just want to speculate on the silver short. Remember back to 2008: In January, the Fed and Bank of America absorbed the sub-prime leader Countrywide. By March, Bear Stearns was down, and the real tremors started. By summer, a dozen banks had failed, and Fannie and Freddie were in big trouble. By September, Lehman was under, and every single one of the top five banks were in serious, legitimate risk of insolvency. The rug was out from under the market, LIBOR rates were at records highs, and credit was frozen. By October, financial terrorism and threats of Congressional martial law had the once-defeated TARP bill successfully forced through Congress after the DJIA crashed 777 points in one day. By November, gold was under $750/oz, Treasuries were starting a path to negative yields, and markets of every kind all over the world were nothing but red. Take a minute to remember this (because its going to happen again, but that's another post): do not forgot how fast things fall apart.

As was astutely covered by GATA during the thrashing rolls of the market in November 2008, besides all this very visible financial deterioration, something else was up. At the time of the GATA article, silver was sitting under $10/oz (back up the truck!) after having lost over 50% of its value from the March 2008 prices of $21/oz. In March, before its collapse, Bear Stearns was sitting on up to 25% of all COMEX silver contracts in a short position when silver was a near 25-year highs. This entire position was acquired by JPM, because if the Fed would not have transferred these positions, then attempting to close this huge short of the metal while it was at record highs would have only unleashed it further. Silver is not the only commodity position JPM accepted. Yet, within 8 months, silver had last over half this price, and JPM was reaping the profits of this massive short position and the massive 50%-plus crash. The November GATA article presented evidence from once-skeptic turned long-time mega silver-bug, Ted Butler (and I do mean mega silver bug, which is appropriate to consider in viewing his analysis). From Mr Butler's November 2008 article:

"This week, I received a copy of a letter, dated October 8, sent from the CFTC to a California Congressman, Gary G. Miller. It discussed allegations of a silver market manipulation because of the data in the monthly Bank Participation Report. The data in that report for August showed that one or two U.S. banks held a massive short position in COMEX silver futures of 33,805 contracts, or more than 169 million ounces. This is equal to 25% of annual world mine production, and was up more than five-fold from the prior month’s report. After this position was established, silver prices fell more than 50%, in spite of a widespread shortage in retail forms of investment silver. Never before had there been a such a large concentrated position in any market, including every manipulation case in the CFTC’s history. Concentration and manipulation go hand in hand. You can’t have one without the other."

Here, Mr Butler is referring to the JPM-held post-Bear short. Check out this detailed post for more information on this bank participation (BPR) than you would like to know, and for plenty of information on the documented short positions of JPM. This is all very important, but for now, let's just fast-forward all the way to last week, and last week's COT report. The COT's, or Commitment of Trader reports, are commodities market participant disclosure reports released by the CFTC. COT reports are notoriously difficult to interpret. They are somewhat like looking at a chess board from above, so theoretically they allow a view of each side (long and short) and side interest (speculative, commercial, hedgers/producers), but they don't necessarily reveal moves or direction. Click on this COT example, and see if you can extrapolate any of this data. Can you read the moves on this chess board?

Well? It is possible, but its not simple. So this is why I'm so pleased to share this very nice visual version of the CFTC's COT reports release, courtesy of Libanman Futures. Thank you, Libanman! Yes, even if the information contained within it is frustrating, perplexing, and perhaps even evidence of massive commodities market manipulation, this is sure a pretty chart! It is quite different from the example above--the COT as issued, as a bunch of numbers which is not easily discernible. However, pump this data in Excel, and you'll receive a visual version that is quite easily understood. Or, just check out Libanman's great work.

So let's visually compare the COT's of different commodities to determine if we can spot a trend.
Here's an example of the cocoa COT:





The light blue is net commercials (banks), darker blues are swap dealers and small speculators, and the pink is net managed money. Positions below the axis are short, positions above are long. The line with red dots is open interest. What we're really looking at here is how the net shorts (which happen to be commercials) respond to the net longs: you'll see that it is very close to a mirror-image. This is what you would except if the net commercials were engaged in the kind of normal activity banks do in future markets to make money, activity such as smartly hedging against the bets they've taken either to insure long positions they've guaranteed for, say, a producer, or to hedge their own proprietary long bets. There are other smart reasons to do this, as a successful bank can figure out how to turn a profit no matter how the commodities markets move (to a point), they just play the markets to move.

Now, let's compare this cocoa COT to the same week's silver COT:




Can you see any differences? Let me rephrase that: is there something wrong with this picture? Where is that mirror-image we saw before? What's with the large changes in long positions and virtually no reflection of these changes in the shorts? What kind of investor can run this gambit without getting burned? Are these some kind of rolling short positions? Don't look at me--your guess is as good as mine!

For one last comparison, let us look at the gold COT. You'll see that despite the constant claims of overspeculation in gold (claims that may or may not be accurate), it looks a whole lot more like cocoa than it does a fellow precious metal, silver. Click here to see the whole Libanman COT collection, and judge for yourself the uniqueness of silver's COT.

Here's the gold COT:



You tell me? Are we looking at JPM's continued massive short when we look at that silver COT? Perhaps: we should have more information with today's COT, considering the huge move in silver that has occurred since last week (about +8%). I might attempt to read it, but I'll most likely just wait for Libanman to make a nice pretty picture of it, and post the link for anyone interested.

That's waaaaay easier. Enjoy.