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Bob Chapman: the Fed, hyperinflation, $ devaluation, and more

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Richard Moore

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Nov 29, 2009, 12:33:12 AM11/29/09

This will strip small and medium-sized banks and force them into
shutting down or being absorbed. This means you have to get your
money out of banks, especially CDs. We repeat get your cash values
out of life insurance policies and annuities. They are invested 80%
in stocks and 20% in bonds. Keep only enough money in banks for
three months of operating expenses, six months for businesses.

The Fed also expects a meltdown in the bond market, especially in
municipals.

Public services will be cut drastically leading to increased crime
and social problems, not to mention the psychological trauma that
our country will experience. Already 50% of homes in hard hit urban
areas are under water, nationwide more than 25%. That means you
have to be out of bonds as well, especially municipals.

http://www.globalresearch.ca/index.php?context=viewArticle&code=CHA20091128&a
rticleId=16313

Farreaching Decision of the Federal Reserve: Banks which received
TARP funds are to restrict commercial lending

By Bob Chapman

Global Research<http://www.globalresearch.ca/>, November 28, 2009

The International Forecaster<http://www.theinternationalforecaster.com/>

The following information may be the most important we have ever
published.

One of our Intel sources, highly placed in banking circles, tells
us that on 1/1/10 all banks that have received TARP funds have been
informed by the Federal Reserve that they must further restrict any
commercial lending. Loans have to be 75% collateralized, 50% of
which has to be in cash, which is a compensating balance.

The Fed has to do one of two things: They either have to pull $1.5
trillion out of the system by June, which would collapse the economy,
or face hyperinflation. This is why the Fed has instructed banks
to inform them when and how much of the TARP funds they can return.
At best they can expect $300 to $400 billion plus the $200 billion
the Fed already has in hand.

We believe the Fed will opt for letting the system run into
hyperinflation.

All signs tell us they cannot risk allowing the undertow of deflation
to take over the economy. The system cannot stand such a withdrawal
of funds. They also must depend on assistance from Congress in
supplying a second stimulus plan. That would probably be $400 to
$800 billion. A lack of such funding would send the economy and the
stock market into a tailspin. Even with such funding the economy
cannot expect any growth to speak of and at best a sideways movement
for perhaps a year.

We have been told that the FDIC not only is $8.2 billion in the
hole, but they have secretly borrowed an additional $80 billion
from the Treasury. We have also been told that the FDIC is lying
about the banks in trouble. The number in eminent danger are not
552, but a massive 2,035. The cost of bailing these banks out would
be $800 billion to $1 trillion. That means 2,500 could be closed
in 2010. Now get this, the FDIC is going to be collapsed before the
end of 2010, which means no more deposit insurance. This follows
the 9/18/09 end of government guarantees on money market funds.
Both will force deposits into US government bonds and agency bonds
in an attempt to save the system.

Major and semi-major banks are being told to obtain secure storage
for new currency-dollars. They expect official devaluation by the
end of the year.

We do not know what the exchange rate will be, but as we have stated
previously we expect three old dollars to be traded for one new
dollar. The alternative is gold and silver coins and shares. For
those with substantial sums that do not want to be in gold and
silver related assets completely you can use Canadian and Swiss
Treasuries. If you need brokers for these investments we can supply
them.

The Fed also expects a meltdown in the bond market, especially in
municipals.

As you can see, the Illuminist program is going to come quicker
than we anticipated. That in part is because they have had to
expedite their program, due to exposure in the IF, other publications
and especially via talk ratio and the Internet. There is no doubt
we have the elitists on the run.

We are reaching the masses. On TalkStreamLive.com we were on the
Rumor Mill this past week and out of 50 talk radio programs we were
5th behind, Rush, Hannity, Dr. Laura and we were tied with Beck.
On the Sovereign Economist on Wednesday night we were 5th behind
Beck and Savage and ahead of Hannity. Both these programs are not
well known and the Sovereign Economist is only about a month old.
It shows you what you can do if you work hard enough at it.

The latest favorable events we are told are the seeds of recovery.
The green-shoots of spring are to be harvested before winter sets
in. We are skeptical of the strength and duration of such a recovery.

The underlying problems are still not being addressed. The US
government and the Fed cannot bail out banking, Wall Street, insurance
and government indefinitely via monetization. Impaired corporations,
no matter what their size, have to be allowed to fail. Stimulus
cannot be used indefinitely. Both have to be reigned in, because
the longer this charade continues the worse the final outcome is
going to be. As we predicted six years ago, Fannie Mae, Freddie
Mac, Ginnie Mae and FHA are the wards of American taxpayers, as is
AIG. All their financial conditions worsen every day. They have
again been insuring subprime mortgages by the thousands and when
they begin to reset next year, we will be back to 60% failure rates.
Even government admits already theyll see 20% failure rates. This,
so that housing inventory can be cut from 11-1/2-months inventory
to 7-months, again in order to bail out the lenders at the expense
of taxpayers. Government and the Fed have no exit plans for these
sinking ships, particularly Fannie, Freddie, Ginnie and FHA, never
mind their meddling in the economy guaranteeing everything is sight.
Benito Mussolini would be very proud of what they have done.

Then we have those on Wall Street, banking and corporate America
who believe they are doing Gods work by looting the American public
making outrageous profits by in part using taxpayer funds, and
allotting themselves disgraceful bonuses as unemployment hovers at
22.2%. Havent these people heard of the French Revolution? Their
arrogance has no bounds. The credit crisis hasnt ended; the Fed has
extended it by throwing money at problems. We have a mortgage market
that is worse than it was a year ago, only kept from sinking by a
tax credit 3% down. As a result now we have more than $1 trillion
of new mortgage failures on the way.

Our monetary base has more than doubled. Interest rates will probably
stay where they are for 18 months or more and we even have a dollar
carry trade.

The 2009 fiscal budget deficit was $1.5 trillion and 2010 will be
worse.

Government is not cutting expenses. They are increasing expenses.

In addition making matters worse corruption is flourishing via the
incestuous revolving door between Wall Street, the Treasury, in a
multiplicity of other appointments and with the Fed. Is it any
wonder 75% of Americans want the Fed audited and investigated. That
said, the present set of circumstances cannot be allowed to go on
indefinitely. We cannot keep insurance, Wall Street and banking on
life support forever. Not when we finance two occupations and an
ongoing war, never mind our unfunded liabilities of Medicare, Social
Security, etc. most all of these problems are being financed by
debt to be paid by our great, great grandchildren. We just created
$12.7 trillion for bailouts and the Inspector General tells us we
are presently on the hook for $23.7 trillion. What happens if all
the recipients need another $20 trillion?

The situation is still dire and the solution is temporary and
unworkable and Washington and New York are well aware of this. The
game will play out over the next few years. In the meantime the
dollar will move lower and inflation, gold and silver higher.

Economics is not complex; it is very simple. Professors and economists
would like to have you believe it is complicated when in fact they
make it opaque, so you cannot understand it. The same is true with
banking. In normal times through the centurys bankers using the
fractional banking system usually lent 8 times their assets, or
deposits. It was only until recently that the privately owned Federal
Reserve told banks within the system to lend 40 times assets or
more in order to accommodate the system.

All this is to cover to confuse and hide the truth of fractional
banking.

Bankers indebt borrowers with money they made up out of thin air.
Debt is enslavement by the bankers upon the people by buying almost
everyone off. In the final analysis banking is a fraud unless money
is interest free. The Fed, and all the other banks are a fraud.

The game as we know it today began in 1694 when the Rothschilds
formed the privately owned Bank of England and the production of
bank notes began and circulated along with sterling silver coins.
The end result has been that the bankers own the world. The system
today is based on confidence and trust, something that has been
worn thin. A reflection of the loss of trust and confidence is that
75% to 80% of Americans want HR1207 and S604 passed by Congress,
so that the Fed can be audited and investigated. The public no
longer trusts the Fed and the banks. As a result the con game may
well be coming to an end. Fifty years ago we and a handful of other
conservative warriors set out to inform the public of the giant
scam that the Fed really was. It has been a long hard road. Gary
Allen and Alan Stang are gone and of the originals all that are
left are G. Edward Griffin, Stan Monteith, Anthony Hilder and us.
During our lifetimes we now probably will see the end of the Fed.
Because the people have finally been awakened. It was a long hard
battle that may soon come to fruition.

The final step will be the termination of the Federal Reserve and
its monopoly on financial theft. Unfortunately it will mean the
demise of the only financial system we have known for 315 years.
We do not know as yet what the new system will be like, but the con
game is over and most of the worlds inhabitants are broke. The debt
that is owed simply cannot be repaid. Japan, the US, the UK and
Europe will be the first to go followed by most of the rest of the
world.

You ask who will be the big winners? Gold and silver of course.
Just as we have been telling you they would for 9-1/2 years, since
gold was $252.00 and silver $3.80. Look at the gains for those who
listened. And, we still have a long, long way to go to preserve our
wealth. Over all those years the gold suppression cartel fought to
hold down gold prices by selling gold, using derivatives and futures
and in collaboration with good producers such as Barrick Gold and
others. Hopefully HR3996 (HR-1207) will now pass unchanged and we
can take a look at what the Fed and the Treasury were doing and who
aided them.

What we are witnessing in the US and world economy is the result
of the greed of central banks to make as much money as possible
before they have to collapse the system to bring about World
Government.

Manufacturing activity in the Federal Reserve Bank of Kansas City's
district improved in November.

The bank's production index for November versus a month ago moved
to 17 from 6 in October. In November 2008, it stood at -31, from
-40 in the previous month.

On a monthly comparison, the November shipments index hit 11 from
1 in October, while on a year ago basis it was -28, from -40.

The November new orders index on a monthly basis was 14 versus 11
the prior month, while on a year ago basis it stood at -16 from
-37.

Hiring was mixed, with the monthly employment index at 2 in November,
from 0 the month before, while on a year ago basis it was -49, from
-47.

Inflation was mixed, with the November prices paid index at 29,
from 18, while the prices received index stood at 4, from -4

The Kansas City Fed district includes Colorado, Kansas, Nebraska,
Oklahoma, Wyoming, northern New Mexico and western Missouri.

U.S. consumer sentiment levels fell in November, a report Wednesday
said.

The University of Michigan/Reuters final consumer sentiment index
moved to 67.4 from 70.6 in October. It was expected to come in at
66.8, and it stood at 66.0 in the preliminary reading.

The current conditions index was 68.8, from 73.7 in October, while
the final expectations index hit 66.5, from 68.6.

Consumers' final one-year inflation expectations forecast was 2.7%,
from 2.9% the month before, while the five-year outlook was 3.0%,
after 2.9%.

New-home sales unexpectedly climbed in October despite bad weather
and uncertainty over a big tax credit for first-time buyers.

Sales of single-family homes increased 6.2% to a seasonally adjusted
annual rate of 430,000, the Commerce Department said Wednesday.

Economists surveyed by Dow Jones Newswires estimated a 1.0% drop
to a 398,000 annual rate.

Some analysts thought the looming expiration of an $8,000 tax credit
for homebuyers would scare off buyers in October. New-home sales,
unlike sales of existing homes, are recorded with the signing of a
sales contract and not the closing. There was also unseasonable
cool and wetness in parts of the U.S.

last month.

The tax credit has since been extended by Congress through April,
a move made earlier this month that is seen helping the housing
market.

Wednesday's report said sales in September fell 2.4% to 405,000.
Year over year, sales were up 5.1% since October 2008.

The median price for a new home fell in October, but not by much,
dropping 0.5% to $212,200.

Inventories shrank some more. There were an estimated 239,000 homes
for sale at the end of October. That represented a 6.7 months'
supply at the current sales rate. An estimated 250,000 homes were
for sale at the end of September, a 7.4 months' inventory.

Commerce's report Wednesday showed October new-home sales fell in
most regions but were up in the South.

In a glimmer of hope for the labor market, the number of U.S. workers
filing new claims for jobless benefits last week fell to the lowest
level since September of 2008.

Total claims lasting more than one week, meanwhile, also decreased.

Initial claims for jobless benefits declined by 35,000 to 466,000
in the week ended Nov. 21, the Labor Department said in its weekly
report Wednesday. The previous week's level was revised to 501,000
from 505,000. This represents the lowest figure for claims since
September 13, 2008 and it is the first time initial claims have
fallen below the 500,000 mark since early January, according to
Labor Department data.

Last week's initial claims fell by more than economists expected.
Economists surveyed by Dow Jones Newswires had predicted a decrease
of 10,000 claims.

The four-week moving average of new claims, which aims to smooth
volatility in the data, also fell by 16,500 to 496,500 from the
previous week's revised average of 513,000. That is the lowest
figure since November 8, 2008.

Economists widely expected initial claims would fall in Wednesday's
report, and some believe that this the break away from the 500,000
mark will be sustained in the weeks to come.

"Taken as a whole, the labor market data for the US is suggesting
we are in a gradual, steady improvement towards job growth at some
point over the next three to six months and the decline in jobless
claims is consistent with that," said Zach Pandl, an economist at
Nomura Global Economics. "The trend has been very persistent since
the end of August and we are expecting that to continue."

In the Labor Department's Wednesday report, the number of continuing
claims -- those drawn by workers for more than one week in the week
ended Nov. 14 -- declined by 190,000 to 5,423,000 from the preceding
week's revised level of 5,613,000.

The unemployment rate for workers with unemployment insurance for
the week ended Nov. 14 was 4.1%, a decrease of a 0.2 percentage
point from the prior week's unrevised rate of 4.3%.

The largest increase in initial claims for the week ended Nov. 14
was in Florida due to layoffs in the construction, trade, service
and manufacturing sectors. The largest decrease in initial claims
occurred in California.

Spending by Americans bounced back in October as their incomes rose
slightly more than expected and inflation remained low, boding well
for economic growth in the fourth quarter.

Commerce Department data Wednesday showed spending last month rose
by 0.7% compared with a September decline of 0.6%, while personal
income rose by 0.2% for the second straight month.

Meantime, a key gauge of prices that is closely watched by the U.S.
Federal Reserve to set monetary policy reiterated inflation wasn't
a threat as the economy recovers slowly.

The core price index for personal consumption expenditures, which
excludes volatile food and energy, rose a monthly 0.2% in October
and by 1.4% year-on-year.

Economists surveyed by Dow Jones Newswires had forecast consumer
spending would rise by 0.6% in October while income would increase
by 0.1%. The core PCE index was seen rising by a monthly 0.1%.

The U.S. economy's rebound was softer than originally thought in
the third quarter, the government said Tuesday in a revision to its
gross domestic product estimate which showed less consumer spending
than initially estimated.

U.S. GDP - the broadest measure of output of goods and services -
grew at a 2.8% annual rate during the July to September period,
less than the 3.5% rate calculated by the Commerce Department a
month ago.

Consumer spending, which accounts for 70% of U.S. economic output,
increased at a 2.9% annual rate during the third quarter - less
than the 3.4% estimated previously.

Wednesday's report was an encouraging sign for growth in the fourth
quarter, since both consumer spending and incomes rose by more than
expected in October.

Economists currently expect slightly better economic growth in the
fourth quarter compared to the previous three months. One prominent
forecaster, Macroeconomic Advisers, predicts GDP growth of 3.1%.

Personal income data for the previous months was revised up slightly.
It rose by 0.2% in September and by 0.3% in August, the report
showed, compared to previous estimates of a flat reading in September
and a 0.1% increase the previous month.

Still, with more than 10% of the U.S. labor force out of work, the
rise in incomes remains moderate.

Federal Reserve officials earlier this month raised their expectations
for growth this year and in 2010, but predicted the recovery will
be so slow that unemployment will remain high and inflation low
until the end of next year.

As for price gauges in Wednesday's report, the price index for
personal consumption expenditures excluding food and energy, year
over year, rose 1.4%.

The year-over-year gain in September was 1.3%.

The Fed watches this core PCE index closely for signs of inflation
pressures.

Fed officials see core inflation around 1.45% in 2009, 1.25% in
2010, and 1.3% in 2011.

On a monthly basis, Wednesday's report showed the core PCE index
increased 0.2% in October compared to a 0.1% increase in September.

The PCE price index including food and energy prices rose 0.3% in
October compared to September. It rose a monthly 0.1% in September.
Year over year, the PCE price index was up 0.2% in October after
falling 0.6% in September.

Demand for long-lasting goods unexpectedly fell in October, brought
down by the defense sector, and a barometer of capital spending by
businesses tumbled in another sign of the recovery's sluggishness.

Manufacturers' orders for durable goods decreased 0.6% to a seasonally
adjusted $166.17 billion, the Commerce Department said Wednesday.

Military goods demand plunged. Excluding defense, all other durables
increased by 0.4% in October, after going 1.8% higher in September.

Still, if not for a jump in commercial airpline bookings, the drop
in overall durables would have been much greater.

While generally negative, the report Wednesday had a few bright
spots.

September durables were revised way up, for instance.

A key number in the monthly data, orders for non-defense capital
goods excluding aircraft, fell, by 2.9%, after increasing 2.6% in
September. The orders are seen as a proxy for capital spending by
businesses.

While the economy stopped shrinking last summer, the recovery is
expected to be slow, because unemployment has topped 10%. Last week,
the government said U.S. home construction fell sharply in October,
an unexpected drop that erased months of gains.

Economists surveyed by Dow Jones Newswires had projected overall
durable goods orders would climb 0.5% in October. Some manufacturers
have boosted orders to slow their inventory liquidation and rebuild
depleted stockpiles of goods. The Wednesday data showed manufacturers'
inventories of durable goods were unchanged in October, ending a
string of declines. The last three reports on the sector by the
influential research group the Institute for Supply Management have
showed manufacturing expanding.

Cars, radios, and coffee makers are durables, goods meant to last
at least three years. Coming out of the severe recession, durables
year to date were down 23%, in unadjusted terms, from the same
10-month period in 2008. Overall durables in September rose 2.0%,
adjusted from a previously revised 1.4% increase.

US Airways (LCC) said this week it plans to defer the delivery of
54 Airbus jets, in a bid to improve liquidity and ease its strained
finances. The deferral will reduce the company's aircraft capital
expenditure by about $2.5 billion over the next three years. The
economy has hurt airline revenues.

A sign within Wednesday's data of future demand for durables,
unfilled manufacturers' orders, fell, by 0.4%, the 13th drop in a
row.

Durable-goods shipments of manufacturers fell 0.2% last month.

Orders for transportation-related goods climbed 1.5%, pushed by a
50.8% jump in non-defense planes. Motor vehicle orders dipped 0.1%,
despite the success of the government's incentive program "cash for
clunkers" last summer.

Excluding the transportation sector, orders for all other durables
decreased 1.3% in October. Demand ex-transportation had climbed
1.8% in September.

Orders last month for metals and electrical equipment rose. Computers
and machinery fell.

October capital goods orders decreased 2.0%. Non-defense capital
goods - items meant to last 10 years or longer - rose 1.2%.
Defense-related capital goods orders went down by 18.4%.

MBA Mortgage Applications decline by 4.5% in Nov. 20 week.

Negative interest rates are back. Yields on short-term US government
debt have fallen into negative territory as banks and investors
park their cash in havens before the end of the year.

Ted Wieseman, economist at Morgan Stanley, says: There has been a
regular pattern during this crisis of bills being badly squeezed
around quarter ends, but its happening a lot earlier than normal
this time around. Even last year when the financial crisis was
nintensifying so far ahead of the actual calendar turn.

Q3 GDP clearly demonstrates that US bean-counters are manufacturing
unreasonable economic data. First, the initial 3.5% gain was reduced
to 2.8%.

But the revised Q3 GDP is hokey because it estimates that real gross
domestic purchases increased 3.5%. This is preposterous given the
huge declines in sales taxes that have been reported nationally!

Q3 GDP would have been revised even lower if not for the .25 decline
in the GDP price adjustment. We have moaned about the understating
of inflation in order to overstate economic (GDP) strength for
years.

And then there is the bogus jobs and income that inflates GDP.
Given the decline in income taxes according to federal, state and
municipal taxing agencies, how did income increase in Q3?

Real government spending increased 8.3%... Auto production, due to
Cash for Clunkers, contributed 1.45 to GDPGDI increased 2.0%.

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

The price index for gross domestic purchases, which measures prices
paid by U.S. residents, increased 1.4 percent in the third quarter,
0.2 percentage point less than in the advance estimate; this index
increased 0.5 percent in the second quarter. Excluding food and
energy prices, the price index for gross domestic purchases increased
0.4 percent in the third quarter, compared with an increase of 0.8
percent in the second.

Heres something else from the GDP report that caught our eye: Profits
from current production (corporate profits with inventory valuation
and capital consumption adjustments) increased $130.0 billion in
the third quarter, compared with an increase of $43.8 billion in
the second quarter.

Taxes on corporate income increased $6.7 billion in the third
quarter, compared with an increase of $35.6 billion in the second.

How do profits increase $130B while taxes only increase $6.7B?

Heres the possible answer: Domestic profits of financial corporations
increased $97.0 billion in the third quarter, compared with an
increase of $28.5 billion in the second. Domestic profits of
nonfinancial corporations increased $12.9 billion in the third
quarter, compared with an increase of $29.8 billion in the second.
[Why would non-financial corporations make far less money in Q3
than Q2 if the economy was better in Q3? How much of financial
earnings are of market-to-model quality?]

The weakness in the non-financials tells you how limited this
recovery is at this point, said Joel Naroff, chief economist at
Naroff Economic Advisors Inc. in Holland, Pennsylvania. Businesses
are going to be very cautious in increasing the cost side and the
biggest part of the cost side is labor. They arent going to rush
out and hire.

In the first three quarters of 2009, profits at financial institutions
soared 198 percent, the biggest nine- month gain since records began
in 1948.

Earnings were down 65 percent in the nine months ended in December
2008, the biggest such decrease on record.

A House bill still being drafted aims to raise $150 billion each
year to pay for new jobs.

Under a bill being drafted by Democratic Reps. Peter DeFazio (Ore.)
and Ed Perlmutter (Colo.), the sale and purchase of financial
instruments such as stocks, options, derivatives and futures would
face a 0.25 percent tax.

The bill, a copy of which was obtained by The Hill, is titled the
Let Wall Street Pay for the Restoration of Main Street Act of 2009.

Banks have spent the past year dealing with a mountain of bad assets.
Now attention is turning to trillions of dollars of debt they have
maturing over the next few years.

Banks unable to maneuver around the challenge could be forced to
refinance their debt at sharply higher costs.

Citigroup has about $30 billion in 2010 of debt coming due next
year, with an additional $39.5 billion in 2011 and $59.3 billion
in 2012. Bank of America must deal with debts totaling about $55.4
billion in 2010, $35.3 billion in 2011 and $58.4 billion in 2012.
J.P. Morgan Chase & Co. faces about $130 billion maturing through
2012.

Rising borrowing costs for banks could spill into the broader economy
at a time when consumer and corporate borrowers already are under
stress. Banks could pass on the costs in the form of higher interest
rates.

The Rasmussen Reports daily Presidential Tracking Poll for Tuesday
shows that 27% of the nation's voters Strongly Approve of the way
that Barack Obama is performing his role as President. Forty-two
percent (42%) Strongly Disapprove giving Obama a Presidential
Approval Index rating of -15. This is the lowest Approval Index
rating yet measured for President Obama.

Overall, 45% of voters say they at least somewhat approve of the
President's performance. That matches the lowest level of total
approval yet measured for this president. Eighty-one percent (81%)
of

Democrats approve as do 33% of unaffiliated voters. Eighty-three
percent (83%) of Republicans disapprove. Among all voters, 54% now
disapprove.

Support for the health care plan proposed by the President and
Congressional Democrats has fallen to a new low of 38%. Sixty percent
(60%) of voters believe passage of the bill will lead to higher
health care costs.

http://www.rasmussenreports.com/public_content/politics/obama_administration/
daily_presidential_tracking_poll

U.S. banks are earning money again, but they're writing fewer
business loans, threatening a fragile economic recovery.

The Federal Deposit Insurance Corp. reported Tuesday that U.S. bank
loans fell by $210.4 billion or 2.8% during the third quarter the
biggest drop since the FDIC started keeping records in 1984. Banks
booked $2.8 billion in third-quarter profits, reversing a second-quarter
loss of $4.3 billion. "We need to see banks making more loans to
their business customers," says FDIC Chairman Sheila Bair. "This
is especially true for small businesses."

Loans to businesses fell 6.5%, and real estate loans plummeted 8.1%.

"Until small businesses are able to borrow, we can't have a robust
economy, because that's your largest source of jobs," says Richard
Posner, a law professor at the University of Chicago and a federal
circuit judge. The Small Business Administration has said that small
businesses created 64% of new jobs in the past 15 years.

Banks are reluctant to make new loans until they've cleared off the
bad ones they made during the housing boom. Back then, they paid
"insufficient attention to certain kinds of risky loans," says
Edward Kane, finance professor at Boston College. "You can't expect
them to turn around and turn the lending machine back on."

Non-current loans rose more than 10% during the quarter to $366.6
billion or nearly 5% of all loans, the highest rate on record. Banks
charged off nearly $51 billion in bad loans last quarter, the 11th
straight quarterly increase and up more than 80% from a year earlier.
"Loan losses will continue to climb as long as foreclosures keep
rising and homeowners, builders and developers continue to hurt,"
says Kate Monahan, banking analyst at Aite Group.

Banks don't expect things to get better anytime soon: Two out of
three banks set aside more reserves for losses during the quarter,
reserving a total of $62.5 billion, 22% higher than last year. Banks
are hoarding money in super-safe Treasury securities, and, "Businesses
were not as eager to take on debt," says FDIC chief economist Richard
Brown.

Increasing bank failures are feeding the worries: 124 banks have
failed this year, up from 25 in all of 2008, draining the FDIC's
deposit insurance fund, which fell below zero (to minus $8.2 billion)
in the third quarter. But the FDIC had earlier set aside $38.9
billion to cover losses, giving it total reserves of $30.7 billion
to protect depositors in failed banks. The FDIC has another $23.3
billion in cash. The agency expects to collect another $45 billion
at the end of the year when banks pay three years of deposit insurance
premiums in advance.

Bair warns not to read too much into one quarter's results, noting
that banks won't return to full health until the economy improves.
"It really is all about the economy at this point," she says. "I
don't want to make any predictions."

The International Monetary Fund said it will have access to a credit
line of up to $600 billion to make loans during financial crises
after contributing countries agreed to fold commitments into one
pool.

The agreement, yet to be approved by the IMF board, adds as many
as 13 members from the current 26 to the so-called New Arrangements
to Borrow, including emerging nations China, Russia, Brazil and
India, the IMF said in an e-mailed statement.

The decision marks an important moment for multilateralism and the
fund, which will help the IMFs effectiveness in its response to
crises, Managing Director Dominique Strauss-Kahn said in yesterdays
statement.

The deal goes beyond a pledge by leaders of the Group of 20 nations
to contribute up to $500 billion to a credit arrangement thats
currently worth $54 billion, the IMF said. The worst financial
crisis since the Great Depression prompted more nations to seek aid
from the fund, created after World War II to help ensure the stability
of the global monetary system.

Connecticut plans to join Ohio in suing credit-rating companies for
negligent, reckless and incompetent work in grading debt purchased
by state pension funds, according to Attorney General Richard
Blumenthal.

Connecticut and a number of other states are preparing legal action
against Standard & Poors, Moodys Corp. and Fitch Ratings, Blumenthal
said today in a Bloomberg Television interview. Ohio Attorney General
Richard Cordray sued the debt raters this month on behalf of five
Ohio public employee retirement funds, saying improper ratings cost
the funds more than $457 million.

The state actions come amid criticism of the ratings services by
investors and lawmakers including Senate Banking Committee Chairman
Christopher Dodd, who has said the companies wrongly assigned top
credit rankings to U.S.

subprime-mortgage bonds just before that market collapsed in 2007.
Defaults on the debt ignited a credit crisis that has led to more
than $1.7 trillion in writedowns and losses since the start of 2007.

We want money back for our taxpayers as a consequence of these
mis-ratings, Blumenthal said. They gave AAAs to financial instruments
that deserved much, much less. They were the enablers to this
structured finance debacle.

Blumenthal also sued the credit-rating companies last year, saying
they unfairly gave municipal bonds lower ratings than comparable
corporate or structured debt.

Dubai World, with $59 billion of liabilities, is seeking to delay
debt payments, sending contracts to protect the emirate against
default surging by the most since they began trading in January.

The state-controlled company will ask all creditors for a standstill
agreement as it negotiates to extend maturities, including $3.52
billion of Islamic bonds due on Dec. 14 from its property unit
Nakheel PJSC, the builder of palm tree-shaped islands, Dubais
Department of Finance said in an e-mailed statement. Moodys Investors
Service said it would consider the plan a default should bondholders
be forced to accept the terms.

A Long Island couple is home free after an outraged judge gave them
an amazing Thanksgiving present -- canceling their debt to ruthless
bankers trying to toss them out on the street.

Suffolk Judge Jeffrey Spinner wiped out $525,000 in mortgage payments
demanded by a California bank, blasting its "harsh, repugnant,
shocking and repulsive"

acts.

The bombshell decision leaves Diane Yano-Horoski and her husband,
Greg Horoski, owing absolutely no money on their ranch house in
East Patchogue.

Spinner pulled no punches as he smacked down the bankers at OneWest
-- who took an $814.2 million federal bailout but have a record of
coldbloodedly foreclosing on any homeowner owing money.

"The bank was so intransigent that he [the judge] decided to punish
them,"

Greg Horoski, 55, said about Spinner's scathing ruling last Thursday
against OneWest and its IndyMac mortgage division.

It erased up to $291,000 in principal and $235,000 in interest and
penalties.

The Horoskis -- who had been paying only interest on their mortgage
-- had no equity in the home.

Horoski, who had begged the bankers to let him restructure the loan,
said, "I think the judge felt it was almost a personal vendetta."
Dealing with the bank, he said, was "like dealing with organized
crime."

OneWest said, "We respectfully disagree with the lower court's
unprecedented ruling and we expect that it will be overturned on
appeal."

It claimed it "has been extremely active in working with consumers
on home loan modifications through the Obama administration's Home
Affordable Modification Program and other loan modification
initiatives."

The bank is owned by a private equity group that purchased the
failed IndyMac bank.

Yano-Horoski, a college professor of English and cognitive reason,
and Horoski, who sells collectible dolls online, bought their
3,400-square-foot, one-level house 15 years ago for less than
$200,000.

In 2004, court records show, they refinanced, paying off their
original mortgage with part of a $292,500 sub-prime loan from
Deutsche Bank. They used what was left for health care and for his
business.

The loan carried an initial adjustable interest rate of 10.375
percent, which soared to 12.375 percent.

It eventually ended up being either owned or serviced by IndyMac,
and the bank sued the couple in July 2005 when they began having
trouble making payments because of Horoski's health problems.

After a foreclosure was approved last January, Yano-Haroski
successfully asked for a court settlement conference.

Spinner excoriated OneWest for repeatedly refusing to work out a
deal, for misleading him about the dollar amounts at stake in the
case, and for its treatment of the couple over months of hearings.

OneWest's conduct was "inequitable, unconscionable, vexatious and
opprobrious," Spinner wrote.

He canceled the debt because the bank "must be appropriately
sanctioned so as to deter it from imposing further mortifying abuse
against [the couple]."

The bank is involved in a similar case in California, where it's
trying to foreclose on an 89-year-old woman, despite two court
orders telling it to stop.

Rates for 30-year fixed U.S. home loans fell for a fourth straight
week, matching a record low of 4.78 percent set in April.

The rate dropped from 4.83 percent last week, mortgage buyer Freddie
Mac of McLean, Virginia, said today in a statement. The average
15-year rate was 4.29 percent.

Low mortgage costs and a tax credit for first-time homebuyers helped
increase demand for property, putting existing home sales on pace
to hit 6.1 million this year. Reduced inventory of unsold homes is
beginning to stabilize prices.

The S&P/Case-Shiller home-price index rose 0.27 percent in September
from August, the fourth consecutive month-to-month gain.

Federal Reserve bond purchases from Fannie Mae, Freddie Mac and
Ginnie Mae, which package home loans into securities, brought yields
on the bonds down, allowing lenders to reduce rates on new loans
while still selling the securities backed by them at a profit.

The central bank pledged to buy up to $1.25 trillion in mortgage-backed
securities in a program scheduled to end the first quarter of next
year.

Yields on Fannie Mae and Freddie Mac mortgage securities fell to
the lowest in more than six months yesterday.

Fed officials have agreed to gradually slow the central banks buying
to promote a smooth transition in markets as the announced purchases
are completed, according to minutes of their Nov. 3-4 meeting
released yesterday.

President Barack Obama signed legislation this month to extend and
expand a home buying tax credit, which may further boost property
sales.

The tax credit for first-time buyers was set to expire Nov. 30 and
may have sparked an increase in existing home sales in October.
Purchases of existing homes rose 10.1 percent to the highest level
since February 2007.

Spending by U.S. consumers rebounded in October more than anticipated,
an indication that mounting unemployment has yet to stifle Americans
willingness to buy.

The 0.7 percent increase in purchases was larger than the median
estimate of economists surveyed by Bloomberg News and followed a
0.6 percent September drop, Commerce Department figures showed today
in Washington. Incomes climbed 0.2 percent, also exceeding expectations.

Not since Henry Kissinger fled a team of LaRouche organizers, in
the back of a delivery truck in New York City's Central Park in the
early 1980s, has an obese fascist moved so fast to escape an angry
crowd, as Al Gore did today in Chicago. Appearing at a bookstore
in the downtown Loop, Gore was confronted by a team of demonstrators
from a grass roots group called "We Are Change," as he was signing
his latest fascist screed on the global warming swindle. Gore bolted
from the bookstore, raced down an alley, jumped into a waiting car,
and tried to speed off, with protesters chasing after him and banging
on the car.

Midwest LYM organizers, who were also on the scene to confront the
global warming swindler, provided an eyewitness account of Fat
Albert's flight of fear.

Make no mistake about it. This little encounter is typical of the
kinds of things going on all over the country, as the fascists who
brought you the near-destruction of the United States and an onrushing
global Dark Age, are no longer walking the streets, smug in the
belief that they are literally getting away with murder. The mass
strike dynamic is playing out in thousands of ways, every day, and
the recent revelations about the "smoking gun" emails from the East
Anglia University global warming propaganda center, have made Al
Gore's life a little more miserable.

As Percy Shelley wrote in "The Mask of Anarchy," "We are many, they
are few."

U.S. building permits for October were revised to down 4.2% from
September to a seasonally adjusted rate of 551,000, the Commerce
Department reported Wednesday.

October building permits were originally reported as being down
4.0% at a seasonally adjusted rate of 552,000.

The Federal Reserve's latest weekly money supply report Friday shows
seasonally adjusted M1 fell by $27.5 billion to $1.691 trillion,
while M2 rose $2.7 billion to $8.392 trillion.

Dubais debt woes may worsen to become a major sovereign default
that roils developing nations and cuts off capital flows to emerging
markets, Bank of America Corp. said.

One cannot rule out -- as a tail risk -- a case where this would
escalate into a major sovereign default problem, which would then
resonate across global emerging markets in the same way that Argentina
did in the early 2000s or Russia in the late 1990s, Bank of America
strategists Benoit Anne and Daniel Tenengauzer wrote in a report.

A default would lead to a sudden stop of capital flows into emerging
markets and be a major step back in the recovery from the global
financial crisis, they wrote. [It is said that Dubais total debt
burden is about $90 billion, because of sizable off-balance sheet
liabilities. That means like European, British and US banks, they
are running two sets of books. Bob]

Average rates for 30-year fixed mortgages fell this week, matching
a record low set last spring and more than a full percentage point
below what they were a year ago, Freddie Mac said Wednesday.

Rates for 30-year mortgages averaged 4.78 percent this week, down
from 4.83 percent last week and equaling the record low reached the
week of April 30.

Freddie Mac has been tracking rates on 30-year fixed mortgages since
1971.

Last year at this time, the 30-year fixed rate mortgage averaged
5.97 percent.

Interest rates began dropping last November, when the Federal Reserve
began spending $1.25 trillion to buy up mortgage-backed securities
in an effort to lower rates, loosen credit availability and bolster
the long-suffering housing market.

Since April, rates have hovered near 5 percent, spurring refinance
activity.

However, credit standards remain stringent, so the best rates usually
are available only to borrowers with solid credit and a 20 percent
down payment.

Rates for 30-year fixed mortgages are now 0.8 percentage points
below this year's peak set in mid-June. Refinancing at the current
rate shaves roughly $100 off monthly payments on a $200,000 mortgage,
said Frank Nothaft, Freddie Mac's chief economist.

Freddie Mac collects mortgage rates on Monday through Wednesday of
each week from lenders around the country. Rates often fluctuate
significantly, even within a given day, frequently in line with
long-term Treasury bonds.

The average rate on a 15-year fixed-rate mortgage fell to 4.29
percent, down from 4.32 percent last week, according to Freddie
Mac. The 15-year rate hasn't been this low since Freddie Mac started
tracking it in 1991.

Rates on five-year, adjustable-rate mortgages averaged 4.18 percent,
down from last week's 4.25 percent. Rates on one-year, adjustable-rate
mortgages were 4.35 percent for the second consecutive week.

The rates do not include add-on fees known as points. The nationwide
fee for loans in Freddie Mac's survey averaged 0.7 point for 30-year
and one-year loans. The fee averaged 0.6 point for 15-year and
five-year mortgages.

Commercial paper contracted for the third week in four, falling
$10.7 billion to $1.257 trillion.

We should remind you that the runs in stocks and bonds have been
almost completely driven by liquidity. Now with Dubais sovereign
debt problems more liquidity could be lost and these markets could
be in deep trouble.

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