U.S. Economic/Financial News

Bank of America Considers 'Nuclear' Option

Sept. 18 (EIRNS)—With all the shrieks coming from Europe, don't forget about Bank of America, which could well beat all the European banks to the finish line of official bankruptcy. Bank of America is reportedly considering the "nuclear" option of filing for bankruptcy for its Countrywide unit—for which it conveniently maintained a separate legal identity after its 2008 acquisition. Since Countrywide only has about $11 billion in assets, the idea would be to shovel the shit of hundreds of billions of dollars of bad mortgage loans under the rug, and try to bury them along with Countrywide.

That's exactly what they are going to try to do, Lyndon LaRouche said on Sept. 18. They'll try to bury it. They have no choice: they are bankrupt, like the rest of the system.

Beginning Move To Eliminate Food Stamps?

Sept. 21 (EIRNS)—It may be recalled that during the debate over an extension of Federal long-term unemployment benefits in August 2010, President Barack Obama infuriated Congressional Democrats by telling them to "take it out of food stamp money" to offset the cost of the extended benefits. The Administration seems to have been exploring ways—besides allowing all-crop food production in America to fall seriously this year—to cut the program that currently provides food stamps to 42 million poor and/or unemployed Americans.

On Sept. 20. the FBI raided eight Michigan stores—primarily Dollar Stores (a chain that sells only markdown items costing $1), charging their owners with conducting "widespread food stamp fraud" and arresting them. But on the same day, the Michigan Department of Human Services announced a crackdown on the recipients—all 2 million who receive food stamps in the state—which could have drastic effects in increasing hunger, and "saving money" in Federal food stamp aid.

Michigan announced that it had adopted a strict impoverishment regulation for food stamps, one which requires recipients to get rid of "assets" in order to get food aid. Up to now, in all states, income is the only criterion for food stamp aid. But in Michigan's initiative, recipients' assets will be "surveyed," and can't be worth more than $5,000 (a car less than 10 years old, a house with any mortgage equity, trifling savings). Otherwise, they "could be" cut off from food stamps. The "survey" is starting immediately with 15,000 people, but will be progressively applied to all 2 million recipients in Michigan, by "visits."

A large share of the recipients will have assets "too high," enabling them to be denied food stamps.

Fed Announces Another Bailout, Over Weak Republican Protest

Sept. 21 (EIRNS)—Four Congressional Republican leaders protested in advance of the Federal Open Market Committee (FOMC) on Sept. 21, but Helicopter Ben Bernanke and the FOMC went ahead with another bailout for U.S. debt securities. This is separate from its "swap lines" bailout just announced for European banks, and its role in the monster "EuroTARP" bailout being demanded by Obama and Geithner and the British.

The Fed's latest program is a commitment to buy $400 billion in U.S. Treasury securities with maturities of "six to 30 years" (primarily 10- and 30-year Treasuries) by next June, while selling some of its holdings of 1-3 year Treasuries. This is supposedly to force down long-term interest rates for mortgages, etc.—which are already at all-time record lows. Not only is it idiotic, but the Fed's years-long "zero-interest" regime is also seriously damaging to commercial banks, particularly small and mid-sized community banks, and becoming more so. The FOMC reiterated its intention to keep short-term rates effectively at zero until "at least mid-2013"; i.e., for a total of five years or more.

In addition to this so-called "Treasury twist", however, the Fed also announces it would resume purchases of mortgage-backed securities—in particular from Fannie Mae and Freddie Mac.

As at the August FOMC meeting, three out of the ten members—Presidents Fisher, Plosser, and Kocherlakota, respectively of the Dallas, Philadelphia, and Minneapolis Federal Reserve banks—voted against this new bailout.

Just before the FOMC meeting, four GOP Congressional leaders publicized a highly unusual, but mildly worded, letter to Bernanke requesting that the Fed conduct no more "quantitative easing" bailouts. "Further measures to loosen credit could exacerbate current problems or further harm the U.S. economy," said the letter from Senators Mitch McConnell and John Kyl and Representatives John Boehner and Eric Cantor. It asked Bernanke to avoid further action "particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action, and quantifiable benefits to the American people.... It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate."

The truthful "H-word," hyperinflation, was not used.