By 2008, the housing market's collapse forced Wall Street giants, Bank of America and Citigroup Inc., to take more than six times 2006 profits, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury... yet until now, the full amounts have remained secret.
"Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?" North Carolina U.S. Representative Walter B. Jones said at a June 1 congressional hearing on Fed lending disclosure. "They get help when the average businessperson... probably across America, they can't even go to a bank they've been banking with for 15 or 20 years and get a loan."
That's what happened for Wall Street then; this is now. In August 2008, gold was $827 an ounce; now, it closed over $1900. Has the rarity, preciousness or some other measure of value of gold more than doubled? The Troy ounce is still 31 grams. Or, has the buying power of dollars declined that much?
With perpetual underemployment in double digits, little redeeming about saving these behemoths evidences in terms of liquidity for small business, consumers, or even Wall Street company's corporate debt, (used to enhance payment of monthly operating/payroll expenses.) Even Wall Street Initial Public Offerings are at 2008 lows.
Mortgage rates have never been cheaper, yet mortgage applications dropped another 9% last week. One in five U.S. home-owners are underwater, yet these "too big to fail" Wall Street financiers sit on their hands. Why? They were quite willing to enlist home-owners into this position.
Being underwater and out of work makes people less "creditworthy." What does a Wall Street financier sitting atopÂ—much of it borrowedÂ—oodles of cash do, if not loan money? One can speculate...
Moving away from the Gold Standard in 1971 allowed "people who have borrowed money to pay it back in currency that's worth less," says Porter Stansberry, founder of Stansberry & Associates Investment Research. "That has huge political implicationsÂ—people want that power very badly. Unfortunately, it's hugely disruptive to our economy."
After the borrowing binge of the past 40 years, "debts can't be paid back," he laments. "They can't even be financed with a legitimate currency anymore."
Stansberry argues the U.S. should go back to a gold (or silver) standard. This would contract the money supply, however, exacerbating the current U.S. situation catastrophically... except for precious metals speculators. Still, he worries the dollar is doomed because of the Fed's money printing.
Such views are familiar to supporters of Ron Paul and have gained a lot of credence in recent years as gold has surged and the dollar has wobbled under the weight of America's huge debt load.
Given options, peopleÂ—including investorsÂ—"vote with their feet"! Certainly, Wall Street, Bank of America, and Citigroup Inc. have.