U.S. Funding For Future Promises Lags By Trillions

July 26th, 2011

USA Today

By: Dennis Cauchon

The federal government’s financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows.

The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for.

This gap between spending commitments and revenue last year equals more than one-third of the nation’s gross domestic product.

Medicare alone took on $1.8 trillion in new liabilities, more than the record deficit prompting heated debate between Congress and the White House over lifting the debt ceiling.

Social Security added $1.4 trillion in obligations, partly reflecting longer life expectancies. Federal and military retirement programs added more to the financial hole, too.

Corporations would be required to count these new liabilities when they are taken on — and report a big loss to shareholders. Unlike businesses, however, Congress postpones recording spending commitments until it writes a check.

The $61.6 trillion in unfunded obligations amounts to $528,000 per household. That’s more than five times what Americans have borrowed for everything else — mortgages, car loans and other debt. It reflects the challenge as the number of retirees soars over the next 20 years and seniors try to collect on those spending promises.

“The (federal) debt only tells us what the government owes to the public. It doesn’t take into account what’s owed to seniors, veterans and retired employees,” says accountant Sheila Weinberg, founder of the Institute for Truth in Accounting, a Chicago-based group that advocates better financial reporting. “Without accurate accounting, we can’t make good decisions.”

Michael Lind, policy director at the liberal New America Foundation’s economic growth program, says there is no near-term crisis for federal retirement programs and that economic growth will make these programs more affordable.

“The false claim that Social Security and Medicare are about to bankrupt the United States has been repeated for decades by conservatives and libertarians who pretend that their ideological opposition to these successful and cost-effective programs is based on worries about the deficit,” he says.

USA TODAY has calculated federal finances based on standard accounting rules since 2004 using data from the Medicare and Social Security annual reports and the little-known audited financial report of the federal government.

The government has promised pension and health benefits worth more than $700,000 per retired civil servant. The pension fund’s key asset: federal IOUs.

Click here for the full report from USA Today

Wells Fargo Fined $85 Million for Pushing Subprime Loans

July 21st, 2011

SFGate.com

By: Bloomberg

Wells Fargo & Co., the largest U.S. home lender, agreed to pay a record $85 million fine to settle Federal Reserve claims it steered borrowers into costlier loans and falsified data in mortgage applications.

Employees at Wells Fargo Financial, the lender’s consumer- finance unit, pushed customers who may have been eligible for prime interest rates into loans carrying higher rates intended for riskier borrowers, the Fed said in a statement announcing the settlement today. Separately, sales personnel used false documents to make it appear borrowers qualified for loans when their incomes made them ineligible.

The company shuttered Wells Fargo Financial in July 2010, eliminating 3,800 jobs and ceased making non-prime home loans. The business was overseen by Mark Oman, 56, who has announced he will retire by yearend. The San Francisco-based bank didn’t admit wrongdoing in agreeing to today’s action.

The civil penalty is the largest issued by the Fed in a consumer-protection action, according to the statement. The accord requires Wells Fargo to re-evaluate qualifications of borrowers who received a subprime, cash-out refinancing loan between January 2006 and June 2008. Wells Fargo must compensate borrowers harmed by the practice, which may exceed 10,000, according to the statement.

The Fed also issued consent orders against 16 Wells Fargo employees that bar them from working in the banking industry, the regulator said in the statement.

Click here for the full report from SFGate.com

The Kevin Trudeau Show: 7-20-11

Today, Kevin explains how government waste is ruining our economy and how just a small modification to where we put our tax dollars could actually fix America’s debt crisis. Plus, get Kevin’s opinion on raw food diets and protein shakes!

Self Help:
Change Your Diet
Hemp Protein

Health:
Hungary Introduces Fat Tax On “Unhealthy” Foods

Media:
Glenn Beck Laughs at Whistleblowers Death

Everything Kevin:
Become An Insider!
Stand with KT!
Kevin is on YouTube!
Sign Up For Kevin’s FREE Podcast
Follow Kevin on Twitter
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Kevin’s Film Club
Kevin’s Book Club

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The Kevin Trudeau Show: 7-13-11

Today, Kevin gives you tips on how to start your own business without a lot of skill, time, money, or education. Plus, get the inside story on the Rupert Murdoch scandal and why the economy is only getting worse.

Self Help:
Summer Sales Bonanza
KT’s Daily Supplements

Media:
Senator Wants to Probe Murdoch for Possible US Phone-Hacking

Wealth:
Dollar Falls Sharply

Everything Kevin:
Become An Insider!
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Kevin is on YouTube!
Sign Up For Kevin’s FREE Podcast
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Kevin’s Film Club
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The Kevin Trudeau Show: 4-9-11

Today, the “all-seeing” Kevin Trudeau gives you his predictions for what will happen to the US economy & the US dollar within the next 2-5 years. Plus, Dr. Tom Morter stops by to explain why Trace Minerals are absolutely imperative to your health and why you should never leave home without it!

Self Help:
Survive And Prosper!
Your Wish Is YOUR Command
Emergency Preparedness
Don’t Leave Home Without It
Nature’s Best Antibiotic

Everything Kevin:
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Kevin is on YouTube!
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Geithner Warns Lawmakers On US Debt Limit

January 12th, 2011

The Wall Street Journal

By: Meena Thiruvengadam and Jeffrey Sparshott

The U.S. could reach its debt limit of nearly $14.3 trillion as early as March 31, Treasury Secretary Timothy Geithner said Thursday.

Geithner in a letter to lawmakers said failure to raise the debt limit could “precipitate a default by the United States” and have catastrophic economic consequences–potentially more harmful than the financial crisis in 2008 and 2009.

The letter received a cool reception on Capitol Hill.

“The American people will not stand for such an increase unless it is accompanied by meaningful action by the President and Congress to cut spending and end the job-killing spending binge in Washington,” Republican Speaker of the House John Boehner said.

Boehner, leading a new Republican majority in the House, said spending cuts remained a top priority lawmakers.

The Treasury Department estimates that the U.S. could reach its debt limit as soon as March 31 and probably no later than May 16. The exact date depends on the rate of economic growth, tax receipts and other factors.

“This means it is necessary for Congress to act by the end of the first quarter of 2011,” Geithner said in the letter.

Geithner is pushing lawmakers to lift that ceiling for the sixth time in less than four years. Lawmakers last increased the debt ceiling almost a year ago.

But by Monday, the federal debt subject to that ceiling stood at around $13.95 trillion, giving the government just $355 billion before it would be legally prohibited from borrowing to pay its financial obligations.

A Treasury official said the administration is hoping to separate the debt ceiling increase from the debate on spending. And in his letter, Geithner said deep spending cuts would delay reaching the ceiling by no more than two weeks.

Boehner, though, emphasized the importance of spending cuts.

“While America cannot default on its debt, we also cannot continue to borrow recklessly, dig ourselves deeper into this hole, and mortgage the future of our children and grandchildren,” he said.

Failure to raise the U.S. debt ceiling could cast doubt on the U.S. government’s ability to meet its obligations and send shockwaves through the bond market.

“Default would have prolonged and far-reaching negative consequences on the safe-haven status of Treasurys and the dollar’s dominant role in the international financial system,” Geithner said.

Click here for the full report from the Wall Street Journal

To Pay Off The National Debt Is Now Mathematically Impossible

February5, 2010

The Economic Collapse

A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don’t realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

And the U.S. government would still be massively in debt.

So why doesn’t the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?

Well, for one very simple reason.

That is not the way our system works.

You see, for more dollars to enter the system, the U.S. government has to go into more debt.

The U.S. government does not issue U.S. currency – the Federal Reserve does.

The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers.

If you will pull a dollar bill out and take a look at it, you will notice that it says “Federal Reserve Note” at the top.

It belongs to the Federal Reserve.

The U.S. government cannot simply go out and create new money whenever it wants under our current system.

Instead, it must get it from the Federal Reserve.

So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).

So that is how the U.S. government gets more green pieces of paper called “U.S. dollars” to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.

So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.

Are you starting to get the picture?

As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure.

So how much money actually exists in the United States today?

Well, there are several ways to measure this.

The “M0″ money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.

The “M1″ money supply includes all of the currency in the “M0″ money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers’ checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually “exists” as we will see in a moment.

Click here for full report.

FDIC Weighs Extraordinary Steps to Shore Up Fund

September 22, 2009

Yahoo! News

By Daniel Wagner

FDIC weighs extraordinary steps, including loans from banks, to shore up insurance fund

The Federal Deposit Insurance Corp. is weighing several costly — and never-before-used — options as it struggles to shore up the dwindling fund that insures bank deposits.

The agency is considering borrowing billions from healthy banks. Alternatively, it may impose a special fee on the banking industry.

Each option carries risk: Drawing money from healthy banks would take dollars out of the private sector, making that money unavailable for investment in the weak economy. But charging the whole industry a fee to replenish the fund could push weaker banks toward failure.

A third option — borrowing from the Treasury — is politically unpalatable, since it would resemble another taxpayer-financed bailout.

A fourth option would be to have banks pay their regular insurance premiums early. But this idea wouldn’t solve the fund’s long-term cash needs.

“The bottom line is, there’s no good solution,” said Jaret Seiberg, an analyst with the research firm Concept Capital. “This is a fight over which option is least bad.”

The FDIC is expected to propose a solution, possibly combining two or more of the options, at a board meeting next week.

Bank failures since the financial crisis struck have drained the fund to its lowest level since 1992, at the peak of the savings-and-loan crisis. The fund insures deposit bank accounts of up to $250,000.

Officials have approached big, healthy banks about making loans to the agency, said two industry officials familiar with the conversations, who requested anonymity because the plans are still evolving. Doing so would help the agency avoid tapping a $100 billion credit line with the Treasury — something FDIC Chairman Sheila Bair is reluctant to do.

But taking billions from large, healthy banks would remove that money from the private sector and prevent it from being invested. That could slow an economic recovery, analysts said.

Industry and government officials said Tuesday that plan was still on the table. But FDIC spokesman Andrew Gray downplayed its likelihood, saying, “It’s an option, but it’s not being given serious consideration.”

The FDIC also could levy a special emergency fee on the industry. That would allow the healthiest banks to keep more capital for investment. But it could drive shakier banks toward failure — further depleting the fund. Losses on commercial real estate and other loans are causing multiple bank failures each week.

Banks already have paid one extra fee this year. And Comptroller of the Currency John Dugan, who holds one of the FDIC board’s five votes, has cautioned against saddling them with another.

Discussing the option last week, Bair acknowledged, “We don’t want to stress the industry too much at this time, when they’re still in the process of recovery.”

Bair also said then that the agency might collect banks’ regular insurance premiums early to infuse the fund with cash. An exemption would likely be provided for banks that are too weak to pay in advance.

This plan would solve the fund’s immediate cash needs. But Seiberg called it “a one-time gimmick” that would merely delay another special assessment.

Because the FDIC expects bank failures to cost the fund around $70 billion through 2013, a short-term boost may not be the answer, Seiberg said.

The banking industry and lobbyists oppose another fee. They also want Bair to avoid tapping the Treasury credit line, because it would lead to higher insurance premiums for banks as the FDIC repays the money.

In a letter Monday to Bair, American Bankers Association CEO Ed Yingling endorsed borrowing from the banks or collecting regular premiums early as alternatives to charging another fee.

The special fee imposed earlier this year is hurting banks, already stressed from depressed income and increased loan losses, Yingling said. Another one “may do more harm than good,” he said.

One advantage of having big banks lend to the insurance fund would be to give healthy banks a safe harbor for their money and limit their risk-taking, said Daniel Alpert, managing director of the investment bank Westwood Capital LLC in New York.

Click here to continue reading the full article from Yahoo! News