/// REAL WORLD INTEL ///
This is NOT part of the T-REX 2012 Readiness Exercise. We’ve been getting quite a bit of chatter about Quantitative Easing THREE being underway. These ar unconfirmed, but credible, reports. The following was received this morning from a listener. I cannot verfy this information, but wanted to pass along what appears to be a warning from someone in the industry to those in his circle of influence. Time will tell.
Dear John Jacob,
Hope all is well. I know this is the second email today, I just decided you might want to report this. If not no worries.
Yesterday evening a long time friend of my mother and investment banker sent us an email saying “QE3 is now underway.” I don’t know his sources but he’s freaking out saying gold isn’t going to be strong soon and the financial system is close to collapse. He’s been in the business for over 30 years and owns an investment company in Pennsylvania.
I don’t know the details of his business or his contacts nor does he know I’m emailing this to you so please don’t disclose his name on-air, I only know I met him at my grandfather’s funeral last year and he was very nice.
He emailed me and few others yesterday saying:
“Subject: RED ALERT QE3 has OFFICIALLY Started
We are in quantitative easing QEIII (ie more Inflationary Actions by the Government)
Trying to get the information out to family and friends. Inflation is being fueled.. it has to come… be prepared.
-xxxxx
That was it so I replied back:
“Source?”
I know he doesn’t cite his sources because well… he’s an investment banker and if he gave away his sources it wouldn’t be good for business.
He did email several links one of which being this one:
http://www.moneynews.com/Headline/Banks-Plans-Prevent-Collapse/2012/08/10/id/448134
The copy is below. The part really important is where the US Government says the banks couldn’t count on their help in the event of a collapse.
I translate that to “Yea, FDIC Insured? HA!”
God Bless,
-xxxxxxxxxx
US Banks Told to Make Plans for Preventing Collapse
U.S. regulators directed five of the country’s biggest banks, including Bank of America Corp. and Goldman Sachs Group Inc., to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks COULD NOT COUNT ON GOVERNMENT HELP.
The two-year-old program, which has been largely secret until now, is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.
Officials like Lehman Brothers former Chief Executive Dick Fuld have been criticized for having been too hesitant to take bold steps to solve their banks’ problems during the financial crisis.
According to documents obtained by Reuters, the Federal Reserve and the U.S. Office of the Comptroller of the Currency first directed five banks — which also include Citigroup Inc., Morgan Stanley and JPMorgan Chase & Co. — to come up with these “recovery plans” in May 2010.
They told banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out, and reducing risk.
The plans must be feasible to execute within three to six months, and banks were to “make no assumption of extraordinary support from the public sector,” according to the documents.
Spokespeople for the five banks declined to comment. The Federal Reserve also declined to comment.
Recovery plans differ from living wills, also known as “resolution plans,” which are required under the 2010 Dodd-Frank financial reform law. Living wills aim to end bailouts of too-big-to-fail banks by showing how they would liquidate themselves without imperiling the financial system.
“Recovery plans are about protecting the crown jewels,” said Paul Cantwell, a managing director at consulting firm Alvarez & Marsal. “It’s about, ‘How do I sell off non-core assets?’ The priority is to the shareholders. A resolution plan is about protecting the system, taxpayers and creditors.”
The recovery plans are being used as part of regulators’ ongoing supervisory process. In Britain, recovery and resolution plans have both been part of the living will requirements for large banks.
Mike Brosnan, senior deputy comptroller for large banks at the OCC, said the regulator continuously evaluates contingency planning at the banks and savings associations it supervises.
“Recovery plans required of the largest banks are helpful in ensuring banks and regulators are prepared to manage periods of severe financial distress or instability affecting the banking sector,” he said.
This summer, nine global banks submitted living wills to the Fed and Federal Deposit Insurance Corp., and regulators released the public portion of the documents.
The recovery plans requested in 2010, meanwhile, have received little publicity. The names of the banks required to submit them have not been previously disclosed, and Reuters obtained them only through a Freedom of Information Act request.
The Fed supplied Reuters with the letters requesting plans from banks, but not the banks’ actual plans because they were deemed confidential supervisory information. The regulator said it was withholding 5,100 pages of information.
MOVING FURTHER FROM DISASTER
Five years after the financial crisis, concerns remain about whether blow-ups at big banks could lead to another round of taxpayer bailouts.
Trading losses have cost JPMorgan nearly $6 billion so far, and scandals such as the alleged rigging of an international interest rate benchmark have only highlighted the risks lurking inside big banks.
These disasters have damaged banks’ reputations, but not their balance sheets. Most are still profitable, and in recent years the five banks have improved their capital bases and liquidity. They also have been subjected to annual Federal Reserve stress tests that measure whether the banks have sufficient capital to weather severe economic scenarios.
Bank of America and Citigroup, in a sense, have already been executing the kind of moves called for in the recovery plans. Both have been selling off non-core operations and assets to streamline their sprawling businesses, after receiving multiple bailouts during the financial crisis.
Bank of America in June 2011 told Fed officials that it could shed branches in some parts of the country if it needed to raise capital in an emergency, a person familiar with the matter said in January. The proposal was part of a series of options provided to the Fed, including issuing a tracking stock for Bank of America’s Merrill Lynch operations.
But just because the bank proposed selling branches does not mean it’s a desirable move or highly probable, the person said. In the past year, Bank of America has shown progress in building capital without such actions. Its Tier 1 common capital ratio increased to 11.24 percent of risk-weighted assets as of June 30 from 8.23 percent a year earlier.
Tier 1 refers to a bank’s core capital and has been the main focus of regulators in assessing a bank’s capital adequacy.
MENTIONED IN PASSING
The banks’ chief risk officers, and in the case of Citigroup, Chief Executive Vikram Pandit, received letters in May 2010 instructing them on what to include in the recovery plans. The requests stemmed from January 2010 crisis management meetings held by regulators. The letters sent to the five banks were nearly identical.
Each plan was to address severe financial stress at the firm, as well as “general financial instability.” The plans should be capable of being executed ideally within three months, but no longer than six months, the documents said.
The plans should “make appropriate assumptions as to the valuations of assets and off-balance sheet positions,” the documents said.
Recovery plans have been mentioned in public before, but only in passing. In testimony to Congress in July 2010, Fed Governor Daniel Tarullo said the “largest internationally active U.S. banking organizations” were working on recovery plans. The initiative stemmed from work led by the Financial Stability Board, a body that coordinates the work of international financial regulators, he said.
Read Ann Barnhardt today.
“That Sentinel failed to keep client funds properly segregated is not, on its own, sufficient to rule as a matter of law that Sentinel acted ‘with actual intent to hinder, delay, or defraud’ its customers.
U.S. Circuit Judge John D. Tinder”
Makes gold and other tangibles look pretty good about now. Corzine’s get out of jail free card. The whole system is crooked.
Barnhardt.biz
I read the article about banks making a SHTF plan with no Fed backing too. I also read somewhere about QE3… I’ll see if I can find it and post it here.
I’ve believed for a long time that QE3 was just a matter of time. Not if, but when. I also expect that public announcements of Quantitative Easing will be muted, as it would beg the question of why they’re doing it when it didn’t help the last two times.
The buzz about banks being told to figure out their own ‘living will’/bailout plan is interesting. The printing presses work just as well now as they did during the bailout, but I think doing so will not be tolerated by the public this time, as last time it helped the ‘fat cat bankers’ but not Main Street, so this is a political no-go.