Another outstanding rant by Denninger—
By Daniel at 20 August, 2009, 3:37 pm
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That our banks are not being forced to take the marks associated with these delinquencies is an outrage. It is the cause of the FDIC’s losses, it is the cause of our credit system remaining locked up, and it is the cause of our continued moribund economy, as without a functioning credit system there can be no actual economic recovery.
These institutions are being protected by our Congress and the willful, intentional blindness of The Federal Reserve, FDIC, OTS and OCC.
These agencies and persons have the same data that is being released to the market. The stock market continues to rally not based on improving economics but based on the federal government and The Federal Reserve continuing to allow institutions to LIE about their financial condition and the expectation that the LIES will be permitted to continue!
This is exactly akin to me going to buy a new car, telling the dealer that I have no money, no job, no assets and no hope of gaining any of the above, but the dealer writes me a loan anyway and lets me drive off so he can claim he made a sale, with full knowledge that there is no chance in Hell I can afford to pay for what just “purchased.” He does so because he believes he can (and has been allowed to!) lie about my financial condition for more than two years by the government thus far, and he thus expects he will be able to so do going forward indefinitely.
But any so-called “economic recovery” based on such a thing is in fact false, as I can’t pay and thus won’t. The cash flow that my payments should generate will not materialize and both the car dealer and government know it.
The system is bankrupt and we MUST clear it of these non-performing loans. We have spent two years playing “extend and pretend”, believing that somehow the economy will imminently turn and thus all these “bad assets” will suddenly become good, even though statistically once you miss two payments the odds of you “curing” that delinquency - due to the fact that you would have to come up with BOTH overdue payments plus the current one - are near zero.
This is an intentional act of fraud up and down the line and it MUST STOP or we will face an economic catastrophe far worse than anything that was believed to be at our doorstep last fall as the production that has occurred but cannot be paid for WILL cause a massive economic dislocation in the near future.
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