cryptogon.com

Say what you will, the Lords of the Crumbling Manor are moving fast. Everyone was still letting the Fannie and Freddie free money and covered bonds-related issues sink in; Well, Move Over. The Lords have come up with an infinitely bigger and potentially more harmful plan:

Now the FDIC gets access to the Fed’s discount windows. Why do I think it’s getting just plain spooky when government institutions (and that’s what the FDIC is) start to engage in emergency lending from a country’s central bank?

Yes, I know the FDIC has very little in assets; I have warned about that for ages. But come on, this just makes everything worse. The FDIC takes over banks that are insolvent, not temporarily illiquid. And the discount windows provide liquidity, short-term and -supposedly- only in emergencies. Nothing about them says solvency, for good reason.

What is Sheila Bair going to do with TAF flows? Pay off those “guaranteed” deposits when banks fail? Let’s hope and pray she does not.

And what is the next step now? Are we going to fund Social Security through these windows too? Is General Petreaus going to finance his fighter jets through them? Someone please tell me where we can expect to end up, once we’re on our way down this road.

In the past few years, whenever I’ve softly and purely hypothetically suggested that perhaps the Lords of the Manor are not trying to save the economy and the country, as is generally and unquestioningly assumed, but that in reality they’re deliberately gutting and liquidating the financial structures, people have always laughed. That, they feel with unrelenting conviction, can not be true.