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Few people really understand the breadth of the financial sector bailout beyond the $700 billion TARP program, some of which has already been paid back.  Virtually everyone in government, the main stream news, and of course the financial sector is doing their best to sweep the entire bailout under the rug.

Dylan Ratigan is one of the few, if not only, main stream news reporters that attempts to tell the whole story – in all their the ugly and painful details.  Here is an MSNBC clip of Ratigan going off on what he calls the $23.7 trillion bailout.  Dylan is absolutely right that the TARP program is a mere drop in the bucket compared to the overall bailout.  But unfortunately, he does not go into enough details or even provide sources for the $23.7 trillion figure.

So where does the $23.7 trillion figure come from? SIGTARP, an oversight commission created at the same time as TARP, produced quarterly reports that present a much more detailed view of the financial sector handouts bailout program.  The July 2009 Sigtarp report contains the $23.7 trillion figure, as shown in the graphic below.

It’s called “Total potential support” because not all of the money has actually been spent.  Much of the potential costs are associated to government guarantees for financial system transactions, which according to the financial institutions, are backed by a pile of worthless paper “assets”.

Two additional SIGTARP quarterly reports have been released since the July report with the $23.7 trillion reference.  True to government form, there is not much consistency in the look and feel of these average 250 page reports.  The section which contained the $23.7 trillion figure – “TARP in context with other programs”- has been removed from subsequent reports.  It’s likely still possible to extract the new figure with a painstaking comb through of the report.  My hunch is that this was intentional.  SIGTARP and the government agencies that created it do not want the true cost of the financial bailout known, or at least not easily known.

Have you found the updated “Total Potential Support” numbers in either the October 2009 or January 2010 SIGTARP reports?  Add the page and section numbers in the comments below.

Also See:

• Total Bailout Cost Now $12.8 Trillion
• Is the FDIC Insurance Program Insolvent?
• Yearly Budget Deficit Tops $2 Trillion

The Financial Lives Of the Poets is truly a book of the times, and one of the best books I’ve read over the last year.  The book revolves around the life of one man, and his interaction with his family (cheating wife, father and 2 sons), his bank (sub-prime mortgage holder about to foreclose on him), his new drug dealing mall friends, his former newspaper boss that laid him off, and the special police drug unit that gains control of his life.  It sounds like a lot, but the character and story development is well done, and it is very entertaining.  And for those that just haven’t had enough of the mortgage meltdown theme, here is a notable quote from the book:

the only thing that seemed rock steady was the house, so we took another chunk out of it, just to catch up, we said, to temporarily cover living expenses, and we refinanced at the peak value; like a snake eating its tail we borrowed against our house to pay the house payment of a house leveraged at forty percent more than the house was worth.

Later when everything seems hopeless, he confirms it with his financial adviser, the same financial adviser who destroyed nearly all of his non-house related assets’

You have fiscal Ebola, Matt.  You are bleeding out through your nose and your mouth and your eye sockets, from your financial asshole.

The desperate situation eventually leads to a subtle crime wave, and then more trouble and doses of reality.  But despite the busy plot, there is also quite a bit of development on the more simple theme of family affairs, and changing relationships – with Matt’s father, his wife, and his kids.  It truly is one of the best books of 2009.  Click the book below to purchase your copy.

One more note, for those wondering about the title.  I don’t want to spoil any more than I already have, but there are a few financial poems and financial haiku’s within the pages.

The Financial Lives of the Poets by Jess Walter

Here is an entertaining rap music video portraying two notable economists, Hayek and Keynes, and their opinions on how to fix the economy.

Once again, CNN misses the mark in its reporting of government finance.  Their latest story  on the supposed $52 billion profit at the Federal Reserve is misguided and irresponsible.

The Federal Reserve banks made a $52 billion profit in 2009, reaping extra income on the government securities they bought in an effort to stabilize the financial system.

But where does this nonsense come from that CNN and every other main stream media outlet reports on?  Here is the link the Federal Reserve press release.  An excerpt follows:

The Federal Reserve Board on Tuesday announced preliminary UNAUDITED results indicating that the Reserve Banks provided for payments of approximately $46.1 billion of their estimated 2009 net income of $52.1 billion to the U.S. Treasury. This represents a $14.4 billion increase over the 2008 results ($31.7 billion of $35.5 billion of net income). The increase was primarily due to increased earnings on securities holdings during 2009…

he Federal Reserve Banks’ 2009 net earnings were derived primarily from $46.1 billion in earnings on securities acquired through open market operations (U.S. Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities), $5.5 billion in net earnings from consolidated limited liability companies (LLCs), which were created in response to the financial crisis, and $2.9 billion in earnings on loans extended to depository institutions, primary dealers, and others. The significant increase in earnings on securities was primarily due to increased securities holdings as a result of the Federal Reserve’s response to the severe economic downturn. Net earnings from currency swap arrangements, which have been established with 14 central banks, and investments denominated in foreign currencies totaled $2.6 billion. Additional net earnings of $1.5 billion were derived primarily from fees of $0.7 billion for the provision of priced services to depository institutions.

Of course the keyword in that Fed statement is in the first line – UNAUDITED.


Why unaudited?  Because nearly every aspect of the Fed’s actions are hidden from American taxpayers, congress and even the president.  Ron Paul is the cosponsor of the HR 1207 bill that threatens to open the Fed’s book to a REAL AUDIT, but until that bill passes, and an audit is performed there is NOTHING in the Fed statemnent that can be trusted, especially false claims of profit.

From the Daily Herald on the Fed’s secrecy:

Today, nearly $13 trillion in taxpayer dollars in bailouts and loans threaten every aspect of our lives. Our constitutional principles and freedoms are being assaulted at every turn. More bailouts, trillion-dollar “stimulus” plans, huge new debt burdens for our children, simply printing money to cover our failed policies and mask our dire economic situation – I could go on and on.

You and I both know President Obama is going to keep going and going unless the proper controls are put into place.

Just think about the magnitude of our spending: The massive, outrageous amount of dollars committed to the economic bailouts in recent months totals more than the New Deal, more than the entire Iraq debacle, more than the 1980s savings and loan mess, more than the Korean War … COMBINED.

The basic premise of examining any problem is determining root cause, which means starting with the Federal Reserve. However, the Federal Reserve is shrouded in secrecy. Their meetings and inner workings are off-limits to the public. And just recently, the Federal Reserve told Congress “NO WAY” when asked to account for $2 TRILLION in taxpayer-backed loans!

Also see:

• The United States Has Not Had A Balanced Budget Since 1957!
• Total Bailout Cost Now $12.8 Trillion

Washington state, like so many other states in the union has huge budgetary problems. An OpEd opinion in the Seattle Times recently asked leaders in the state for their advice to our legislature.   There were two opinions showcased, one of which appeals to the peoples emotions with little regard for financial responsibility.  The other co written opinion was dead on the money about everything wrong with general government spending habits, and Washington state’s specifically.

Richard Davis, the president of the Washington Research Council and Kriss Sjoblom, the council’s economist and vice president of research offered up these choice words.

…What’s been called the state’s structural deficit — an enduring mismatch between revenues and spending — may be better understood as a durable legislative appetite for betting on windfall revenues to bail out overextended budgets. To a remarkable degree, budgetary gambles have paid off over the past decade, as the tech, housing and construction bubbles swelled state coffers.

In 2007, lawmakers raised the stakes, writing a two-year budget that increased spending at twice the forecast rate of revenue growth. Because of the Great Recession, however, 2007-09 revenues came in well below forecast. Only the 2009 federal stimulus windfall averted an even greater budget disaster. The federal monies will be gone in 18 months.

The National Governors Association estimates state budgets will be in the tank through at least 2014. Recent statistics from the Philadelphia Federal Reserve Bank peg Washington’s economy as the fourth-weakest in the nation at present.

It is past time for lawmakers to reset spending and focus on economic growth…

That pretty much sums up the root of our problems.  When additional spending is desired beyond the projected revenue levels, the quick and irresponsible means to achieve additional spending is to just raise the revenue projection numbers – whether achievable or not.

Also See:

• Washington state debt history – does Dino Rossi understand it?
• The United States Has Not Had A Balanced Budget Since 1957!
• The United States National Debt Limit Has Become A Joke
• California Goes Broke – Issues IOU’s
• California’s Exploding Debt Problem

John Perkins, author of Confessions of an Economic Hit Man, just released his new book – Hoodwinked: An Economic Hit Man Reveals Why the World Financial Markets Imploded–and What We Need to Do to Remake Them.

The book is comprised of two main parts – a detailed look at the root of the problem in part I, and the solution as Mr. Perkins sees it in part II.  To find out more, or purchase your copy, just click on the book image below.

Hoodwinked: An Economic Hit Man Reveals Why the World Financial Markets Imploded–and What We Need to Do to Remake Them by John Perkins

The Seattletimes just ran a story on some expensive Tokyo rents that would make a Manhattan studio look cheap.

Now, Hotel Shinjuku 510’s capsules, no larger than 6 1/2 feet long by 5 feet wide, and not tall enough to stand up in, have become an affordable option for some people with nowhere else to go as Japan endures its worst recession since World War II.

Affordable is all relative I guess.  The story goes on to say – “The rent is surprisingly high for such a small space: 59,000 yen a month, or about $640, for an upper bunk.”

There are dozens of good book on options trading theory and practice.  But there is only one I have seen that does a great job with covering the inevitable – how to manage, adjust and refine losing option trades.  And that book is just about to get better with a newly revised edition.  Click the link to pre-order your copy today.  Or if you already have a Kindle, you can access the new book immediately.

The Option Trader Handbook: Strategies and Trade Adjustments (Wiley Trading) by George Jabbour

Just in time for the holiday season is a remake of the popular 12 months of Christmas, in the theme of walking away from your underwater mortgage.

Are you looking for a new career in finance?  Or do you just wonder what all those three letter acronyms mean that people throw around?  Here is a quick summary of some of the most popular financial career acronyms, and how to become one yourself.

How to become a CFP ?- A Certified Financial Planner is a certification mark for financial planners and in the United States is governed by the Certified Financial Planner Board of Standards.  Financial advisers work either independently or through firms that sell financial planning advice, and programs.  The detailed steps to become a CFP are listed on their website, but the summary is:

1. Obtain a bachelor’s degree in any discipline, plus complete the CFP board registered curriculum.
2. Pass the 10 hour CFP Certification Exam.
3. Have at least 3 years experience in the financial planning industry.
4. Pass a mandatory background check.

How to work as a financial planner? – Surprisingly enough, completing the CFP certification and passing the exam does not give you the right to work in the industry.  In fact a large percentage of financial planners in practice today have no official CFP designation.  To practice as a financial planner, and be licensed to sell financial products, it is necessary to pass the Series 7 exam.  From the SEC website, “Individuals who want to enter the securities industry to sell any type of securities must take the Series 7 examination—formally known as the General Securities Representative Examination.”  The detailed information for taking the Series 7 are listed on the FINRA website.  For those considering financial planning as a career, it may be more cost effective to skip the costly CFP program and apply directly to a financial planning firm for sponsorship, and prior to taking the series 7 exam.  After passing the series 7 exam, it is always possible to complete the CFP program as a suplement to your education and business card listed credentials.

How to become a CFA? – The chartered financial analyst program is governed by the CFA Institute.  It is a 3 year self study program that requires taking and passing 3 financial theory intensive exams over a 3 year span.  It is best to have a strong finance and/or economics background before attempting this track.  The types of jobs that a CFA or CFA candidate would target would be investment consultant, fund manager, financial risk manager, wealth manager, or similar.

How to become a registered investment advisor (RIA)? – An RIA is very similar to a financial planner, but it is not licensed through FINRA.  RIA’s are indpendent advisors who generally work on their own, and outside of the control and limitations of larger financial firms.  Whereas financial planners are licensed through FINRA, RIA’s are generally licensed through a state.

How to become a CPA? – A CPA is a certified public accountant.  While it’s not necessary to hold the CPA designation to practice accounting, it will add an additional layer of credentials that can earn you a much higher salary.   The general requirements to earn the CPA designation are:

• A bachelor’s degree, and
• 24 semester credits in accounting and 24 in business
• Passing a uniform CPA exam
• Passing an ethics course
• 2 years general accounting experience supervised by a licensed CPA

How to become a CTA? – A commodity trading advisor is someone (or a firm) that gives people advice on options and futures for a fee.  They may also run managed futures accounts for clients on a fee basis.  CTA’s are regulated by the Commodity Futures Trading Commission.  CTA’s are required to be members of the National Futures Association (NFA).   And in order to practice, a person must pass the series 3 commodity and futures exam, administered by FINRA.  d

Pass series 3 commodity and futures exam.  Link to www.nfa.futures.org  Mention 15 client exemption that allows trading for others without license (up to 15 clients). (http://nvcatoday.nvca.org/index.php/hedge-fund-registration-legislation-introduced-in-congress.html)  Link to www.managedfutures.com  Benefits of managed futures vs hedge fund (segregated accounts, no lockout period, easy to revoke power of attorney)

How to become a CPO? – From the NFA website, a Commodity Pool Operator is “an individual or organization which operates or solicits funds for a commodity pool; that is, an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts or options on futures, or to invest in another commodity pool” .  To conduct business with the public, CPO’s must be registered members of NFA.  Other than registration and abiding by the CFTC rules, there are apparently no special certification exams required to be a CPO.  But

How to become a CLU? – A Chartered Life Underwriter is someone who specializes in life insurance and estate planning.   The official CLU designation is managed by The American College.  The detailed requirements are shown on the American College page.  In general, it requires taking 8 courses (5 required, 3 elective), having 3 years industry experience, adhering to a code of ethics, and take 30 hours of continuing education every 2 years.

How to become a CMT? – A Chartered Market Technician is someone who studies and trades the markets based on a purely technical approach.  The designation is managed by the Market Technicians Association.   Becoming a CMT requires passing 3 technical analysis exams within a 5 year period, and demonstrating 3 years of applicable work experience.

How to become a CEO? -  Seth Godin commented in his book The Dip that “It’s easy to be a CEO.  What’s hard is getting there.  There’s a huge Dip along the way.  If it was easy, there’d be too many people vying for the job and the CEO’s couldn’t get paid as much, could they?”  The larger the organization, the more difficult it will be climbing the ladder to becoming a CEO.  There are no hard and fast rules, but it helps to have an MBA from a top school, be well connected with the leaders of your organization, and possess the personal skills and qualities that are shared by other CEO’s.   If you are serious about rising to the top and becoming a CEO, check out Jeffrey Fox’s book, How to Become CEO: The Rules for Rising to the Top of Any Organization.

How to become a CFO? – A chief financial officer of an organization is a highly paid executive whose main responsibilities are to manage financial risks of the business.  There are no certifications for becoming a CFO, and those that attain this mark have done so by selling themselves into the position, or working their way up the ladder.  According to the Journal of Accountancy website, CFO’s “need need a broad range of skills beyond knowing the ABCs of accounting”.  They also recommend becoming a CPA first, getting a lot of corporate experience, and making your CFO desires known to the CEO. Sam Molinaro, the former CFO of now bankrupt Bear Stearns, and completely derelict in his duties of managing risk, was once quoted as saying “The revenue-generating capacity of this franchise has not been permanently impaired”.  Similar quotes, along with the typical “We are well capitalized” has been the CFO cheer of most financial firms during the financial crisis of 2008 – usually days or weeks before begging for taxpayer funded bailouts.  You want to become a CFO?  Find a blackboard, and write “We are well capitalized!” 10 times, and you are hired.