by Dave Kranzler, Investment Research Dynamics:
Something very ominous is brewing behind the scenes. It is systemic and related to a ongoing credit collapse behind “the curtain.” The indicators are right in front of our eyes, regarded with indifference by a zombified, propaganda-infused public injected with the “hope heroin” greedily pedaled by Wall Street, the Fed and the Government.
The credit markets are in a slow state of collapse led by high yield bonds and leveraged loans, which have been declining for the better part of a year. Recently that decline has turned into a tail-spin in the more toxic classifications of “high yield.”
It was revealed by Zerohedge LINK, in a display of adept journalism, that the Dallas Fed has quietly told its regional member banks to refrain from marking to market their distressed energy loans and to defer an initiative to foreclose on defaulting loans to technically bankrupt energy companies drowning in debt.
Of course the head of the Dallas Fed, a former high-ranking Goldman Sachs executive, has issued a polished denial. We need to two more denials before the intel is confirmed to be true. But I know from a source that it is indeed true. A couple months ago a little birdie passed on the remarks made to his client from the President of a big regional bank in Texas: the economic hurricane brewing from the collapse in energy prices is about to hit Texas hard and it will hit every sector of the Texas economy.
Back to the Dallas Fed issue, does this sound familiar? Anyone happen to learn anything from “The Big Short” about the fraudulent behavior of the big banks when their fraudulent business activity hits the wall? One well-read analyst dismissed this latest round of fraud by attributing it to the change in mark to market accounting rules passed in 2009. But these rules were meant to enable the big banks to avoid reporting asset mark-downs for GAAP purposes, enabling them to mark-up bad assets. This further enabled these banks to misrepresent their earnings per share in quarterly earning reports. But that analyst is whistling past the graveyard on this issue. This is much more insidious and fraudulent than changing the GAAP accounting rules. This is about telling banks to let bankrupt companies pretend to be solvent, just like we saw in The Big Short with CDO’s and CLO’s.
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