Ben Bernanke commented back in 2011, that state and local government defaults were not a central bank issue, but rather a political and fiscal issue. At that time he said local governments were doing just fine so why worry?
But as it turns out, local governments are not doing fine, and many of them are paying excessive dollars to the very banks that Ben Bernanke protects! He is the enemy number one of state and local governments. He could be giving very low interest loans to these governments so they could pay his banks, but he won’t. He is an enemy of the people of the United States!
I wrote that there is a solution to this problem. The cities and counties need to walk away from interest rate swaps and just not pay any penalty. They need to do this all at once, and with LIBOR as an issue, they are now justified in doing so. Governments need to be like the smart homeowners who walked away from their toxic mortgages. Bernanke held interest rates down in order to bail out the banks and the interest rate swaps became another bailout as he screwed governments in the process.
The TBTF banks with the help of the central bank who refuses to bail out local governments, are making money off of toxic loans that governments have no business paying to these banks. Now we understand why it was so important for the main street financial media to shame delinquent homeowners.
It wasn’t that the banks could not handle mass foreclosures. They were more afraid of governments doing the same thing, of walking away from their massive toxic swaps they are paying as a form of tribute to the bankers.
Your tax dollars cannot, in many cases, pay for government employees, for necessary infrastructure, for upgraded transportation, for pensions, because they owe these banks on bets the banks knew would go their way. If you thought government was in charge you are sorely mistaken.
Apparently the Federal Government is keeping it’s mouth shut about these toxic loans for fear the populace could really get pissed off. Guess what, we are pissed off!
These toxic interest rate swaps are in the trillions of dollars. On the local level what is 10 or 20 billion dollars to a transportation system in the bay area? It is a lot. Turns out, when the Ambacs of the world went bankrupt, the governments paid the banks. They should not have done so.
Turns out TARP was used to bail out the very banks that held the local governments as financial hostages. The Federal government became the tool of the banks against your local and state governments! The Fed Private Central Bank also bailed out the banks with easy money loans not available to local and state governments.
Local governments should have walked away from these swaps a long time ago. Instead they paid the banks. That was a big mistake and it is time it stopped. Now that Bernanke is unwilling to help, governments should default on these high interest loans to the TBTF banks, yesterday.
We now understand why main street media is taking America off the track of the real causes of much financial crisis at the local level. They blame the unions, and they blame the politicians and they blame everyone but the banks who pay for MSM. This is a massive fraud upon the American people, and is no different than blaming subprime borrowers when the bankers were actually at fault for allowing the easy money in the housing bubble.
Now we know that the recovery has stalled primarily because of the weakness of governments as they cut back in order to pay these bankers!
The fact that governments are on the hook for toxic loans from the TBTF banks makes the plight of local government a central bank issue regardless of what Bernanke says. It is because of this failure on his part to do the right thing, that makes him local government public enemy number one in the world of finance.
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