Texas Secession Looms As “Independence Resolution” Nears Vote

Authored by Josh Harkinson, originally posted at MotherJones.com,

If the nationalists get their way, this November might be the last time Texans vote for a US president.

 

On Wednesday, the Platform Committee of the Texas Republican Party voted to put a Texas independence resolution up for a vote at this week's GOP convention, according to a press release from the pro-secession Texas Nationalist Movement. The resolution calls for allowing voters to decide whether the Lone Star State should become an independent nation.

Texas was, in fact, its own country for nine years before joining the United States in 1845, and while the idea of returning to independence has never been taken seriously by most people, it remains popular as a romantic notion and marketing hook. Lone Star beer is the "national beer of Texas." Texas Monthly is the "national magazine of Texas." In a 2009 rally, then-Gov. Rick Perry hinted that the state could secede if "Washington continues to thumb their nose at the American people." He later backed off the idea. (Representatives of the state GOP and Texas Nationalist Movement could not be reached for comment.)

The Texas Nationalist Movement, once considered a quixotic fringe group, has added hundreds of members in the years since the election of Barack Obama. According to the Houston Chronicle's Dylan Baddour, at least 10 county GOP chapters are coming to the convention supporting independence resolutions. But this will be the first time in the state's 171-year history that they will actually vote on one. It's very unlikely to win. Then again, that's what people said about Donald Trump.

*  *  *

As we detailed previously, via SHTFPlan.com's Mac Slavo, secession, a formal declaration of independence, is by tradition the right of every Texan and American, and the Fed has doubtlessly crossed the line too many times to count. Fed up Americans are looking for ways to voice their anger, and Texans have a notoriously short fuse, a history of independence and tendencies to secede. But the powers that be may have also fueled a trap on sovereignty. What is shirked at the federal level may be accepted at the international level.

The bankers and social engineers are practiced at ruling by divide and conquer to avoid personally confronting pitchforks and angry townspeople. There is a plan underway, which has already been exposed, known as the North American Union.  Sponsored by Wall Street firms like Goldman Sachs and organizations like the Council on Foreign Relations, the agenda is creating a globalized world that will use immigration to upend politics, shift demographics, supply corporate labor and fracture society.

Like NAFTA before it, the plan will destroy jobs and displace millions of workers, creating new waves of migration across the border. Further integration will restructure shipping, energy and transportation, all while building a scapegoat for the engineered economic collapse that will rile up the masses.

Like a doctor setting a fracture, the underwriters of the North American plan to actually break up regions of America to ‘enhance’ the management and control of society at many levels. According to author Jerome Corsi:

Understanding the plan to merge the U.S., Mexico and Canada, says Corsi, is “the only context in which the current immigration travesty makes sense – and it must be stopped.” This aim to create a North American Union between the United States, Mexico and Canada is the real reason behind “comprehensive immigration reform.”

 

“A North American Union would not just be the end of America as we know it,” claims Corsi, “but the beginning of an EU-like nightmare – a bureaucratic coup d’etat foisted upon millions of Americans without their knowledge or consent.”

Thus, the big banks and power brokers are interested in Texas secession, or at least could exploit it easily:

How might secession transition from a fringe idea to a country-ender? In my conversations with economists, political scientists, and futurists, three broad themes came up that I found the most persuasive: economic collapse, the rise of localism, and North American reshuffling.

 

[…]

 

Let’s say there’s an American revolution—who leaves first? Once the feds “start imposing just huge taxes,” [Peter] Schiff says, the states that have to pay more in than they’re getting back out will pull their stars off the flag. Schiff lists Texas and California as potential pull-out candidates, whereas “Florida probably wants to stay because of all the Social Security money.” […]

 

North America’s borders have remained pretty much static for the last century… But this stability shouldn’t imply that our dividing lines make sense. In 1981’s Nine Nations of North America, Joel Garreau argued that the continent’s borders don’t reflect how we live. Garreau’s nine nations map—which highlighted regions where people share common values, culture, and natural resources—wasn’t intended to be predictive of a future breakup [Ed. Note: yet could be spot on].

 

Take away the artificial borders and we’re all just North Americans… If America ends, so will Canada and Mexico. And if Canada or Mexico goes down the tubes, we won’t be long for this continent either. (Source)

Taken the wrong way by the media, secession and ‘fightin’ talk’ about immigration allow the system to play off the sentiment of the locales and provide friction to open up action. This strategy creates new problems, and give new agency powers to those who could offer to provide solutions. These are new realms for experts to manage, and corporations to service. Remember that calls to secession have been led by bought out “yee haw” politicians like Rick Perry. The gun toting standoff rhetoric has been largely manufactured by scripted suits funded by lobbyists.

Nonetheless, a breaking point is bound to come somewhere, at sometime. As one commenter put it:

“Most Texans do not want to break away from the United States. Most Texans consider themselves Americans. But if ever being American means sacrificing our liberties, we will just prefer to be Texans.”

Is this why FEMA has been training Texas police to deal with riots?

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Lousy, Tailing 30Y Auction Follows Yesterday’s Recordbreaking 10Y

Following yesterday’s record-breaking, blockbuster 10 Year auction it would have been difficult to follow the unprecedented scramble for benchmark OTR paper, and sure enough it was.

Moments ago the Treasury sold $15 billion in 30 Year paper in what may have been one of the weaker ultra-dated bond auctions in recent months, when it printed at 2.615%, tailing the When Issued by 0.7 bps, the first 30Y tail since February, and about 2 bps higher than the 30Y auction in April. 

The internals were likewise weak: the bid to cover was only 2.199, well below the 2.40 in April and the lowest since February. Finally, the allocation did not inspire much confidence, with Indirects taking down 59.7% which while hardly low, was certainly nowhere near the record we saw in yesterday’s 10 Y auction. With Directs allotted 8.8%, or the lowest since last September’s 7.4%, this meant that Dealers were left with 31.5%, the most since February.

Why the disappointment? Perhaps because there were no 50 or 100-year bond sales in Europe today; or perhaps all the duration demand had exhausted itself yesterday. Whatever the reason, following the unexpected revulsion in stocks today, the mood appears to have shifted to the Treasury complex as well, which has seen some weakness following today’s auction.

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Feds Reportedly Stage Multiple Raids in Upstate New York Hasidic Village

A series of federal raids were conducted around the village of Kiryas Joel in upstate New York, Forward reports. Accounts on social media suggest participation in the raids by the FBI, the Bureau of Alcohol, Firearms, Tobacco and Explosives (ATF) and the Sullivan County district attorney’s office.

Neither the FBI nor the U.S. attorney’s office provided Forward with a comment, but the Jewish media outlet suggested the raids may have to do with a couple of ongoing controversies in Kiryas Joel—a video of an ultra-Orthodox principal kissing a boy that is being investigated by local authorities (the school defends his actions), and/or a scandal involving alleged misuse of federal e-Rate funds by Orthodox institutions in Kiryas Joel and elsewhere in upstate New York as well as Williamsburg, Brooklyn.

The e-Rate scandal has already led to federal raids in Kiryas Joel and elsewhere in New York. The federal e-Rate program offers money to libraries to purchase servers as well as to subsidize the cost of phone and internet access. The definition of a library and what kind of institutions qualify is determined at the state and local level. In New York, the determinations are made by local library associations. Most require the institutions have a librarian with a master’s degree.

The Metropolitan New York Library Council (METRO) offers “collegial” level membership for libraries that don’t meet all the qualifications. Such institutions then qualify for e-Rate funding and, as Forward reported in 2013, some Orthodox institutions joined METRO to qualify for funding, and then allegedly received far more than would be necessary for the institutions given their small size. Many of the institutions were Satmar Hasidic—Forward reports that one of the community’s two top religious leaders had decreed that Satmar children who had internet at home could not attend Satmar schools, thus spurring growth in internet cafes as well as the library-like institutions under scrutiny.

Congress passed legislation to set up E-rate in 1996. It’s funded by “universal” fees on phone and internet bills, and the program spends $2.25 billion a year on subsidies. The program has been plagued with fraud and waste almost from the beginning, including a previous multi-million dollar fraud in New York in 2002. The amounts involved in Kiryas Joel are in the six-figure range. That means that if today’s raids are associated with the e-Rate scandal, the cost of the probes and raids could easily surpass the amount of money involved in the fraud. Fraud prevention easily leads to more waste.

In the meantime, internet access has expanded since the 1990s largely thanks to private enterprise and the lack of onerous regulation. Local government efforts at managing and meddling with internet access are often disasters, with local governments also choking broadband competition and impeding internet access that way as well. E-rate is a program that’s long outlived its usefulness, if it even had any in the first place. The plug should have pulled after the first multi-million dollar fraud—there are more efficient ways to improve internet access, with the near ubiquity of internet access in the U.S. today serving as evidence of that in action.

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Countries Teetering on the Verge of Bankruptcy

In the 15th century moneylender’s had their benches broken when they run out of their hard-earned cash on other people’s backs and hence the origin of ‘bankruptcy’. The broken benches, smashed stopped them starting up business again. Back then insolvency was public and it was irrevocable. Although, like everything where there’s a will, there’s a way and the broken benchers probably still got back into their moneylending line of business to fleece a few more before they went down the tubes again. That was the beginning of when banks started to become too big to fail.

Just recently France got another telling off from Moody’s and ended up beng downgraded. While the rest of Europe has managed to drag (almost) itself out of recession and see some sort of growth, France is still in the doldrums and suffering for its lack of initiative and lack of stimulus. It was downgraded from Aa2 to Aa1, despite the outlook being stable. The report from Moody’s stated that the problems will continue since France is not addressing the problems at the root of the matter, resulting in structural unemployment as well as weak profits for companies and losses in global markets. The report stated: “The current economic recovery in France has already proven to be significantly slower — and Moody’s believes that it will remain so — compared with the recoveries observed over the past few decades. In part, this is due to the erosion of competitiveness and loss of growth potential following the global financial crisis. It is becoming increasingly clear, in the rating agency’s view, that these problems will continue to constrain growth long after the cyclical recovery from the crisis is completed. In Moody’s opinion, France’s potential annual growth rate is at most 1.5% over the medium term. France faces material economic challenges, such as a high rate of structural unemployment, relatively weak corporate profit margins, and a loss of global export market share that have their roots in long-standing rigidities in its labour and product markets.”

The rating attributed to France is expected to remain as is for the next 12 to 18 months, which means that there will be no improvement in the French economy for another 2 years probably.

But, France is nowhere near as bad as some countries. There are some that are almost on the verge of implosion and they have soaring debts. What will happen to them and who are they?

Most In-Debt Countries in the world on the edge of Insolvency

7. Belarus

The outlook for this country is negative according to Moody’s and government debt for 2015 stands at 39.6% of GDP. The credit rating for Belarus is Caa1. The last-dictator of Europe, President Alexander Lukashenko, who has been in power for over 20 years, now refuses to privatize national industries still in good-old Communist style. It has suffered greatly due to the sanctions imposed upon Russia as its economy is closely linked to the Russian Federation’s. Its currency has also suffered and is now linked and indexed to the Russian ruble (40%), the US dollar (30% and the euro (30%).

6. Argentina

Argentina’s outlook is also negative and the credit rating currently stands at Caa1, with government debt at 49.5% of GDP for 2015. The inflation rate in the late 1980s stood at 12,000% and they are still suffering the consequences of the terrible years that set them back then. In 2001, the government defaulted on $100 billion in debt when it was unable to see its exports rise because it had pegged its currency to the US dollar. The country defaulted again in 2014 and in the up-coming elections all candidates are looking to see a rise in foreign investment to get themselves out of trouble.

5. Jamaica

This country has a credit rating that stands at Caa2 and 132.8% of government debt as a percentage of GDP (2015). GDP per capita currently stands at $8,784 also. The country has a positive outlook since its credit rating recently went from Caa3 to Caa2. There is greater confidence in the economy due to the simplification of tax returns and the implementation of a new minimum business tax.

4. Belize

This country has an outlook that is stable and a rating of Caa2. Government debt this year stands at 75.7% of GDP and GDP per capita is $8,321. Its GDP is currently at $1.8 billion. In 2012, the country defaulted on the repayment of $23 million, after having run up debts to the tune of $540 million.

3. Venezuela

This country has a credit rating of Caa3 and its outlook is stable today with government debt at 39.6% of GDP. Per capita GDP stands at $16,346. Fuel prices have had an adverse effect on this country’s economy and caused increases in debt, since nearly 94% of earnings are from oil today for this country.

2. Greece

Government debt here stands at 172.7% of GDP (2015) and per capita GDP is $26,773. The rating is currently under review for Moody’s and the present credit rating stands at Caa3. Greece defaulted on the repayment of $138 billion of its bailouts of 240 billion euros in 2012. The country has one of the highest unemployment rates in the history of the world sometimes hitting 25% (and even 60% for youth employment). What changes will take place with the election of the left-wing party Syriza and Prime Minister Tsipras, then his resignation and now his stunning victory and regaining of power in a second election within eight months?

1. Ukraine

 Ukraine has a credit rating of Ca and a negative outlook. Its government debt stands at 94.1% of GDP ad its per capita GDP amounts to $8,278 today. This country has the worst credit rating of all country in the world and it is the second lowest credit rating possible. The likelihood of default stands at 100% according to Moody’s.

 

There are only seven countries in the world with a credit rating that is worse than C in the world today. These are the seven countries that will go bankrupt if they don’t find a solution to their problems.

The Ancient Greeks had it off to a tee. Bankruptcy didn’t even exist as a term and when a man ended up falling into debt then it was his wife, children and servants that ended up in debt slavery. They would have to work and were forced into physical labor in order for his debt to be paid back. It was only in Athens that the families of debtors were saved by the Laws of Solon, forbidding an Athenian from being enslaved. But, it was ok to enslave foreigners or people who were not from Athens. Sometimes that slavery would last for the lifetime of the wife and children, given to the creditor since the debtor had made a mistake. What’s changed these days when someone goes bankrupt? It’s just someone else that ends up paying for it all rather than the person or the institution that did the dirty deeds in the first place. When the banks go bankrupt, we don’t break their benches any more. We just tell them not to worry and that they will get a good old-fashioned bailing out from the Federal Reserve. When the banks lend too much because they want to make a killing, we let them do it again because they were visibly having so much fun doing so.

Even before capital markets took off internationally, countries were going bankrupt and Spain, France, Portugal and Prussia regularly went bankrupt because their eyes were bigger than their bellies with regard to world expansion. They never had the money, but they just ran into debt and went bankrupt.  Back then, they never concealed it. Today, things are different. Bankruptcy fraud is the order of the day with asset concealment or destruction of documents, conflict of interest ad redistribution arrangements as well as falsification.

Once upon a time in the not-too-distant past people ended up going to a debtors’ prison for falling into debt. Back in the 19th century it was a common way to deal with those that owed too much money to others; forced into labor to pay off what they owed to their creditors. Of course, at the same time, the wife and children fell into poverty because there was no safety net to fall back on. When released from prison, they were forced in debt bondage and became indenture servants or serfs.

How many of the bankers should end up as debt-bondaged serfs? What should happen to the countries that just willingly allow themselves to fall into debt? 

 

 

 

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Following Rousseff’s “Coup”, Brazil’s Problems Are Only Just Starting

Following today’s Brazilian Senate vote, which as reported earlier was expected to vote overwhelmingly to endorse Dilma Rousseff’s impeachment and did just that in a 55-22 vote, Rousseff appealed to the public in a televized broadcast and condemned the move to impeach her as a “coup” and a “farce“, denying she has committed any crimes.

She was addressing the nation on TV for the first time since senators voted overnight to suspend her for budgetary violations and put her on trial after being accused of illegally manipulating finances to hide a growing public deficit ahead of her re-election in 2014. Rousseff responded that her government was “undergoing sabotage”.

In her TV speech in front of supporters at the presidential palace, Mr Rousseff said that she may have made mistakes but had committed no crimes, adding: “I did not violate budgetary laws.” She said: “What is at stake is respect for the ballot box, the sovereign will of the Brazilian people and the constitution.” Branding the process “fraudulent”, she vowed to fight the charges against her and said she was confident she would be found innocent.

Rousseff accused the opposition of leading the impeachment because they had vehemently opposed all the advances she and her predecessor, Luiz Inacio Lula da Silva, had made for the Brazilian poor and lower middle classes. After her speech she left the presidential palace and shook hands with supporters lining the pathway.

In terms of immediate next steps, the following flow chart highlights the key developments over the next 6 months.

 

Meanwhile, as Rousseff continues to fight for her political life, things in brazil are already in motion as another controversial figure, vice president Michel Temer became interim president as soon as Ms Rousseff was suspended. A few key bullet points summarizing his rocky relationship with Rousseff courtesy of BBC:

  • The 75-year-old law professor of Lebanese origin was Ms Rousseff’s vice-president and was a key figure in the recent upheaval
  • Up until now, he’s been the kingmaker, but never the king, having helped form coalitions with every president in the past two decades
  • He is president of Brazil’s largest party, the PMDB, which abandoned the coalition in March
  • In recent months, his role has become even more influential; in a WhatsApp recording leaked in April, he outlined how Brazil needed a “government to save the country”.

There is an amusing and unconfirmed anecdote circulating how Temer became president as summarized in the following tweet:

 

What is less amusing, however, is that if Brazil is indeed seeking to cleanse its corrupt political class, Temer is hardly the right guy to do it. In fact, if markets believe that the Brazilian political situation will stabilize following the Rousseff “coup” as she calls it, we would be sellers for one simple reason. As AP puts it, the man who may become Brazil’s next president is almost as unpopular as the leader facing impeachment now, and stained by scandals of his own.

Just like in technocratic Europe, where unelected politicians are thrust upon the public to quietly transfer wealth, Vice President Michel Temer, who hasn’t won an election on his own in a decade, is famed as a backstage wheeler-dealer, and his critics say he’s leading the plot to replace his boss, embattled President Dilma Rousseff.  

And with Temer now the acting president, the AP frames the big question as follows: can he avoid ouster himself.

Among his documented transgressions, he signed off on some of the allegedly illegal budget measures that led to the impeachment drive against Rousseff and has been implicated, though never charged, in several corruption investigations.

The son of Lebanese immigrants, Temer is one of the country’s least popular politicians but has managed to climb his way to the top, in large part by building close relationships with fellow politicians as leader of the large but fractured Brazilian Democratic Movement Party.

Think Frank Underwood.

 

While the 75-year-old’s reserved manner has earned him the nickname of “butler,” he is not without flash. His wife is 32-year-old Marcela Temer, an ex-beauty pageant contestant who tattooed Temer’s name on her neck.

 

Allies, such as former Rio de Janeiro Gov. Wellington Moreira Franco, say Temer’s ability to cut deals will help him unify the country at a time when deep polarization has exacerbated the worst crisis to face Latin America’s largest economy since the 1930s.  “Michel is a man of common sense,” Franco told The Associated Press. “He never wanted to be in this position, but he feels someone needs to end the division soon.

We wonder how much it cost Temer to buy this “admission” from his friend.

Meanwhile critics, and there are many, say Temer is anything but a statesman simply looking out for the future of his nation.

“Captain of the coup,” former Finance Minister Ciro Gomes called Temer, using the term used by Rousseff to describe the impeachment process.”

If (Temer) becomes president, I will campaign for his impeachment the next day,” Gomes recently told reporters.

While Rousseff and Temer have long had a frosty relationship, their political alliance formally ruptured last week when Rousseff publicly accused him of plotting against her. Temer has said he won’t address the impeachment matter until the Senate decides.

And amid months of political maneuvering on all sides, one incident involving Temer stands out as bizarre: a 13-minute audio of him rehearsing an inauguration speech days before the impeachment vote. Temer said it was “accidently leaked,” though detractors say more likely it was done to gauge public sentiment.

As president, Temer would inherit a long list of problems. The economy is expected to contract by nearly 4 percent, the Zika virus has ravaged poor northeastern states, and sharp budget cuts combined with political instability are fueling worries about the country’s readiness to host the Summer Olympics in August. Just earlier this week, a famous Brazilian football player urged people not to come to the Olympics or risk bodily harm, even death.

* * *

Whether the Rio Olympics in just over two months are a disaster or not, however, one thing is certain – for months, the business community has been hoping that Temer would take over from the leftist Rousseff. But whether he’ll have the ability or appetite to take on major reforms, such as overhauling a costly pension system, is unclear.

“I think that Temer is not going to be able to govern if he assumes the presidency,” said Jandira Feghali, a Rousseff ally and Brazilian Communist Party representative, arguing that Temer won’t have legitimacy without a presidential election.

Like some 60 percent of Congress’ 594 members, Temer faces allegations of corruption, including in the massive kickback scheme at the state oil company Petrobras. In a recent plea bargain by a key senator, Temer was accused of supporting one of the company’s former directors involved in overpricing contracts for bribes. Investigators suspect the payments went to Temer and his party.

The vice president has also been accused of involvement in an illegal ethanol-purchasing scheme and of being on a list of secret payments made by constructor Camargo Correa, presumably for contract favors. Temer has denied wrongdoing.

As an elected official, he enjoys a high level of immunity; only the country’s highest court can decide to try him. A respected constitutional scholar, Temer got into politics in the 1960s. His first government job was in the education department for Sao Paulo, Brazil’s most populous state.

He worked during the administration of Gov. Adhemar de Barros, whose management style was described by many Sao Paulo residents as “steal but get things done.”

But Temer’s biggest problem is that at the end of the day, he is just as unpopular as Rousseff, if not more:

In 2006, the last time he ran for an election on his own, Temer was one of the least voted-for deputies from Sao Paulo. Still, because his party was crucial in the governing coalition, he became speaker a third time in 2009 and was Rousseff’s running mate in the 2010 and again in 2014.

 

Only 2 percent of Brazilians said they’d vote for him for president in 2018, according to a recent nationwide poll by Datafolha. The April 9 poll also found that 58 percent of Brazilians would want him impeached if he takes over for Rousseff. The margin of error was 2 percentage points, and 2,779 people were interviewed in 170 cities.

 

“If he goes out and says he won’t run for re-election, he’ll be given the status of a statesman,” said Marcos Troyjo, a professor at Columbia University’s School of International & Public Affairs. “That would give his government a grace period.”

So has the market once again gotten ahead of itself by soaring nearly 50% since the start of the year on hopes that Temer will “fix” things? Absolutely. Which is why there may have never been a clearer case of selling the news.

And while we wait for the algos to realize just how truly devastated Brazil’s depressionary economy is, here are another gratuitous photo of Michel “Butler” Temer’s 32-year-old wife, Marcela.

 

… and her sister, Fernanda Tedeshi, captured here during her time as a Playboy model.

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Additional Evidence Emerges That U.S. Government Officials Intentionally Whitewashed the Saudi Role in 9/11

Screen Shot 2016-05-12 at 10.48.40 AM

Rep. Brad Sherman (D-Calif.) is criticizing the Obama administration as having tried to strong-arm a former senator who is pushing to declassify 28 pages of the 9/11 report dealing with Saudi Arabia.

He recounted how Rep. Gwen Graham (D-Fla.) and her father, former Senate Intelligence Committee Chairman Bob Graham (D-Fla.), were detained by the FBI in 2011 at Dulles International Airport outside Washington. The message from the agents, according to the Grahams, was to quit pushing for declassification of the 28 pages.

The FBI “took a former senator, a former governor, grabbed him in an airport, hustled him into a room with armed force to try to intimidate him into taking different positions on issues of public policy and important national policy, and the fact that he wasn’t intimidated because he was calm doesn’t show that they weren’t trying to intimidate him,” Sherman said in an interview with The Hill’s Molly K. Hooper.

– From last week’s post: Disturbing Claim – FBI Interrogated Former Senator for Wanting “28 Pages” Declassified

Critics of my repeated focus on highlighting the Saudi role in 9/11 claim that anything revealed in the “28 pages” will be marginal at best, leaving many of the most important questions surrounding the attacks shrouded in secrecy. I agree. What I disagree with is the conclusion that aggressively pursuing a declassification of the 28 pages is therefore meaningless.

There’s almost always a underlying reason behind my relentless pursuit of certain topics. One of the key purposes of this website is to chronicle the myriad examples of U.S. government lies, corruption and criminality on behalf of a handful of insiders at the expense of the citizenry. This is because I agree wholeheartedly with Thomas Jefferson when he wrote to Charles Yancey:

If a nation expects to be ignorant & free, in a state of civilization, it expects what never was & never will be. The functionaries of every government have propensities to command at will the liberty & property of their constituents. There is no safe deposit for these but with the people themselves; nor can they be safe with them without information. Where the press is free and every man able to read, all is safe.

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Bank C&I NPLs Are Rapidly Increasing

Nonperforming Loans (NPLs) for U.S. Banks’ Commercial & Industrial (C&I) loan portfolio is rapidly deteriorating climbing $9.32 Billion over 2015 Q4 figures.

Commercial & Industrial NPLs

While worsening C&I NPLs are concerning, it is the acceleration in the deterioration that should be alarming. The industry NPL% has leapt to 1.24% which is well above last quarter’s 0.78%.

U.S. Banks Commercial & Industrial NPL %

The jump from 0.78% in 2015 Q4 to 1.24% in 2016 Q1 mimics the 1.17% to 1.69% seen in 2008 Q3 to Q4.

What’s even more amazing is that the 1.24% would really be 1.28% if C&I lending had stayed flat. The jump to 1.24% was actually lower than it would have been due to the additional $71.168 Billion in additional C&I lending over last quarter.

Yes, at a time when C&I NPLs are increasing U.S. Banks added another $71.168 Billion of net additional C&I lending in the quarter. The $71.168 Billion increase (3.86% quarterly growth) was the second highest in history (2007 Q3 had $89.98 Billion).

As a reminder, we had considerable C&I loan growth from 2003 Q1 to 2008 Q3 as well. In 2003 Q1 C&I stood at $952.13 Billion. Just less than 6 years later it was $1.51 Trillion – growing $556.95 Billion (58.50%). Yes, very similar to the most recent growth.

Since 2010 Q2 C&I lending has grown from $1.16 Trillion to $1.91 Trillion – $748.78 Billion of growth in 6 years.

Banks Commercial & Industrial NPL %

Note how the growth was slower in the 2010 time frame and then began to accelerate in 2011. If we look at just the past 5 years the growth was $711.38 Billion (59.19%). To put this in perspective the other 12 large bank portfolios have collectively grown just $499.55 Billion.

5 Year Loan Growth in Billions (2011 Q1 to 2016 Q1):

Since 2011 Q1 C&I lending has increased $711.38 Billion for a 59% growth rate (light green text). Not only has C&I outpaced the other 12 portfolios in aggregate it has done so by more than $211 Billion.

Other high flyers have been Multifamily at 66%, Auto at 49% and Farmland at 36%.

 


I would caution that we’re beyond the “it’s Energy related” part of the commentary. C&I delinquencies are rising in most geographies and at nearly all big banks.

The following table lists the Top 15 C&I lenders top to bottom. At the top is Bank of America with $239.58 Billion in C&I (at an average Yield of 2.97%) and Bank of Montreal is #15 with $24.88 Billion in C&I.

C&I NPL % Heat Map Top 15 C&I Lenders

Wells Fargo has seen it’s C&I NPL % climb from 0.55% in 2015 Q2 to 1.52% in 2016 Q1 – NPL $ climbed $1.46 Billion in the quarter.

Take a gander at Capital One jumping from 2.24% to 3.98%. Even SunTrust which had been performing exceptionally well has seen rates go from 0.20% 3 quarters ago to 1.09% – a fivefold jump in the rate in 6 months.

The two standouts in the group are Toronto-Dominion and Bank of Montreal. Both banks have seen NPL % rates decline over the past year.

C&I NPLs are getting worse and are likely to climb higher in the next few quarters. We can’t add near $750 Billion in new lending in 6 years and not expect higher subsequent NPLs.

 


 

Commercial & Industrial NPLs:  Wells Fargo

 

Commercial & Industrial NPLs:  Citigroup

 

Commercial & Industrial NPLs:  SunTrust

 

Commercial & Industrial NPLs:  Capital One

 

Commercial & Industrial NPLs:  Comerica

 

Commercial & Industrial NPLs:  BOKF

 


 

Now, many people will say “hey, the banks are plenty well reserved for this. Well, not really. Let’s take a quick look at BOKF’s Coverage Ratio which compares their Loan Loss Reserves (ALLL) against their NPLs:

BOKF Coverage Ratio:

Just a few quarter’s ago BOKF had $2.39 of reserves for every $1 of NPLs. A very fast increase of $144.78 Million in NPLs in two quarters took the ratio down to $1.01. While a $1.01 is not bad I think it’s a good bet the ratio will fall even further in the next few quarters.

To paraphrase Mike Tyson – “everyone has a Loan Loss Reserve plan until they get hit in the face with rapidly increasing NPLs.” Banks are well reserved until they aren’t.

The glory days of declining Bank NPLs are behind us. The good news is that we’re not seeing other Loan Portfolios begin to have NPL stress. That said, it would be shocking if we don’t start to see some spillover in other portfolios.

For the first time in 5 years Commercial RE NPLs increased over the prior quarter.

Commercial RE NPLs:

The $162.23 million QonQ increase is not definitive proof that CRE is going to fall apart, however, it does indicate that we might have hit a bottom in NPLs for this cycle. To think C&I NPL stress will not lead to other issues would be an optimistic yet probably naive assumption. 


Data Source: all data is from BankRegData which collects Call Reports from the FDIC and makes it simple to analyze bank trends.

 

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Destroying Fed Rosengren’s Propaganda (in 1 Simple Chart)

Boston Fed’s Eric Rosengren spewed forth more attempts to define the narrative as an improving one in which The Fed hikes rates to “save the world.” Unfortunately, almost every word he uttered is pure propaganda and utterly false based on his “guess” – which has been so spot on for years.

First he utters…

  • *ROSENGREN: LIKELIHOOD OF FED RATE HIKES HIGHER THAN MKT PRICING

Seems The Fed knows so much better than the ‘market’…

Then he proclaimed…

  • *ROSENGREN: MARKET REMAINS TOO PESSIMISTIC ABOUT U.S. ECONOMY

Does this look like a market that is “too pessimistic” about the US economy?

 

Seems like bonds had it right all along…

 

Credibility just went negative.

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9/11 Commissioner Breaks Ranks, Says Saudi Government Officials Implicated By Secret “28 Pages”

Nothing to see here.John Lehman, a former Reagan administration Secretary of the Navy and one of five Republican commissioners on the 11-member 9/11 Commission, has broken ranks by plainly asserting his belief that a number of Saudi government officials helped provide a support system for the 19 hijackers. 

Lehman told The Guardian that the secret “28 pages” of a joint congressional inquiry into 9/11 contain “an awful lot of participation by Saudi individuals in supporting the hijackers, and some of those people worked in the Saudi government.” He added that the commission’s chairman, former Gov. Tom Kean (R-N.J.), and vice-chairman, former Rep. Lee Hamilton (D-Ind.), had engaged in a “game of semantics” when they recently asserted that only one Saudi government worker had been “implicated” in the attacks.

In Lehman’s view, “There was an awful lot of circumstantial evidence” and he regretted that many, including the Saudi government, read the commission’s final report as “an exoneration of Saudi Arabia.” Senior Saudi government officials and the royal family were not implicated in the attacks, according to Lehman, but he said “at least five” Saudi officials were “strongly suspected” of supporting the 9/11 terrorists. 

One 9/11 commissioner who requested anonymity told The Guardian of heated arguments among commissioners and staffers over how the intelligence pertaining to any Saudi connection with the attacks appeared in the final report:

In fact, there were repeated showdowns, especially over the Saudis, between the staff and the commission’s hard-charging executive director, University of Virginia historian Philip Zelikow, who joined the Bush administration as a senior adviser to secretary of state Condoleezza Rice after leaving the commission. The staff included experienced investigators from the FBI, the Department of Justice and the CIA, as well as the congressional staffer who was the principal author of the 28 pages.

Zelikow fired a staffer, who had repeatedly protested over limitations on the Saudi investigation, after she obtained a copy of the 28 pages outside of official channels. Other staffers described an angry scene late one night, near the end of the investigation, when two investigators who focused on the Saudi allegations were forced to rush back to the commission’s offices after midnight after learning to their astonishment that some of the most compelling evidence about a Saudi tie to 9/11 was being edited out of the report or was being pushed to tiny, barely readable footnotes and endnotes. The staff protests were mostly overruled.

Unsurprisingly, Zelikow remains staunchly opposed to releasing the “28 pages” now, having recently told NBC News that the classified pages “provide no further evidence” not already in the public domain and that their declassification would “only make the red herring grow redder.”

Former Sen. Bob Graham (D-Fl.), who was part of the congressional inquiry which produced the “28 pages” and who has long advocated for their release, wrote in a Washington Post op-ed yesterday that the “the American people [have] all the authority and capability needed to review the 28 pages and determine the truth.” There are increasing bipartisan efforts in Congress to “require declassification” of the pages within 60 days. 

President Obama has been non-committal about whether or not he would order the release of the pages, and he has threatened to veto a proposed bill which would strip foreign officials of immunity from lawsuits related to terrorism. 

According to White House Press Secretary Josh Earnest, President Obama hasn’t even read the “28 pages.” 

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