America

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You Know The Banking System Is Unsound When…

goldBy Mike “Mish” Shedlock

1. Paulson appears on Face The Nation and says “Our banking system is a safe and a sound one.” If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it.

2. Paulson says the list of troubled banks “is a very manageable situation”. The reality is there are 90 banks on the list of problem banks. Indymac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?

3. In a Northern Rock moment, depositors at Indymac pull out their cash. Police had to be called in to ensure order.

4. Washington Mutual (WM), another troubled bank, refused to honor Indymac cashier’s checks. The irony is it makes no sense for customers to pull insured deposits out of Indymac after it went into receivership. The second irony is the last place one would want to put those funds would be Washington Mutual. Eventually Washington Mutual decided it would take those checks but with an 8 week hold. Will Washington Mutual even be around 8 weeks from now?

5. Paulson asked for “Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)” just days after he said “Financial Institutions Must Be Allowed To Fail”. Obviously Paulson is reporting from the 5th dimension. In some alternate universe, his statements just might make sense.

6. Former Fed Governor William Poole says “Fannie Mae, Freddie Losses Makes Them Insolvent”.

7. Paulson says Fannie Mae and Freddie Mac are “essential” because they represent the only “functioning” part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only “functioning” part of the mortgage market is insolvent?

8. Bernanke testified before Congress on monetary policy but did not comment on either money supply or interest rates. The word “money” did not appear at all in his testimony. The only time “interest rate” appeared in his testimony was in relation to consumer credit card rates. How can you have any reasonable economic policy when the Fed chairman is scared half to death to discuss interest rates and money supply?

9. The SEC issued a protective order to protect those most responsible for naked short selling. As long as the investment banks and brokers were making money engaging in naked shorting of stocks, there was no problem. However, when the bears began using the tactic against the big financials, it became time to selectively enforce the existing regulation.

eorder1934-28810. The Fed takes emergency actions twice during options expirations week in regards to the discount window and rate cuts.

11. The SEC takes emergency action during options expirations week regarding short sales.

12. The Fed has implemented an alphabet soup of pawn shop lending facilities whereby the Fed accepts garbage as collateral in exchange for treasuries. Those new Fed lending facilities are called the Term Auction Facility (TAF), the Term Security Lending Facility (TSLF), and the Primary Dealer Credit Facility (PDCF).

13. Citigroup (C), Lehman (LEH), Morgan Stanley(MS), Goldman Sachs (GS) and Merrill Lynch (MER) all have a huge percentage of level 3 assets. Level 3 assets are commonly known as “marked to fantasy” assets. In other words, the value of those assets is significantly if not ridiculously overvalued in comparison to what those assets would fetch on the open market. It is debatable if any of the above firms survive in their present form. Some may not survive in any form.

14. Bernanke openly solicits private equity firms to invest in banks. Is this even close to a remotely normal action for Fed chairman to take?

15. Bear Stearns was taken over by JPMorgan (JPM) days after insuring investors it had plenty of capital. Fears are high that Lehman will suffer the same fate. Worse yet, the Fed had to guarantee the shotgun marriage between Bear Stearns and JP Morgan by providing as much as $30 billion in capital. JPMorgan is responsible for only the first 1/2 billion. Taxpayers are on the hook for all the rest. Was this a legal action for the Fed to take? Does the Fed care?

16. Citigroup needed a cash injection from Abu Dhabi and a second one elsewhere. Then after announcing it would not need more capital is raising still more. The latest news is Citigroup will sell $500 billion in assets. To who? At what price?

17. Merrill Lynch raised $6.6 billion in capital from Kuwait Mizuho, announced it did not need to raise more capital, then raised more capital a few week later.

18. Morgan Stanley sold a 9.9% equity stake to China International Corp. CEO John Mack compensated by not taking his bonus. How generous. Morgan Stanley fell from $72 to $37. Did CEO John Mack deserve a paycheck at all?

19. Bank of America (BAC) agreed to take over Countywide Financial (CFC) and twice announced Countrywide will add profits to B of A. Inquiring minds were asking “How the hell can Countrywide add to Bank of America earnings?” Here’s how. Bank of America just announced it will not guarantee $38.1 billion in Countrywide debt. Questions over “Fraudulent Conveyance” are now surfacing.

20. Washington Mutual agreed to a death spiral cash infusion of $7 billion accepting an offer at $7.85 when the stock was over $13 at the time. Washington Mutual has since fallen in waterfall fashion from $40 and is now trading near $5.00 after a huge rally.

21. Shares of Ambac (ABK) fell from $90 to $2.50. Shared of MBIA (MBI) fell from $70 to $5. Sadly, the top three rating agencies kept their rating on the pair at AAA nearly all the way down. No one can believe anything the government sponsored rating agencies say.

22. In a panic set of moves, the Fed slashed interest rates from 5.25% to 2%. This was the fastest, steepest drop on record. Ironically, the Fed chairman spoke of inflation concerns the entire drop down. Bernanke clearly cannot tell the truth. He does not have to. Actions speak louder than words.

23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits.

24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.

25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.

What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.

Source: Global Economic Analyis

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U.S. Federal and State Drug Laws

Drug Charges – An Overview

Drug charges cover a broad range of offenses, from the less severe, such as simple possession of a small amount of certain drugs, to the more serious, such as participation in an ongoing drug-related criminal enterprise or manufacturing and distributing drugs. Even minor charges can be terrifying, however, and carry the risk of serious penalties upon conviction; the more serious charges, of course, can give rise to even graver consequences. An experienced criminal defense attorney can take some of the terror out of drug charges by answering questions and guiding an accused offender through the complex legal maze that awaits.

Federal and State Drug Laws

Although in earlier times drugs were an accepted part of many religious rituals and were lauded for their medicinal effects, society’s view of drug use changed and the first narcotics laws began to appear in the early 1900s. In 1970, the federal government passed the Drug Abuse Prevention and Control Act, which codified federal drug law into a uniform system. The Act classifies drugs into five categories, listed in schedules, and establishes regulatory requirements and penalties for the misuse of the drugs on each schedule. The Act also allows the United States Attorney General to add drugs to the schedules as necessary. Most states have drug laws that mirror the federal act, but the penalties may be less harsh and more flexible under state sentencing schemes than under the federal sentencing guidelines. A conviction of simple possession, for example may result in a sentence under state law of drug treatment rather than jail time, and probation may be available to first-time offenders for even the more serious crimes.

The most severe legal restrictions and penalties involve Schedule I and II drugs as set forth in the federal law. Schedule I drugs are those with a high potential for abuse, with an absence of any medical use, and that are dangerous to the user even under medical supervision. The most well known of these drugs are heroin, LSD, mescaline, marijuana, and peyote. Schedule II drugs have a high potential for abuse and a high potential for severe psychological or physical dependency, but a currently accepted medical use. Schedule II drugs include opium, cocaine, methadone, amphetamines, and methamphetamines. Schedule III drugs, by comparison have less potential for abuse than Schedule II drugs, a potential for moderate psychological or physical dependency, and an accepted medical use. The most well known Schedule III drug is nalline, which is used to detect narcotic use. Schedule IV drugs have less potential for abuse than Schedule III drugs, they have a limited potential for dependency, and they are accepted in medical treatment. These drugs include tranquilizers, meprobamate, chloral hydrate, most drugs that cause sleep, and sedatives. Schedule V drugs, which have a low potential for abuse, limited risk for dependency, and accepted medical uses, include drugs with small amounts of codeine or other narcotics in them.

Drug-Related Crimes and Penalties

The federal sentencing guidelines begin with forty-three base offense levels for drug charges and add or subtract a few levels depending on certain specified criteria. The higher the offense level, the harsher the sentence. The base offense level under the federal guidelines differs for different drugs and for different amounts of the same drug. For instance, if the conviction is for the crime of manufacturing 300 kilograms of heroin, the base offense level is forty-two. If the conviction is for manufacturing 300 kilograms of cocaine, the base offense level is thirty-eight. Crack is a form of cocaine and is listed on the same schedule of controlled substances, but the quantity of crack needed to impose a certain sentence is much less than the quantity of powdered cocaine. A person convicted of the crime of delivering five grams of crack will receive a sentence in the federal system of five to forty years, for example, whereas to receive that same sentence on a cocaine charge, a person would have to be convicted of delivering 500 grams of powdered cocaine. It is essential for an accused to be represented by attorneys who have experience navigating these sentencing issues.

The crime of “simple possession” requires that the offender knowingly and intentionally possess a scheduled drug without a valid prescription. The government must prove that the offender knew the drug was a controlled substance and that he or she had either actual possession of it or other control over it, either alone or with another.

Manufacturing, delivering, or possessing with intent to deliver a controlled substance is a crime with escalating penalties depending on the drug involved, the quantity of the drug, and the offender’s prior record. For example, a first offender convicted of possessing with intent to deliver 100 grams to five kilograms of heroin will receive a mandatory minimum sentence of five years in prison, but possibly as many as forty years. Three crimes-distributing controlled substances to persons under twenty-one years of age, distributing controlled substances near a school, and causing persons under age eighteen to violate drug laws-are penalty-enhancement crimes for which the sentence is double or triple what it would otherwise be for distributing that particular amount and type of drug under other circumstances.

The offense of “continuing criminal enterprise” is charged when the defendant commits a felony drug violation as part of a continuing enterprise or scheme with five or more individuals, and from which substantial income is derived. The penalty is twenty years to life in prison, or even the death penalty if the offender intentionally kills another in the course of the enterprise.

Conclusion

Drug crimes carry harsh penalties, particularly under the federal law. If you have been charged with a drug-related crime, you could be facing time in prison-a frightening thought for most people. If your future is on the line because of a drug charge, do not hesitate to call an experienced criminal defense attorney, who will put his or her skill and knowledge to work for you at once.

Source: Brucar and Yetter P.C.

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3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation – 25 Times More Than 1995 Estimate | USGS

North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation.

A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency’s 1995 estimate of 151 million barrels of oil.

Technically recoverable oil resources are those producible using currently available technology and industry practices. USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources.

New geologic models applied to the Bakken Formation, advances in drilling and production technologies, and recent oil discoveries have resulted in these substantially larger technically recoverable oil volumes. About 105 million barrels of oil were produced from the Bakken Formation by the end of 2007.

The USGS Bakken study was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocol as required by the Energy Policy and Conservation Act of 2000.

The Bakken Formation estimate is larger than all other current USGS oil assessments of the lower 48 states and is the largest “continuous” oil accumulation ever assessed by the USGS. A “continuous” oil accumulation means that the oil resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences. The next largest “continuous” oil accumulation in the U.S. is in the Austin Chalk of Texas and Louisiana, with an undiscovered estimate of 1.0 billions of barrels of technically recoverable oil. Read more…

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Five Reasons You Don’t Owe Income Tax, Dammit! | Reason

By Brian Doherty

Here are some of the core arguments against the legality of the income tax one finds in the tax honesty movement. Devotees probably would regard them as oversimplifications. This is certainly not an all-inclusive list.

1) The IRS declares in various documents that the income tax is “voluntary.” And in Flora v. U.S. (1960), the Supreme Court announced, “Our system of taxation is based upon voluntary assessment and payment.”

2) In Brushaber v. Union Pacific (1916), the Supreme Court declared that “the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation” is “erroneous,” and thus the 16th Amendment did not give Congress any taxing powers it did not already have. Hence, an unapportioned direct tax such as the income tax still cannot be legal. (Most mainstream readings of this extremely hard-to-follow decision say the Court meant Congress always had the power to levy an income tax, and that it was merely the question whether it should have to be apportioned that was at issue.)

3) Income, for the purposes of the tax code, should not be understood in any “common sense” way but only as defined by the Supreme Court. The Supreme Court, in Merchant’s Loan and Trust Company v. Smietanka (1921), defined it as having the same meaning as in the Corporation Excise Tax of 1909-and as Irwin Schiff has written, “nothing that was received by private persons was taxable as ‘income’ under that Act.” Income is defined as “gain derived…from labor” in a previous Supreme Court decision, Stratton’s Independence v. Howbert (1913).

4) Title 26 of the U.S. Code, in which tax-related statutes are found, is inherently “void for vagueness” because it lacks precise definitions of such terms as state, United States, employee, and person. Again, “common sense” definitions aren’t good enough. (Many tax honesty types interpret the use of the word includes in the tax code as properly meaning, “is limited to.”)

5) According to the tax-honesty reading of U.S. Code 26, Section 861, only income from foreigners or from overseas activity appears to actually be subject to the income tax.

6) The IRS declares in various documents that the income tax is “voluntary.” And in Flora v. U.S. (1960), the Supreme Court announced, “Our system of taxation is based upon voluntary assessment and payment.”

7) In Brushaber v. Union Pacific (1916), the Supreme Court declared that “the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation” is “erroneous,” and thus the 16th Amendment did not give Congress any taxing powers it did not already have. Hence, an unapportioned direct tax such as the income tax still cannot be legal. (Most mainstream readings of this extremely hard-to-follow decision say the Court meant Congress always had the power to levy an income tax, and that it was merely the question whether it should have to be apportioned that was at issue.)

8) Income, for the purposes of the tax code, should not be understood in any “common sense” way but only as defined by the Supreme Court. The Supreme Court, in Merchant’s Loan and Trust Company v. Smietanka (1921), defined it as having the same meaning as in the Corporation Excise Tax of 1909-and as Irwin Schiff has written, “nothing that was received by private persons was taxable as ‘income’ under that Act.” Income is defined as “gain derived…from labor” in a previous Supreme Court decision, Stratton’s Independence v. Howbert (1913).

9) Title 26 of the U.S. Code, in which tax-related statutes are found, is inherently “void for vagueness” because it lacks precise definitions of such terms as state, United States, employee, and person. Again, “common sense” definitions aren’t good enough. (Many tax honesty types interpret the use of the word includes in the tax code as properly meaning, “is limited to.”)

10) According to the tax-honesty reading of U.S. Code 26, Section 861, only income from foreigners or from overseas activity appears to actually be subject to the income tax.

Source: Reason

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Johnny Liberty’s “Are You Sovereign” Presentation | Granada Forum (1995) | YouTube Videos

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