*** Citizenship Is Not A Spectator Sport *** Denninger Market Ticker

Citizenship Is Not A Spectator Sport

Ok, folks, here's another "Come To Jesus" Ticker.

Last night we saw the mother and father of all implosions - and attempted "sticksaves" and "power grabs", all at once.

First, the implosions.

Lehman Brothers has gone down and Bank America has forcibly swallowed Merrill Lynch. Forced by The Fed, one assumes - they surmised (correctly) that come Monday shorts would attack Merrill immediately and in force, thrusting them to the bottom of the pool if they did not first insure that they couldn't be attacked. So a deal was brokered, and now we have gone from five investment banks to two, with the count decreasing by fifty percent in one day.

That's right - Morgan Stanley and Goldman Sachs are all that's left, and they won't last long. Say good-bye to the last pieces of the Depression-era legislation that prohibited the co-mingling of investment and commercial banking, the hard way.

ALL investment and commercial banking is now in the hands of a very small number of institutions, with the key players being JP Morgan and Bank of America.

This is not a good thing folks. Not at all. At the same time The Fed orchestrated this they also announced that the "23A Exemptions" that limit to 10% the "passthrough" financing to affiliates was being "temporarily suspended" on a blanket basis.

In addition, The Fed has announced that it will take equities as collateral for loans. "Equities" is a fancy name for stocks.

That's right - for the first time in history, now banks can take stocks to the discount window. Maybe even their own stocks.

The Fed has gone from taking only the highest-quality securities - "AAA" rated debt instruments - to taking everything up to and including the most dangerous (common stock) all at once!

Now I may be blind but I've read The Federal Reserve Act multiple times and nowhere do I see where equities can be taken to the window (or anywhere else for that matter) for Fed Credit.

If they intend to actually do this, its quite clear they don't care what the law says. They're going to do it anyway, and their precedent is that you sat back and allowed them to take equity when they bailed out Bear Stearns, and said nothing! They will do anything they want by citing "exigent circumstances" and claim blanket authority.

What's worse, this effectively makes The Fed a margin lender on the equity markets! You think they don't have a reason to interfere in the market eh? Oh boy, now they have billions of reasons, all of them sitting on their balance sheet! Fair and open markets? Bah!

Note carefully folks - this effectively makes The Fed LONG (that is, a "buyer") of STOCKS.

What's even better is that they don't eat their own losses if there are any - they're yours!

That's because The Federal Reserve Act says that the profits (or losses) from The Fed flow through to the Treasury (after operating expenses) which means that now, suddenly The Federal Government is potentially directly exposed to losses in the stock market!

Now it has always been true that The Government "loses" when the market goes to hell as it gets less in the way of tax receipts. But that's different than suffering an actual capital loss - and that is now possible.

You think you've seen "intervention" in the stock market in the past? Bah! You've seen nothing yet; now we have The Fed going entirely outside of the boundaries of The Federal Reserve Act and literally making things up as they go along.

Over the last 20 years you have been repeatedly lied to, bamboozled and scammed by those "in power", including the members of both political parties, The Fed, and Treasury.

Who has eaten the harm to your standard of living as your cost of food and fuel has doubled over the last couple of years? You have.

Who has taken the hit as our job base has gone overseas, so China can buy a trillion dollars worth of our debt to artificially suppress their currency, thereby making it uneconomic to manufacture DVD players and Cell Phones here, and costing us millions of high-paying jobs? You have.

Who took the damage when you were conned into buying houses with Option ARMs, with Alan Greenspan himself telling people that Adjustable Rate mortgages were the "best option" for many people - with rates at the bottom? You did.

Who took the hit from the credit bubble when Alan Greenspan intentionally blew liquidity into the system and held it there for an extended period of time, keeping interest rates at 1%, thereby igniting the housing and credit bubble and leading directly to this mess? You did.

Who has found that its nearly impossible to have a single-earner household with children nowdays, where one parent stays home with the kids while the other is a breadwinner, as a direct consequence of rapidly-rising costs for food, energy and housing? You have.

Who has seen medical and educational costs skyrocket at 3x the rate of inflation, fueled by an intentionally-blown credit bubble such that your son or daughter will graduate with $100,000 of debt, and you can't buy a medical procedure at a reasonable cost nor afford individual insurance? You have.

Who, all-in, has seen their standard of living stagnate and even reverse over the last few years, as all of these elements together conspire to destroy your earnings capacity and wealth? You have.

Was any of this a mistake, an accident, or "unexpected consequences"?

No - absolutely every bit of it was an intentional act by people in power in The United States - Representatives, Senators, Treasury officials and The Fed.

All of it.

The credit bubble was not a mistake folks. It was an intentional act undertaken for the explicit purpose of getting you to buy things you cannot afford at prices that are radically jacked up from where they should be. It has been a raw attempt to appeal to your "desire for more", without regard to whether you can actually afford any of it. It was intended to and did operate as a monstrous transfer of wealth from you to a handful of bankers in New York!

You have been led around by the nose to think your kid needs an Ipod, you need a cruise vacation, one Lexus isn't enough (you must have two) and you "deserve" a boat, an RV and a vacation home in the Hamptons - no matter how far in debt you must go to get it.

You have been told repeatedly by bankers and lenders that "you can afford it" when nothing of the sort is in fact true. Being naive and uneducated, you have believed these people -and been repeatedly shorn like sheep.

For over a year I have blogged in an impassioned tone, asking, even pleading for America to wake up, smell the coffee (or in this case the rancid stench of bad debt) and raise hell with their elected representatives. To tell them that this crap is unacceptable and must stop. To demand that these elected officials represent us, not greedy investment and commercial bankers, not to mention turning a blind eye to blatant usurpations of power by The Fed that extend beyond the clearly-documented powers in The Federal Reserve Act.

What has America - both the population and our elected representatives - done?

In the case of our elected representatives, nothing.

In the case of the population, we've managed to muster forty protesters.

Yeah.

Forty.

Folks, you are literally having everything we have worked for and defended over the last 230 years destroyed before your eyes.

Our free market.

Our banking system.

Our representative government.

It is all being destroyed piece-by-piece.

Your ability to earn a living has come under attack, your savings have been systematically robbed and your home's equity has been stripped off and handed to a bunch of greedy bankers who have bought yachts and vacation homes in The Hamptons. You can no longer buy health care on the open market with your free cash flow and your kid can't afford to go to college.

You have sat back and let all this happen over the last 20 years; this is all - every bit of it - happening because every single day you give your explicit consent!

Follks, we continue to cross more and more lines on a daily basis - lines that were supposed to not be possible to cross. Federal Agencies like The Federal Reserve have been allowed to intentionally blow huge credit bubbles in our economy, effectively destroying your ability to accumulate savings and leading the population to take on more and more debt. At the same time these credit bubbles have led to insane price inflation in essential goods and services such as housing, food, energy, medicine and education.

Now we have The Fed intentionally interfering in the stock market by making margin loans against stocks while able to shove off any losses they take on you!

This morning, as I write this, the DOW futures are down over 300 points.

Are you going to allow these same bankers, appointed officials and elected representatives to destroy your 401k, 403b and/or IRA as well?

How far does this have to go before you say "enough!" and put a stop to it? How long before you show up with a few hundred - or thousand - of your friends and neighbors, angry letters and demands in hand?

We have an election coming in November. Has this usurpation been the focus of either candidate?

No, and it won't be, until and unless you force it upon them.

That opportunity exists here and now - but if we, the people, refuse to take it, I don't want to hear complaints one, two, three or four years from now.

The clear opportunity - and perhaps the last opportunity - to stop the destruction of our way of life not only for ourselves but for our children and grandchildren is right under your nose, with just a few weeks before you go to the polls.

Wake up America.

THIS IS, QUITE POSSIBLY, YOUR LAST CHANCE.