patrick.net

Up until around 1930, most felons were routinely sterilized upon committment. A little known fact is originally castration was the method used, until the vascectomy operation was invented by a prison doctor as a humane alternative to castration.

The case Skinner v. Oklahoma did NOT hold felon sterilization per se unconstitutional. It merely said that Okalahomas exception for white-collar criminals was a violation of equal protection.

Regarding jailing deadbeat parents, take a look at this:

http://en.wikipedia.org/wiki/Debtors_prison

Quote:

In 1833 the United States reduced the practice of imprisonment for debts at the federal level. Most states followed suit. It is still possible, however, to be incarcerated for debt: debts of fraud, child-support, alimony, or release fines can land a citizen in jail or prison, or prevent one’s release.

Prominent Americans who spent time in debtors' prison include inventor Charles Goodyear, and Robert Morris, a signatory of the United States Declaration of Independence.

Unquote.

So it appears that debtors prison, apart from fraud, now is reserved for only the vilest types of criminals (sarcasm intended): Those who did not pay their child support or (ahem) alimony. Note how not paying taxes is not included on the list.

I can't believe that I am the only one here that is more than a little bit concerned that "deadbeat dads" and "deadbeat ex-husbands that got no-fault-divorced upon" are the ONLY classes of human beings that can still be put in debtor's prison. FBs, homedebtors, credit card mavens, tax evaders and other types of deadbeats need not apply.

I think that is food for thought.

DennisN,

what do you mean by castration? You mean making the felons eunichs before vasectomy was invented?

The right to breed is the ultimate competition among men, and that's why I believe that we should not subsidize each other's breeding effort, or results of breeding effort. Let's all duke it out and superior genes should win. However, having sex is god-given right, so castration is a bit harsh.

I am all for bringing back the practice of sterilization for offenders of certain serious crimes.

justme,

jailing costs way too much money, and once they are jailed, you cannot deploy them for productive use or someone will cry abuse of prison labor.

I think a better alternative is to cut off all social benefits and welfare to deadbeat parents, unless they agree to move into some kind of concentration camp where food will be served and shelter will be free. Now, let's be very careful not to call these places prisons, because we can deploy them for simple assembly jobs - like making toys or whatever, so that we can at least get some productivity out of them.

At some point this planet will reach 'peak population'/peak food production and the government will turn protestors and angry bloggers into Soylent Green to feed the compliant masses.

There are deadbeat dads simply living on a very low income, below the garnisment level, too.

HelloKitty is right, except I see the future more as Ran Prieur envisions, it's just a matter of staying out of Empire's say as it falls, as Jim Kunstler says, the gov't may have trouble answering the phones, much less setting up camps for anyone.

OO,

That *sounds* a little better, but I am not so sure it is different in practice. And does it still only apply to deadbeat parents? Then I am against it. It should apply to all debtors or none.

Note that social benefits and welfare already ARE cut off, through garnishment of wages and benefits.

Not to OO, but in general:

The problem with all these simplistic populistic lets-get-tough-on-social-problem-X "solutions" is that they are discriminary, arbitrary, totalitarian, unevenly enforced, expensive, ripe for abuse and generally do not solve the problem at hand, That is why I am against them.

OO - the US already has a HUGE prison labor industry. Prison labor is probably the largest single producer in the US.

I'd expect us, if we go that way, to end up having different levels, or circles, as Soltzenytsyn describes it, with prisons for the unskilled, out building roads and things, all the way up to prisons for engineers inventing stuff for the gov't.

Prison production was one of the pillars holding the old USSR up. This is a way Ran Prieur and Kunstler may be wrong - if the gov't nationalizes things to the extent that the old USSR did, and most of us end up in prisons of one type or another.

In my own case, I am not allowed to make more than the very bare minimum needed for survival. I will be punished if I add to the GDP of the Empire, so I don't.

I can’t believe that I am the only one here that is more than a little bit concerned that “deadbeat dads” and “deadbeat ex-husbands that got no-fault-divorced upon” are the ONLY classes of human beings that can still be put in debtor’s prison. FBs, homedebtors, credit card mavens, tax evaders and other types of deadbeats need not apply.

Actually, not quite true. Student loans are also non-dischargeable in bankruptcy, and creditors can pretty much garnish, win judgments against and hound the debtor forever. So, in reality, we have 3 classes of de facto "debtor's prison" in the U.S.:

1. student loan debtors (forever)
2. deadbeat dads (until child(ren) reaches 18)
3. deadbeat ex-husbands (until spouse remarries or becomes "self-supporting")

HARM,

Thanks for the taxonomy.

@justme,

Np. And all kidding aside, I am not in favor of the piecemeal erosion of individual bankruptcy protection we have seen over the last ~30 years or so.

Not everyone who ends up in bankruptcy court is a reckless FB or is just trying to ruthlessly "game" the system (disclaimer: I have never filed BK, but know several family members and friends who have). I believe BK should be an avenue of last resort, but it still *should* remain an option for people who would otherwise carry unrepayable debts to the grave.

What's better for society and the economy? Hounding unlucky people to the point where they change their identities, leave the U.S., or simply "drop out" of the system altogether? Or, giving them a (limited) fresh start, and allowing them to work, be productive and rejoin society?

Speaking of "ruthless" bankruptcies and people who "game" the system, how many times has a major U.S. automaker or airline repeatedly declared bankruptcy? How many American companies routinely use BK as a way to force a "renegotiation" with a labor union? Or as a regular "financial planning" tool?

Pot calling the kettle black?

There's a reason BK's in the Constitution. Some kind of "reset" button is necessary in every society.

Changing my ID, leaving the US, or simply dropping out of the system, living "below the radar" are things I'm really looking at. The more I worked and the more I earned, the more miserable I was. I have health ins for the first time in 15 years because I'm in the welfare system now. If I can make it out OK as a street artist or street musician or both, I'll be a hell of a lot happier than I'd be as an overworked, subconsciously suicidal cubicle rat.

Changing ID is about the best for the US economy, leaving the US or dropping out hurt the US economy. For these reasons I favor the second two options - leave the Empire or at least leave it economically.

Ob-english, I realize discriminary is not a good english word. I meant discriminatory, of course.

HARM,

>Pot calling the kettle black?
It certainly could seem that way,

OT.

Remember the unprecedented negative non-borrowed reserve at Fed that every financial blog is talking about?
http://www.federalreserve.gov/releases/h3/Current/

On Feb 8, they came out with an announcement (seemingly someone from the Fed must be reading financial blogs, since MSM never reported this)

February 08, 2008
Recent Declines in Nonborrowed Reserves

The H.3 statistical release indicates that nonborrowed reserves of depository institutions have declined substantially since mid-December to a level that is now negative. This development reflects the provision of a large volume of reserves through the Term Auction Facility (TAF) and has no adverse implications for the availability of reserves to the banking system.

By definition, nonborrowed reserves are equal to total reserves minus borrowed reserves. Borrowed reserves are equal to credit extended through the Federal Reserve's regular discount window programs as well as credit extended through the TAF. To maintain a level of total reserves consistent with the Federal Open Market Committee's target federal funds rate, increases in borrowed reserves must generally be met by a commensurate decrease in nonborrowed reserves, which is accomplished through a reduction in the Federal Reserve's holdings of securities and other assets. The negative level of nonborrowed reserves is an arithmetic result of the fact that TAF borrowings are larger than total reserves.

http://www.federalreserve.gov/feeds/h3.html

There's a Chinese idiom which describes this situation perfectly. Once upon a time, a smart bloke decided to dig a hole at his backyard and store 300 units of silver. After he did so, he was afraid that someone might steal it. Therefore, the smart bloke erected a sign above his digging ground that said: 300 units of silver does not lie beneath. Ever since, Chinese have been describing such an act as, 300 units of silver does not lie beneath.

Uh, why am I in moderation again? Did I divulge something serious about the Fed?

OO,

Probably :-) But I do not have any un-moderation powers, sorry.

I've said for a while that the IRS should be able to follow up on the income stated on a loan application, and should use them as a trigger for audits. The standard mortgage application is a federal form which even has a certification clause where you basically are certifying under civil and criminal penalties that the information is correct.

The link below is the form in PDF from a broker.

http://www.somersetmortgagecorp.com/pdf/valoan.pdf

Specifically on topic, I'm not sure I see any relevance to loan applications and child support. A court can definitely subpoena an application but the information is otherwise confidential.

HelloKitty Says:
February 14th, 2008 at 12:02 pm
"At some point this planet will reach ‘peak population’/peak food production and the government will turn protestors and angry bloggers into Soylent Green to feed the compliant masses."

Penn and Teller on their show Bullshit ridiculed people who believe this, and then literally in the same breath praised genetically engineered food saying if it wasn't for that science, the world only be capable of producing enough food for 2/3rds of the current population.

It's really unfortunate that it seems our government enforcement folks don't have the resources to go after all those who falsified mortgage applications. The problem is simply too large to handle.

It would seem they are going after some of the bigger fish, there will be some fall guys that politicians can hold out as examples of justice and consequence, while most of the real sharks walk free. It's shocking.

Below link is short wash post piece describing current FBI & SEC enforcement efforts. It’s shameful, in my opinion; so many resources are spent chasing phantom "terrorists" that we are left with this.

http://tinyurl.com/ypvv3w

We do need to keep the sheeple in line; we do need deal harshly with those who facilitated the liars and liars themselves at the lowest level. Like IRS random audit sampling, let's run a diff on mortgage apps and 1040's and slap all those folks with a nice criminal record. That's one with a little more consequence than FICO drop. It was a real fraud, committed with intent and malice, with real consequences and real victims. Ours is of course a society without real justice, but here we need some and I have a feeling it will not be coming. Let's redeploy all those donut eating gas guzzling ticket giving loafing first responder heroes at some middle class white boomers instead of pointing them at our ghettos.

To serve and protect? When I see those guys coming I don't feel like they are serving me and I certainly don't feel much protected.

Being behind in child support payments will prevent you from getting a law license in California. See the short list of credential issues here:
www.calsb.org/state/calbar/calbar_generic.jsp?cid=10115&id=3922

Be in compliance with California court ordered child or family support obligations.

OO, thanks for posting the Fed feed. Someone posted that link a week ago and I remember thinking -- hmmmm, this can't be good. I revisited it yesterday and read some of Mish's commentary (continuing to get that sinking feeling in the pit of my stomach).
Fed said:
increases in borrowed reserves must generally be met by a commensurate decrease in nonborrowed reserves, which is accomplished through a reduction in the Federal Reserve’s holdings of securities and other assets, or as I said yesterday "most of the cash that came in the door through Treasury redemptions (which decreased SOMA) went out the door through TAF (and to a lesser extent, with Repos)". But don't worry, its still in the "vault", acting as required reserves for member banks.... and I'm sure we have nothing to worry about, as the collateral is AAA+.

EBGuy,

what I am interested in knowing is the Fed's statement of

"increases in borrowed reserves must generally be met by a commensurate decrease in nonborrowed reserves, which is accomplished through a reduction in the Federal Reserve’s holdings of securities and other assets."

I think the only way of "reduction" is selling. But to who? at what price?

We dont need to enforce ANY mortgage fraud laws.

All we need is NO LONGER have the government guarantee ANY mortgage loans. (possible exception of low balance VA loans)

So if you couldnt stick the loan to a GSE, and the pensions,hedge funds, chinese are no longer buying loans - then what happens? Banks actually scrutinize borrowers, they have to hold thier own loans (gasp!), and they are gonna want 30% down and good income like in 1980.

Once the government gives out 'freebies' by the billion and uses the honor system the fraud starts on day 1. Then you need another anti-fraud government department, then more jails for these people, and a department to liquidate the foreclosed homes or fix them up (hud) it never ends until you wake up speaking French and your family has been bus drivers for the government for genertations (and its considered a great job w/pension and benefits but no one can start a business due to 80% combined tax rates)

If you lent your own cash to a home loan borrower, what are the chances of a you lending to a guy with a liar loan 125% no money down? zero. You'd probably visit him at work and talk to his high school teachers and ex girlfriends before you lent money. This is how it should be IMO. OR we have the bubble/bust and the taxpayer funding the whole thing like now (it sux huh?)

Penn and Teller are great. But I'm talking about hundreds of years from now, im not predicting food riots next week. HOWEVER if we can all copy our brains to hardrives - we can exist on solar energy and wont need food! cha-ching food problem solved.

HelloKitty Says:
February 14th, 2008 at 4:35 pm
"We dont need to enforce ANY mortgage fraud laws."

I agree with everything you said except this. It really is fraud when someone fabricates a paystub, or uses someone's identity. The free market does depend on law enforcement to keep it going.

We dont need to enforce ANY mortgage fraud laws.

All we need is NO LONGER have the government guarantee ANY mortgage loans. (possible exception of low balance VA loans)

This sounds dangerously close to capitalism.

I just thought it was a bad show to have Penn and Teller on one hand discounting the overpopulation crowd and then right away saying there isn't enough food on the planet without genetics.

A little unclear above but that link refers to the negative non-borrowed reserves at the Fed. I had not seen the Fed feed "Recent Declines in Nonborrowed Reserve" until OO posted it today (thanks!).

OO asks: I think the only way of “reduction” is selling. I naively assumed redemption meant that the Treasury securities had reached maturity and were not rolled over/renewed. May be true for some of the issues, but this says otherwise:
In response, the Desk adjusted the composition of its portfolio to include a somewhat higher level of RPs and lower level of outright holdings, by arranging two redemptions of bill holdings at weekly auctions. In December, further redemptions were made and adjustments to outstanding RPs made as needed, to accommodate the impact of TAF loans and swap drawings on reserve supplies. Note that the net ~$40 billion reduction of SOMA was the result fo selling ~$50 billion and buying $10 billion over the year. Bear in mind that some of this is a result of trying to balance varying maturity dates.
Also, notice that the SOMA draw down was mostly a result of not purchasing as much as in previous years: Altogether, in 2007 the Desk bought $10.7 billion in 8 outright operations. In the preceding year, the Desk purchased $44.3 billion in 39 outright operations.

My gut keeps telling me that the "borrowed reserves" are a result of "deleveraging" in the fractional reserve system when a heck of a lot of money disappears overnight (read: housing bubble equity goes poof and the subsequent banks losses begin to affect the reserves). Then again, I never felt comfortable with the idea the banks borrow overnight to "top off' the reserves -- now it appears they've borrowed the entire amount (again, don't worry, the collateral is good... right?)

A little unclear above but "that link" refers to the negative non-borrowed reserves at the Fed. I had not seen the Fed feed “Recent Declines in Nonborrowed Reserve” until OO posted it today (thanks!).

OO asks: I think the only way of “reduction” is selling. I naively assumed redemption meant that the Treasury securities had reached maturity and were not rolled over/renewed. May be true for some of the issues, but this says otherwise:
In response, the Desk adjusted the composition of its portfolio to include a somewhat higher level of RPs and lower level of outright holdings, by arranging two redemptions of bill holdings at weekly auctions. In December, further redemptions were made and adjustments to outstanding RPs made as needed, to accommodate the impact of TAF loans and swap drawings on reserve supplies. Note that the net ~$40 billion reduction of SOMA was the result fo selling ~$50 billion and buying $10 billion over the year. Bear in mind that some of this is a result of trying to balance varying maturity dates.
Also, notice that the SOMA draw down was mostly a result of not purchasing as much as in previous years: Altogether, in 2007 the Desk bought $10.7 billion in 8 outright operations. In the preceding year, the Desk purchased $44.3 billion in 39 outright operations.

My gut keeps telling me that the “borrowed reserves” are a result of “deleveraging” in the fractional reserve system when a heck of a lot of money disappears overnight (read: housing bubble equity goes poof and the subsequent banks losses begin to affect the reserves). Then again, I never felt comfortable with the idea the banks borrow overnight to “top off’ the reserves (a normal operation) — now it appears they’ve borrowed the entire amount (again, don’t worry, the collateral is good… right?)

Penn and Teller.... yeah, ok, I can sleep soundly now knowing Penn and Teller say everything's OK.

Actually look up something called the Olduvai Theory if you want to know how things are likely to go. So far it's right on track.

NY governor Spitzer gives monolines 5 days to come up with outside funds or face breakup. He is worried about protecting municipal issuers.

http://tinyurl.com/28k6nx

So a forced breakup is coming, with the sweet smelling muni's in a healthy portfolio and the foul MBS stuff in another. The insurers are in a tough spot, they can't leverage and maximize the value of the muni's with so much uncertainty behind the valuation and risks their MBS. Who exactly is going to give them additional capital if it has a high probably of burning? The government might make the case of 'critical sector' and throw them cash, but even they are saying no more soup.

In my opinion, this is now the show. Monoline rating downgrade ripples through the valuation chain, and that crack in the dam we've been looking at is now spraying out water.

A chain of significant loss annoucements all over the place including pension funds, retirement portfolios, endowments, and foreign entities. Maybe even joe six pack's statement will be affected.

If this doesn't clench the sphincter, I don't know what else will.

Moderator, if you could take my 4:45pm comment out of moderation and delete the 4:48pm post (as it is a repost that lost most of the formatting).

I posted that H3 data from the Fed last week and I got the feeling from NVR that I was viewed as a nut. Now when more data comes out you guys then start to put your tinfoil hats on.

http://patrick.net/wp/?p=564#comments

This data is not hard to get and it is even easier to digest. You don't even need to look at the raw numbers. Just graph it in any excel worksheet all the data they have on their site going back as far as you please. The graph is not pretty. Seeing inflection points is more important than just the negative numbers you now see. The fed knows there is some serious risk and they are staying quiet about it until they decide their next move. I imagine their stress levels are running very high now.

In short the fed is scratching their heads trying to figure out how to get out of this mess without having to yell "Jenga!".

thenuttyneutron,

the funny thing is that the Fed actually issued a specific announcement just for the H3 data.

Psychologically, you'd never volunteer any explanations if you feel ok about the subject. If the Fed volunteered explanation on H3 without the public inquiring (at least at the Senate level, we peons don't count), that must mean they are extremely uncomfortable about it.

http://www.greenrushcapital.com/fed.html

Enjoy this little video.

@Nutty

Apologies if I came across in any way inappropriate, I think my written language comes across too strong sometimes. My concern about the banking system is real and genuine, I think I was a little too obtuse in my questions. Educate me, what are you seeing that I'm not. That's why I'm here; nearly everyone here has way more knowledge than I in these areas. I've not taken the time to try to digest the reports themselves or graph the data, as you have. Explain to me what it means, as I've never liked to get too deep in the numbers stuff, and don't understand what the numbers implicate.

My question still stands, is it really possible for our banking system to collapse, or can't the Fed just effectively hand out more money. I'm naive in this matter. They control the money supply, no? I sincerely don't understand this piece; I think I'm missing something.

In short the fed is scratching their heads trying to figure out how to get out of this mess without having to yell “Jenga!”.

lol and agreed. I guess we have to laugh at this mess, sometimes I feel like it weighs heavy. Imagine what Ben feels like, I suspect he'll be looking awfully old soon, this thing is going to age the man.

Well you know when you are leveraged up on a house after putting 5% down and then the house's market value drops by 10%, you have in effect destroyed that money. The thing that is occuring now is not exactly the same, but it is similar.

Just watch the video and eat some popcorn. It explains it better than I can. When I saw this H3 data and looked at all the historical data from the fed, I got a lot of pucker factor. Grab that data and graph it. You will see some interesting trends with historical economic events. This H3 data has never gone negative till just a few weeks ago. That is SCARY.