Fraudulent Accounting for Dummies or How the Govt lets the Banks Rob You Blind.

After the ‘Securitization of Sub Prime Mortgage” Fraud crashed the economy in 2008, from February 2009, U.S. Big Banks weren’t required to account for their assets (or liabilities) at “market value” (i.e. what people were willing to pay for them in the real world). Instead, the Banksters were allowed to do their accounting on the basis of what they thought their own assets should be worth.

How has the bankrupt United States of America kept its entire (paper) house-of-cards from crumbling all around it? Two words: fraudulent accounting.

  As many readers know, following the Crash of ’08 U.S. Big Banks were hopelessly bankrupt. They were leveraged well in excess of (the legal) 30:1, with the vast majority of that leverage tied directly to the (fraud-saturated) U.S. housing market – and house prices.

The effect of this leverage was that (as a matter of arithmetic) only a 3% decline in U.S. house prices would render all these banks insolvent (3% X 30). In fact the U.S. housing market plummeted lower by roughly ten times that amount (in just its first down-leg). The mere $15+ trillion in hand-outs/loans/guarantees from the Bush regime was only a Band-Aid which would keep these fraud-factories afloat for a few months, barring other equally extreme action. And so Mark-to-Fantasyaccounting was born.

Beginning in February 2009, U.S. Big Banks weren’t required to account for their assets (or liabilities) at “market value” (i.e. what people were willing to pay for them in the real world). Instead, the Banksters were allowed to do their accounting on the basis of what they thought their own assets should be worth.

  Suddenly, the same corporations which had just all been bankrupted ten times over were able to pass a “stress test.” Of course thatCinderella Stress Test proved nothing about the solvency of U.S. banks. However simply being instantly able to cobble-together afaçade of solvency did illustrate the magnitude of the fraud in this Mark-to-Fantasy accounting.

But for decades prior to this the U.S. federal government had already been engaging in its own Mark-to-Fantasy accounting. Unlike U.S. corporations, which are (except for the Big Banks) still required by law to acknowledge all debts and liabilities in their accounting; the federal government only acknowledges the liabilities it wants to acknowledge – the small ones.

The remainder of these obligations are simply shoved to the side, and permanently ignored by all of the U.S.’s elected representatives, of both parties. But other people do keep track of these “unfunded liabilities”. A former Reagan economic advisor, and now economics professor estimated this mountain of Unfunded Obligations at more than $200 trillion.

The U.S. government has $15+ trillion of “official debt”, and $200+ trillion of ignored liabilities. Now that is “creative accounting”!

U.S. state and local governments were so impressed by the federal government’s financial gymnastics that (one by one) they began copying these accounting practices themselves, and creating their own mountains of Unfunded Liabilities.

How big are these state/local mountains of hidden-and-ignored liabilities? No one really knows. As even the Main Stream Media is telling us:

“…Thanks to a patchwork of accounting practices and rosy investment assumptions, it’s not even clear just how big a financial hole many states and cities have dug for themselves…”

Except, of course, NORTH DAKOTA… WHY?

The main story gets even more interesting and continues HERE