Russian Oil - the sleeping giant

With sky rocketing oil prices pressing down on the economy of the United States and indeed the world, American media sides steps the issues with a professionals grace deflecting the populations attention. Focusing mainly on increased demand and sighting decreased supply and the war in Iraq as major causes.

But as the west makes it's moves on the OPEC nations the Russian equations is silently left out of the popular media. Russia is the second largest oil producer in the world next to the combined output of OPEC and is no stranger to the game of manipulating world politics with it's resources.

Since the end of the cold war North American media coverage of Russian affairs has evaporated, but after almost two decades of quiet recovery and expansion of it's economy this sleeping giant has been asserting it's authority, positioning itself as "one of the regional great powers." according to Irina Kobrinskaya of the Institute of World Economy in Russia, in statements made to Al Jazeera on June 15th. She goes on to say that "this is a fact of life and Russia wants it to be admitted by the world."

The last few years have seem amazing growth in Russia, and clearly it has ambitions to regain it's former prominence in world affairs. As the largest single nation producer of OIL the government is flush with dividend and allowing rapid development and quickly increasing it's economic clout. Like us there citizens are bearing the brunt of this paying a premium for fuel.

In fact Russia has been asserting for some time and has been trying to soften it's image of late while at the same time making sure the world knows it's not just a veto power. Russia is reported to be considering an effort to bring other natural gas exporters into an international cartel similar to OPEC. Venezuela and Iran are also said to be pushing the cartel idea for an October unveiling.

A new world economic order "must also be multipolar and must include a more balanced distribution of finances and national resources," said Foreign Minister Sergei Lavrov.

As the Russians Shuffle there politics to pot on a kinder face, Vladimir Putin steps down from running Russia as President to running Russia as Prime Minister is quote saying in regards to U.S. plans for a limited defense against ballistic missiles, "a new arms race has been unleashed in the world." He vowed to field new weapons, which have been under development for years, "in response."

Bear Stearns JP Morgan Fed Minutes released

Briefly mentioned in todays news is the Federal Reserves minutes on two meetings March 14,2008 and March 16,2008 regarding the Fed financed takeover of Bear Stearns by JP Morgan.

Two Key points outlined in these minutes not mentioned by most media outlets are the ones with the most significance both historically and relevant from a tax payers point of view.

"At its meeting on March 14, 2008, the Board had authorized the Federal Reserve Bank of New York (New York Reserve Bank) to extend credit to JPMorgan Chase & Co. (JPMC) to provide financing on a nonrecourse basis." In other words the financing was made under a condition where if defaulted no other action could be taken to recoup the loss other than liquidating the the assets the financing was secured with, in this case the assets of the company that was being bought with the financing, Bear Stearns. Authorization was made for $30 billion, the final loan was $28.82 billion. JP Morgan put up only $1.15 billion.

"Temporary exemptions from section 23A and capital requirements. In connection with the proposed JPMC/Bear Stearns acquisition, the Board granted an 18-month exemption requested by JP Morgan Chase Bank." While these excemptions are further qualified, this allows the fed to grant the loan even though JP Morgan didn't have the capital to secure the loan and the securing assets couldn't cover it.

Many have speculated that this is not the first time the JP Morgan empire and elements in the Federal Reserve have used times of economic distress to redistribute our nations wealth. Some have even gone as far as to suggest there was no reason to bail out Bear Stearns, wild speculation is what led to the panic.

J.P. Morgan had initially proposed buying Bear for a fire-sale price of
$2 a share, but it later increased the offer to $10 a share. As a
result, the Fed negotiated its loan to a lower amount than originally
anticipated.

Bear had survived one liquidity challenge, in the summer of 2007, when
two of its hedge funds cratered after the subprime mortgage collapse.
The firm had labored to repair its balance sheet and improve its
financing. "Our capital position is strong," said Bear's CFO, Sam
Molinaro, at an investors' conference in February. "Balance-sheet
liquidity has continued to improve throughout the course of the year.
We spent an awful lot of time trying to reduce our higher-risk asset
categories."

But the panic was fueled by wild rumors and on March 10th a major bank - accounts differ on which - had rebuffed Bear's request for a common short-term $2 billion "repo" loan. March 11th Goldman Sachs's credit derivatives group sent its hedge fund clients an e-mail announcing it would no longer step in for them on Bear derivatives deals.

When word of the Goldman e-mail leaked out, the floodgates opened.
Hedge funds and other clients, eventually running into the hundreds,
began yanking their funds.

Even though Bear Stearns stock dropped 40% the day after the bailout, at 1.2 billion it was a fire sale, and not JP Morgans first. Your Income Tax dollars hard at work.