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VANCOUVER ( Bullion Bulls Canada ) -- A major U.S. bank has recklessly leveraged its balance sheet, and then engaged in totally fraudulent accounting to hide massive losses on very risky bets. Then, instead of "deleveraging," it uses its crooked accounting to report phantom-profits, and makes huge payouts on those phantom profits, which in reality is doing nothing but ratcheting-up the bank's leverage even further.

Sound familiar? Indeed, I'm sure most readers are thinking "give me more clues, or I'll have no way of knowing which Wall Street bank you're talking about." In fact, according to none other than


this is the formula which every Wall Street bank used in reporting their first quarter "profits." However, in this case, the "bank" to which I'm referring is the

Federal Reserve


Despite my own cynicism regarding the Apex of Evil in the U.S. criminal syndicate known as its "banking sector," even I was shocked with the Fed's degree of insolvency -- and how thin is the veil of lies which hides that insolvency. I owe my education in this regard to (of all people) a former Fed governor, interviewed (of all places) on



"Kudlow Report." When the Fed's insolvency is being openly spelled out by a former Fed governor, on a media outlet which has been a staunch supporter of the banking cabal, then that's a pretty thin "veil."

The numbers are shockingly simple. With the Federal Reserve having mimicked Wall Street (or vice versa) and shaved its reserves and operating capital to the bone, while steadily ratcheting up the leverage (and thus level of risk) on its balance sheet, an increase in U.S. interest rates of only 1% would make the Fed hopelessly insolvent, based only on the interest rate losses on its Fannie/Freddie bonds.

These holdings comprise less than half of the Fed's balance sheet, meaning much more carnage from an interest rate hike was totally ignored by the former governor. Also, given that Fannie and Freddie themselves are nothing but insolvent shells (and "black-holes" for taxpayer dollars), the scenario of insolvency outlined by the governor totally ignores the $100's of billions in losses which the Fed would incur, should it ever be forced to report these "assets" at their real-world value.

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In fact, the Fed is the only entity among all private U.S. companies which is allowed to even report its bonds at "mark to fantasy" valuations. That's right; in comparison the bookkeeping of the

Wall Street Oligarchs is almost honest. If this isn't enough to strike yet more terror into the hearts of U.S. taxpayers, consider this: according to the former Fed governor, the only hope of an "exit strategy" for the Fed (i.e. avoiding its own bankruptcy) is if insolvent U.S. homeowners pay off all of their negative-equity mortgages (courtesy of the Fed/Wall Street housing bubble). If the Fed was looking for better odds in trying to remain solvent, it should start buying lottery tickets.

These numbers are yet again another illustration of the

compulsive dishonesty of Ben Bernanke. If we assume that the Chairman of the Federal Reserve actually looks at the Fed's balance sheet from time to time (and can operate a calculator), then his previous talk of an "exit strategy" (i.e. beginning to raise interest rates to a normal level) is immediately seen as a cynical lie. Unless "bankruptcy" was the Fed's secret exit-strategy, then Helicopter Ben was never seriously considering raising interest rates, despite nearly 18 months of rhetoric to the contrary.

We already know how Wall Street plays its own game of roulette, based upon the staged "crisis" they manufactured in 2008. Engage in insane leverage while making ridiculously leveraged bets -- like mortgaging your house for a single "spin" on a roulette wheel. Even the odds (i.e. leverage) are almost identical.

Then after you lose everything, you run to the Treasury Department for a multi-hundred billion dollar bailout. And for every dollar of Treasury Department money you pillage from taxpayers, you get the Federal Reserve to slip you $15 more dollars in "free money" off of its printing press.

The obvious question is, who does the Fed "run to" when its thinly-disguised insolvency becomes an open reality? The equally obvious answer is the Treasury Department (i.e. U.S. taxpayers). While the bankster crime syndicate gets its stooges in the media to report "profits" from this act of taxpayer-rape, strip away the phony accounting and all we see are handouts piled atop handouts -- with severe losses waiting on the horizon for all of the "assets" being temporarily propped up with this shell-game.

Of course, the reality here is that with the Treasury Department's coffers totally empty (just as its pondering how to raise the debt ceiling) there is no "money" to bring the Fed back from insolvency. The only source of money is the printing press of the Fed itself -- and thus we can ponder how this "bailout" will take place.

Because all money created by the Fed is brought into existence via more debt, first the Fed will print up $100's of billions more Bernanke-bills out of thin air. Then it will "lend" this worthless paper to the Treasury Department in return for U.S. bonds (i.e. taxpayer IOU's), and then taxpayers will pay interest on the Fed bailout until the end of time to the Fed itself -- since no U.S. debt is ever retired (i.e paid off).

Roulette is a lot of fun. For those of us who live in "the real world," it is a prohibitively expensive game to play. However, for a small group of

criminal-gamblers, it is the most fun game of all: you get to keep (and hide) all of your "winnings," and every time you lose everything you simply rob from the little people to pay for your next "spin."

It is time to close-down the banksters' casino, and simply abolish the most reckless of all the gamblers: the Federal Reserve. Anything less would be a crime in itself.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.