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 Bloomberg, 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 CNBC's "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.