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Paul Merrell

BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit - Bloomberg - 0 views

www.bloomberg.com/...-derivatives-to-bank-unit.html

banksters toxic-derivatives BoA JPMorgan FDIC Dodd-Frank too-big-to-fail

shared by Paul Merrell on 13 Nov 13 - No Cached
  • Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation. The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.
  • Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms. “The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”
  • Moody’s Investors Service downgraded Bank of America’s long-term credit ratings Sept. 21, cutting both the holding company and the retail bank two notches apiece. The holding company fell to Baa1, the third-lowest investment-grade rank, from A2, while the retail bank declined to A2 from Aa3.
  • ...5 more annotations...
  • The Moody’s downgrade spurred some of Merrill’s partners to ask that contracts be moved to the retail unit, which has a higher credit rating, according to people familiar with the transactions. Transferring derivatives also can help the parent company minimize the collateral it must post on contracts and the potential costs to terminate trades after Moody’s decision, said a person familiar with the matter. Bank of America estimated in an August regulatory filing that a two-level downgrade by all ratings companies would have required that it post $3.3 billion in additional collateral and termination payments, based on over-the-counter derivatives and other trading agreements as of June 30. The figure doesn’t include possible collateral payments due to “variable interest entities,” which the firm is evaluating, it said in the filing.
  • Derivatives are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates. Dodd-Frank Rules Keeping such deals separate from FDIC-insured savings has been a cornerstone of U.S. regulation for decades, including last year’s Dodd-Frank overhaul of Wall Street regulation. The legislation gave the FDIC, which liquidates failing banks, expanded powers to dismantle large financial institutions in danger of failing. The agency can borrow from the Treasury Department to finance the biggest lenders’ operations to stem bank runs. It’s required to recoup taxpayer money used during the resolution process through fees on the largest firms.
  • Bank of America’s holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades. That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.
  • Moving derivatives contracts between units of a bank holding company is limited under Section 23A of the Federal Reserve Act, which is designed to prevent a lender’s affiliates from benefiting from its federal subsidy and to protect the bank from excessive risk originating at the non-bank affiliate, said Saule T. Omarova, a law professor at the University of North Carolina at Chapel Hill School of Law. “Congress doesn’t want a bank’s FDIC insurance and access to the Fed discount window to somehow benefit an affiliate, so they created a firewall,” Omarova said. The discount window has been open to banks as the lender of last resort since 1914. As a general rule, as long as transactions involve high- quality assets and don’t exceed certain quantitative limitations, they should be allowed under the Federal Reserve Act, Omarova said.
  • In 2009, the Fed granted Section 23A exemptions to the banking arms of Ally Financial Inc., HSBC Holdings Plc, Fifth Third Bancorp, ING Groep NV, General Electric Co., Northern Trust Corp., CIT Group Inc., Morgan Stanley and Goldman Sachs Group Inc., among others, according to letters posted on the Fed’s website. The central bank terminated exemptions last year for retail-banking units of JPMorgan, Citigroup, Barclays Plc, Royal Bank of Scotland Plc and Deutsche Bank AG. The Fed also ended an exemption for Bank of America in March 2010 and in September of that year approved a new one. Section 23A “is among the most important tools that U.S. bank regulators have to protect the safety and soundness of U.S. banks,” Scott Alvarez, the Fed’s general counsel, told Congress in March 2008.
  • Paul Merrell on 13 Nov 13
     
    So according to Bloomberg, JPMorgan's commercial bank was the recipient of 99 percent of JPMorgan's $79 trillion (face value of derivatives) in bad bets. So adding JPMorgan's $78 trillion or so to the $75 trillion in bad bets Bank of America unloaded on its FDIC insured subsidiary, we arrive at $153 trillion in bad bets moved by two investment banks alone under the FDIC umbrella. Meanwhile, FDIC has authority under Dodd-Frank to liquidate these insolvent banks but doesn't, despite several successful lawsuits to recover the value of toxic derivatives that they sold to smaller banks that failed (which implies that FDIC could tell JPMorgan and BoA's investment banksters that they've got to pay off the toxic assets they transferred to their commercial banks, rather than diluting the insurance for normal depositors. Problem: the two big investment banks don't have sufficient assets to absorb those losses, so the too-politically-connected-to-fail factor kicks in. Note that I have not done any legal research in regard to these issues and am basing these observations on what has been stated about legal requirements in various media articles.
Paul Merrell

It Can Happen Here: The Confiscation Scheme Planned for US and UK Depositors | WEB OF D... - 0 views

webofdebt.wordpress.com/...anned-for-us-and-uk-depositors

financial-collapse Cyprus banksters U.S. confiscation

shared by Paul Merrell on 12 Apr 13 - No Cached
  • Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.  
  • Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash. Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.”  The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.
  • No exception is indicated for “insured deposits” in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. The FDIC is an insurance company funded by premiums paid by private banks.  The directive is called a “resolution process,” defined elsewhere as a plan that “would be triggered in the event of the failure of an insurer . . . .”
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  • The 15-page FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.”  It begins by explaining that the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability.” Evidently anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite, the authors state: An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock]. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.
  • If our IOUs are converted to bank stock, they will no longer be subject to insurance protection but will be “at risk” and vulnerable to being wiped out, just as the Lehman Brothers shareholders were in 2008.  That this dire scenario could actually materialize was underscored by Yves Smith in a March 19th post titled When You Weren’t Looking, Democrat Bank Stooges Launch Bills to Permit Bailouts, Deregulate Derivatives.  She writes: In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositaries to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and remember, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders.
  • Smith writes: Lehman had only two itty bitty banking subsidiaries, and to my knowledge, was not gathering retail deposits. But as readers may recall, Bank of America moved most of its derivatives from its Merrill Lynch operation [to] its depositary in late 2011. Its “depositary” is the arm of the bank that takes deposits; and at B of A, that means lots and lots of deposits. The deposits are now subject to being wiped out by a major derivatives loss. How bad could that be? Smith quotes Bloomberg: . . . Bank of America’s holding company . . . held almost $75 trillion of derivatives at the end of June . . . . That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.
  • $75 trillion and $79 trillion in derivatives! These two mega-banks alone hold more in notional derivatives each than the entire global GDP (at $70 trillion).
  • Smith goes on: . . . Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. . . . Lehman failed over a weekend after JP Morgan grabbed collateral. But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. Perhaps, but Congress has already been burned and is liable to balk a second time. Section 716 of the Dodd-Frank Act specifically prohibits public support for speculative derivatives activities.
  • An FDIC confiscation of deposits to recapitalize the banks is far different from a simple tax on taxpayers to pay government expenses. The government’s debt is at least arguably the people’s debt, since the government is there to provide services for the people. But when the banks get into trouble with their derivative schemes, they are not serving depositors, who are not getting a cut of the profits. Taking depositor funds is simply theft. What should be done is to raise FDIC insurance premiums and make the banks pay to keep their depositors whole, but premiums are already high; and the FDIC, like other government regulatory agencies, is subject to regulatory capture.  Deposit insurance has failed, and so has the private banking system that has depended on it for the trust that makes banking work.
  • The Cyprus haircut on depositors was called a “wealth tax” and was written off by commentators as “deserved,” because much of the money in Cypriot accounts belongs to foreign oligarchs, tax dodgers and money launderers. But if that template is applied in the US, it will be a tax on the poor and middle class. Wealthy Americans don’t keep most of their money in bank accounts.  They keep it in the stock market, in real estate, in over-the-counter derivatives, in gold and silver, and so forth. Are you safe, then, if your money is in gold and silver? Apparently not – if it’s stored in a safety deposit box in the bank.  Homeland Security has reportedly told banks that it has authority to seize the contents of safety deposit boxes without a warrant when it’s a matter of “national security,” which a major bank crisis no doubt will be.
  • Paul Merrell on 12 Apr 13
     
    Time to get your money out of the bank and into gold or silver, kept somewhere other than in a bank safety deposit box. 
Paul Merrell

Bank of America Corp (BAC): Bank Of America Dumps $75 Trillion In Derivatives On U.S. T... - 0 views

seekingalpha.com/...axpayers-with-federal-approval

banksters toxic-derivatives BoA FDIC

shared by Paul Merrell on 13 Nov 13 - No Cached
  • Bloomberg reports that Bank of America (BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion.Derivatives are highly volatile financial instruments that are occasionally used to hedge risk, but mostly used for speculation. They are bets upon the value of stocks, bonds, mortgages, other loans, currencies, commodities, volatility of financial indexes, and even weather changes. Many big banks, including Bank of America, issue derivatives because, if they are not triggered, they are highly profitable to the issuer, and result in big bonus payments to the executives who administer them. If they are triggered, of course, the obligations fall upon the corporate entity, not the executives involved. Ultimately, by allowing existing gambling bets to remain in insured retail banks, and endorsing the shift of additional bets into the insured retail division, the obligation falls upon the U.S. taxpayers and dollar-denominated savers.
  • Even if we net out the notional value of the derivatives involved, down to the net potential obligation, the amount is so large that the United States could not hope to pay it off without a major dollar devaluation, if a major contingency actually occurred and a large part of the derivatives were triggered. But, if such an event ever occurs, Bank of America's derivatives counter-parties will, as usual, be made whole, while the American people suffer. This all has the blessing of the Federal Reserve, which approved the transfer of derivatives from Merrill Lynch to the insured retail unit of BAC before it was done.
  • Paul Merrell on 13 Nov 13
     
    From 2011. $75 trillion in bankster bad derivatives bets transferred to FDIC insured commercial bank subsidiaries. Why FDIC insurance is no longer anything but a tax on depositors to insure nominal value of toxic derivatives for the investment banksters. And why all of the major commercial banks in the U.S. lack sufficient real assets to repay depositors when the collapse comes. RIP, FDIC. 
Gary Edwards

Is Bank of America Headed for the Glue Factory? » Counterpunch: Tells the Fac... - 0 views

www.counterpunch.org/...ca-headed-for-the-glue-factory

Banksters Federal-Reserve-Bankster-Cartel Bank-of-America FDIC banksters

shared by Gary Edwards on 22 Oct 11 - No Cached
  • The GAO detailed instance after instance of top executives of corporations and financial institutions using their influence as Federal Reserve directors to financially benefit their firms, and, in at least one instance, themselves….
  • The corporate affiliations of Fed directors from such banking and industry giants as General Electric, JP Morgan Chase, and Lehman Brothers pose ‘reputational risks’ to the Federal Reserve System, the report said. Giving the banking industry the power to both elect and serve as Fed directors creates ‘an appearance of a conflict of interest,’ the report added….
  • ‘If we [i.e. the World Bank] had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure.’” (“Non-Partisan Government Report: Federal Reserve Is Riddled with Corruption and Conflicts of Interest,” Washington’s Blog)
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  • this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral.
  • This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.” (Naked Capitalism)
  • Let’s say the second biggest bank in the country is starting to teeter because it’s loaded with all manner of dodgy (toxic?) derivatives that could blow up at any minute and take down the entire global financial system. Would you (a) Wait until the bombshell exploded knowing that the only choice you would then have would be to further expand the Fed’s balance sheet by another couple trillion dollars or (b) Try to sleaze the whole thing off on Uncle Sam and let the taxpayers pick up the tab?
  • Gary Edwards on 22 Oct 11
     
    Nice catch by Marbux.  A Bloomberg article explains how Bank of America is moving high risk derivatives into the coffers of a federally insured subsidiary.  Meaning, when (not if) the derivatives fail, the tax payers will get stuck with covering the losses and making the Banksters whole. The article also explains the recent GAO audit of the Federal Reserve where it was disclosed that through interlocking directories and shareholdings, the Bankster industry is in control of the Federal Reserve.  Awful, sickening stuff.  But a good catch nevertheless. excerpt: There are two things worth noting in this article. First, according to Bloomberg, "the transfers (of derivatives) are being requested by counterparties." Well, how do you like that? In other words, the investors on the other side of these contracts want Merrill to put them under an insurance umbrella provided by the FDIC. Now, why would that be? The only reason I can come up with, is that they know that a lot of these complex instruments are undercapitalized and ready to implode, so they want to make sure they get their money back any way possible. That means they need to latch on to Uncle Sam without anyone knowing about it. But, like we said, the cat is out of the bag. The other thing worth noting is that the Fed and the FDIC are at loggerheads over the matter. ("The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting.") Now, that's not good at all, in fact, it's a big red flag that suggests the Fed trying to pull a fast one on the American people. One does not have to look too far for other examples of Fed misbehavior; the endless bailouts (TARP, QE1 and 2, Operation Twist, ZIRP, etc) In fact, the Fed's history is a tedious chronicle of one shifty deal after another. This is just more of the same; another gift to big finance at the public'
Paul Merrell

It Can Happen Here: The Confiscation Scheme Planned for US and UK Depositors - 0 views

www.informationclearinghouse.info/article34442.htm

banksters confiscation financial-collapse FDIC

shared by Paul Merrell on 29 Mar 13 - No Cached
  • Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.  
  • One might wonder why the posting of collateral by a derivative counterparty, at some percentage of full exposure, makes the creditor “secured,” while the depositor who puts up 100 cents on the dollar is “unsecured.” But moving on – Smith writes: Lehman had only two itty bitty banking subsidiaries, and to my knowledge, was not gathering retail deposits. But as readers may recall, Bank of America moved most of its derivatives from its Merrill Lynch operation [to] its depositary in late 2011. Its “depositary” is the arm of the bank that takes deposits; and at B of A, that means lots and lots of deposits. The deposits are now subject to being wiped out by a major derivatives loss. How bad could that be? Smith quotes Bloomberg:
  • The 15-page FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.”  It begins by explaining that the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability.” Evidently anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite, the authors state: An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock]. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.
  • ...7 more annotations...
  • No exception is indicated for “insured deposits” in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. The FDIC is an insurance company funded by premiums paid by private banks.
  • If our IOUs are converted to bank stock, they will no longer be subject to insurance protection but will be “at risk” and vulnerable to being wiped out, just as the Lehman Brothers shareholders were in 2008.  That this dire scenario could actually materialize was underscored by Yves Smith in a March 19th post titled When You Weren’t Looking, Democrat Bank Stooges Launch Bills to Permit Bailouts, Deregulate Derivatives.  She writes: In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositaries to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and remember, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders.
  • Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash. Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.”  The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.
  • . . . Bank of America’s holding company . . . held almost $75 trillion of derivatives at the end of June . . . . That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show. $75 trillion and $79 trillion in derivatives! These two mega-banks alone hold more in notional derivatives each than the entire global GDP (at $70 trillion).
  • Are you safe, then, if your money is in gold and silver? Apparently not – if it’s stored in a safety deposit box in the bank.  Homeland Security has reportedly told banks that it has authority to seize the contents of safety deposit boxes without a warrant when it’s a matter of “national security,” which a major bank crisis no doubt will be.
  • Another alternative was considered but rejected by President Obama in 2009: nationalize mega-banks that fail. In a February 2009 article titled “Are Uninsured Bank Depositors in Danger?“, Felix Salmon discussed a newsletter by Asia-based investment strategist Christopher Wood, in which Wood wrote: It is . . . amazing that Obama does not understand the political appeal of the nationalization option. . . . [D]espite this latest setback nationalization of the banks is coming sooner or later because the realities of the situation will demand it. The result will be shareholders wiped out and bondholders forced to take debt-for-equity swaps, if not hopefully depositors.
  • President Obama acknowledged that bank nationalization had worked in Sweden, and that the course pursued by the US Fed had not worked in Japan, which wound up instead in a “lost decade.”  But Obama opted for the Japanese approach because, according to Ed Harrison, “Americans will not tolerate nationalization.” But that was four years ago. When Americans realize that the alternative is to have their ready cash transformed into “bank stock” of questionable marketability, moving failed mega-banks into the public sector may start to have more appeal.
Gary Edwards

World Economy Now Worth Less than Risky Derivatives FDIC is Liable For | Western Free P... - 0 views

www.westernfreepress.com/...very-economy-on-earth-combined

Banksters Banksters-of-America Federal-Reserve-Bankster-Cartel FDIC banksters

shared by Gary Edwards on 09 Nov 11 - No Cached
  • Gary Edwards on 09 Nov 11
     
    quote:  Regardless of what those Occupying Wall Street have to say about it, you can be a capitalist and believe that what is happening here is wrong. A private corporation should not be able to plunder the U.S. Treasury to cover its losses via the FDIC. There appears to be very little information publicly available as to what could possibly even be worth 75 trillion dollars, but it's most definitely not cash or paychecks from the individual depositors the FDIC was designed to protect. In fact, it appears to be 75 trillion dollars of risky debt packaged as derivatives. To put that in perspective, the annual GDP of all of planet Earth is only 58 trillion dollars!
Gary Edwards

321energy :: The Greatest Transfer of Wealth in History :: Bob Moriarty - 0 views

www.321energy.com/...moriarty081008.html

financial-crisis obama-socialism wealth-transfer redistribution-of-wealth banksters

shared by Gary Edwards on 05 Nov 09 - Cached
  • Gary Edwards on 05 Nov 09
     
    Bob Moriarty from 321 Energy provides a brief explanation of the fundamentals -  excerpt: I've made it clear for a year that I believe we have entered what will be the most serious depression in history. It also will involve the greatest transfer of wealth in history. There are two basic classes of assets. There are paper assets and real assets. An ounce of gold is a real asset. A copper mine is a real asset. A house is a real asset. An oil field is a real asset. Over the counter derivatives now total over $596 trillion dollars, (click here [pdf]) ten times the size of the world economy. Those are paper assets, their value is derived from some other asset. That derivative size is what is going to destroy the world's financial system, it's all fraud. A mortgage is a paper asset. A T-Bill or T-Bond is a paper asset. A $100 bill is a paper asset. It's pretty easy to see that a $500,000 mortgage on a house now worth $250,000 isn't worth very much. Latest figures show 9.6 million homes in the US have negative equity. How many of those loans are going to be paid back? According to an ex-Fed Director, both Fannie Mae and Freddie Mac are bankrupt. They were leveraged 65-1. For those comforted by the thought of the FDIC bailing you out should the banking system fail entirely, you need to realize the FDIC is leveraged at 130-1. We are told that the collapse of Washington Mutual alone could bankrupt the FDIC. In a depression, no real assets appear or disappear. Paper assets, on the other hand, turn to vapor. But the ownership of real assets will change as the real assets move from weak hands into strong hands.
Paul Merrell

US sues 16 banks for rigging Libor rate - Americas - Al Jazeera English - 0 views

www.aljazeera.com/...r-rate-201431544528243637.html

banksters libor fraud litigation

shared by Paul Merrell on 16 Mar 14 - No Cached
  • The US Federal Deposit Insurance Corp. (FDIC) has sued 16 big banks that set a key global interest rate, accusing them of fraud and conspiring to keep the rate low to enrich themselves. The banks, which include Bank of America, Citigroup and JPMorgan Chase in the US, are among the world's largest. The FDIC says it is seeking to recover losses suffered from the rate manipulation by 10 US banks that failed during the financial crisis and were taken over by the agency. The civil lawsuit was filed on Friday in federal court in Manhattan, the Associated Press reported. The banks rigged the London interbank offered rate, or Libor, from August 2007 to at least mid-2011, the FDIC alleged. The Libor affects trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans. A British banking trade group sets the Libor every morning after the 16 international banks submit estimates of what it costs them to borrow. The FDIC also sued that trade group, the British Bankers' Association.
  • By submitting false estimates of their borrowing costs used to calculate Libor, the 16 banks "fraudulently and collusively suppressed [the Libor rate], and they did so to their advantage," the FDIC said in the suit.
  • Four of the banks - Britain's Barclays and Royal Bank of Scotland, Switzerland's biggest bank UBS and Rabobank of the Netherlands - have previously paid a total of about $3.6bn to settle US and European regulators' charges of rigging the Libor. The banks signed agreements with the US Justice Department that allow them to avoid criminal prosecution if they meet certain conditions. Under a change announced last July, the London-based company that owns the New York Stock Exchange, NYSE Euronext, will take over supervising the setting of Libor from the British Bankers' Association. The changeover is scheduled to be completed by early next year.
Gary Edwards

A Crisis Worse than ISIS? Bail-Ins Begin - nsnbc international | nsnbc international - 0 views

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Banksters

shared by Gary Edwards on 31 Dec 15 - No Cached
  • Propping Up the Derivatives Scheme Dodd-Frank states in its preamble that it will “protect the American taxpayer by ending bailouts.” But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors. That includes depositors, the largest class of unsecured creditor of any bank.
  • Title II is aimed at “ensuring that payout to claimants is at least as much as the claimants would have received under bankruptcy liquidation.” But here’s the catch: under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured.
  • The over-the-counter (OTC) derivative market (the largest market for derivatives) is made up of banks and other highly sophisticated players such as hedge funds. OTC derivatives are the bets of these financial players against each other. Derivative claims are considered “secured” because collateral is posted by the parties. For some inexplicable reason, the hard-earned money you deposit in the bank is not considered “security” or “collateral.” It is just a loan to the bank, and you must stand in line along with the other creditors in hopes of getting it back. State and local governments must also stand in line, although their deposits are considered “secured,” since they remain junior to the derivative claims with “super-priority.”
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  • Under the old liquidation rules, an insolvent bank was actually “liquidated” – its assets were sold off to repay depositors and creditors. Under an “orderly resolution,” the accounts of depositors and creditors are emptied to keep the insolvent bank in business.
  • The point of an “orderly resolution” is not to make depositors and creditors whole but to prevent another system-wide “disorderly resolution” of the sort that followed the collapse of Lehman Brothers in 2008.
  • The concern is that pulling a few of the dominoes from the fragile edifice that is our derivatives-laden global banking system will collapse the entire scheme. The sufferings of depositors and investors are just the sacrifices to be borne to maintain this highly lucrative edifice.
  • At first glance, the “bail-in” resembles the normal capitalist process of liabilities restructuring that should occur when a bank becomes insolvent. . . . The difference with the “bail-in” is that the order of creditor seniority is changed. In the end, it amounts to the cronies (other banks and government) and non-cronies. The cronies get 100% or more; the non-cronies, including non-interest-bearing depositors who should be super-senior, get a kick in the guts instead. . . . In principle, depositors are the most senior creditors in a bank. However, that was changed in the 2005 bankruptcy law, which made derivatives liabilities most senior. Considering the extreme levels of derivatives liabilities that many large banks have, and the opportunity to stuff any bank with derivatives liabilities in the last moment, other creditors could easily find there is nothing left for them at all.
  • A study involving the cost to taxpayers of the Dodd-Frank rollback slipped by Citibank into the “cromnibus” spending bill last December found that the rule reversal allowed banks to keep $10 trillion in swaps trades on their books. This is money that taxpayers could be on the hook for in another bailout; and since Dodd-Frank replaces bailouts with bail-ins, it is money that creditors and depositors could now be on the hook for.
  • As of September 2014, US derivatives had a notional value of nearly $280 trillion
  •  Citibank is particularly vulnerable to swaps on the price of oil. Brent crude dropped from a high of $114 per barrel in June 2014 to a low of $36 in December 2015.
  • What about FDIC insurance? It covers deposits up to $250,000, but the FDIC fund had only $67.6 billion in it as of June 30, 2015, insuring about $6.35 trillion in deposits. The FDIC has a credit line with the Treasury, but even that only goes to $500 billion; and who would pay that massive loan back? The FDIC fund, too, must stand in line behind the bottomless black hole of derivatives liabilities
  • You can move your money into one of the credit unions with their own deposit insurance protection; but credit unions and their insurance plans are also under attack.
  • In short, the goal of the bail-in scheme is to place losses on private creditors. Alternatives that allow them to escape could soon be blocked.
  • The Dodd Frank Act and the Bankruptcy Reform Act both need a radical overhaul, and the Glass-Steagall Act (which put a fire wall between risky investments and bank deposits) needs to be reinstated.
  • Meanwhile, local legislators would do well to set up some publicly-owned banks on the model of the state-owned Bank of North Dakota – banks that do not gamble in derivatives and are safe places to store our public and private funds.
  • Gary Edwards on 31 Dec 15
     
    Excellent analysis of the coming banking crisis anw how our politicians have put the citizens on the hook for risky bank derivative gambling.  Thanks Marbux! Ellen H. Brown (nsnbc) : While the mainstream media focus on ISIS extremists, a threat that has gone virtually unreported is that your life savings could be wiped out in a massive derivatives collapse. Bank bail-ins have begun in Europe, and the infrastructure is in place in the US.  Poverty also kills.
Gary Edwards

Banksters - William Black tells the real truth - YouTube - 0 views

www.youtube.com/watch

Banksters Lehman-Brothers William-Black Savings&Loan financial-collapse

shared by Gary Edwards on 26 Nov 11 - No Cached
  • Gary Edwards on 26 Nov 11
     
    Savings & Loan crisis regulator Bill Black testifies in front of the House in 2011.  He explains the financial collapse of 2008, the role of subprime and liar's loans, and the incredible fraud running rampant through the Bankster industry.  Lehman Brothers alone was responsible for near 80% of the fraudulent liar loan mortgage security packages sold throughout the world.  Black lays much of the blame on the Federal Reserve, the SEC, and three individuals: Greenspan, Bernanke, and Timothy Geitner (NY Federal Reserve).  He compares how regulators with limited authority were able to contain and minimise the Savings and Loan fraud problem, with the near total lack of effort by the Federal Reserve, FDIC and SEC regulators.  Extrordinary testimony.  And Congress, the Justice Department, the Federal rEserve, the SEC, the FDIC and all the other elite regulators continue to do NOTHING!
Paul Merrell

The Global Banking Game Is Rigged, and the FDIC Is Suing | Global Research - 0 views

www.globalresearch.ca/...5377703

banksters libor litigation FDIC

shared by Paul Merrell on 23 Apr 14 - No Cached
  • On March 14, 2014, the FDIC filed suit for LIBOR-rigging against sixteen of the world’s largest banks – including the three largest USbanks (JPMorgan Chase, Bank of America, and Citigroup), the three largest UKbanks, the largest German bank, the largest Japanese bank, and several of the largest Swiss banks. Bill Black, professor of law and economics and a former bank fraud investigator, calls them “the largest cartel in world history, by at least three and probably four orders of magnitude.”
Gary Edwards

David Skeel: A Nation Adrift From the Rule of Law - WSJ.com - 1 views

online.wsj.com/...4184704577588822128122752.html

wsj rule-of-law David-Skeel

shared by Gary Edwards on 23 Aug 12 - No Cached
  • Gary Edwards on 23 Aug 12
     
    "No one doubts that the coming election will be the most important referendum on the size and nature of government in a generation. But another issue is nearly as important and has gotten far less attention: our crumbling commitment to the rule of law. The notion that we are governed by rules that are transparent and enacted through the legislative process-not by the whims of our leaders-is at the heart of that commitment. If legislators exceed their authority under the Constitution, or if otherwise legitimate laws are misused, courts must step in to prevent or remedy the potential harm. During the 2008 financial crisis, the government repeatedly violated these principles. When regulators bailed out Bear Stearns by engineering its sale to J.P. Morgan Chase, they flagrantly disregarded basic corporate law by "locking up" the transaction so that no other bidder could intervene. When the government bailed out AIG six months later, the Federal Reserve funded the bailout by invoking extraordinary loan powers for what was clearly an acquisition rather than a loan. (The government acquired nearly 80% of AIG's stock.) Two months later, the Treasury Department used money from the $700-billion Troubled Asset Relief Program fund to bail out the car companies. This was dubious. Under the statute, the funds were to be used for financial institutions. But the real violation came a few months later, when the government used a sham bankruptcy sale to transfer Chrysler to Fiat while almost certainly stiffing Chrysler's senior creditors. According to two leading legal scholars, Eric Posner and Adrian Vermeule, rule-of-law violations are inevitable during a crisis. The executive branch takes all necessary steps, even if that means violating the law, until the crisis has passed. The argument is powerful, and its advocates are correct that presidents and other executive-branch officials often push the envelope during a crisis. Yet pushing the envelope isn't the same thing as f
Gary Edwards

Robosigning Credit Cards: The Next Major Bank Scandal? | The Reformed Broker - 0 views

www.thereformedbroker.com/...ds-the-next-major-bank-scandal

robosigning-mortgages robosigning-credit-cards Banksters Joshua-M-Brown Foreclosure-Gate Credit-Card-Debt-Collection

shared by Gary Edwards on 18 Jan 12 - No Cached
  • Gary Edwards on 18 Jan 12
     
    This article is definately a "must read".  The summary is that the credit card debt mess is far worse than the mortgage foreclosure mess.  The Banksters are guilty of massive illegal activities in foreclosure gate, including forging documents and signatures.  Apparently the same thing has happened with Credit Card Debt Collection!!!! excerpt:   From American Banker: "If sloppy record keeping and problems with false affidavits is a problem with mortgages, it's 100 times bigger in credit card accounts," says Michelle Weinberg of the Legal Assistance Foundation of Metropolitan Chicago. Worse than mortgages, even? Let's just review the mortgage situation: Robosigning consists of blatantly illegal practices in which banks and mortgage companies had their employees sign affidavits and other documents without verifying the information therein; forge signatures on documents; backdate documents; falsely notarize documents; create new documents to replace missing ones; or some combination of all the above. Did I mention that all of this is illegal? Contrary to what the banks would have you believe, robosigning was not a one-off - it happened on a systematic level. So much so that some of the nation's largest banks (including Bank of America Corp. and  JPMorgan Chase & Co., ) were forced to halt foreclosures to "review" these practices in late 2010. The companies that did this claimed that they had to cut corners because they couldn't keep up with all of the paperwork created by the housing boom last decade. But we now know that this is not true - there's evidence that robo-signing goes back all the way to at least 1998. This all means that thousands of Americans were foreclosed upon erroneously and that even homebuyers and sellers in good standing may be unable to prove their rightful ownership. The problem is so big that Sheila Bair, the former head of the FDIC, acknowledged that they don't even know how big it is. It's so big that the b
Paul Merrell

U.S. Banks Spawn 10,000 Units Worldwide to Cut Taxes - Bloomberg - 0 views

www.bloomberg.com/...ts-worldwide-to-cut-taxes.html

Federal-Reserve-Bankster-Cartel federal reserve too big to fail

shared by Paul Merrell on 26 Jul 12 - No Cached
  • The biggest U.S. banks created more than 10,000 subsidiaries in the past 22 years as they expanded, using legal structures to pay lower taxes and escape tighter regulation, according to a Federal Reserve study.
  • The 2010 Dodd-Frank Act asked the FDIC and Fed to make sure the largest banks, if they get into trouble, can be wound down without collapsing the rest of the financial system.
  • The 1999 repeal of the Depression-era Glass-Steagall Act was the main catalyst for the biggest banks getting bigger, the Fed study concluded. The assets of the largest lenders have since tripled to $15 trillion.
  • ...1 more annotation...
  • Earlier this month, the largest lenders submitted blueprints to regulators explaining how they could be dismembered without bringing down the rest of the financial system. Dodd-Frank authorized the FDIC to use these so-called living wills to determine whether the biggest banks need internal restructuring -- such as ring-fencing some units with separate capital pools backing them -- to ensure that their dissolution would be orderly in case they fail.
Gary Edwards

The Bailout So Far - WSJ.com Holman W. Jenkins Jr.: - 0 views

online.wsj.com/...SB122826676533474525.html

finacial-crisis economy free-market

shared by Gary Edwards on 03 Dec 08 - Cached
  • Gary Edwards on 03 Dec 08
     
    Washington a few months ago might have bought the entire stock of subprime mortgages for about half the money committed by the Fed and Treasury last week to prop up Citigroup and spur consumer and mortgage lending. Buying up bad mortgages would at least have left the private sector in charge of issuing new credit, which -- however bad its performance during the housing bubble -- would likely produce better results than government directing credit allocation in the economy. They (Federal Reserve-Treasury-FDIC-Congress) failed to douse the confidence/systemic-risk fire and now have moved on to fighting recession by turning credit allocation into a public utility. Vikram Pandit of Citigroup says: "We have gone from arm's length, free market, just-in-time availability" of funding to a system where big credit-reliant businesses now have only one place to turn, government.
  • Gary Edwards on 03 Dec 08
     
    Maybe Washington will succeed in forestalling a deep and prolonged recession. Maybe all the money ($8 trillion by one count) being printed to acquire or insure mortgages, student loans, credit card receivables, commercial paper and banking shares will be seamlessly withdrawn once those assets are sold back to willing parties in the private sector when the panic has passed. Maybe taxpayers will even make a profit on the deal.
Gary Edwards

Porter Stansberry : This key gov't statistic is signaling crisis - 0 views

www.thedailycrux.com/...Porter_Stansberry

porter-stansberry Guidotti-Greenspan-rule debt-interest-expense financing-sovereign-debt usa-default

shared by Gary Edwards on 08 Apr 10 - Cached
  • These obligations aren't future promises to pay. This isn't Medicare spending projected out until 2040. These are all obligations that either have known maturities or will come due in the next two or three years.
  • What's a reasonable rate of interest on these debts? Right now, it costs the U.S. government almost 5% to borrow for 30 years. Let's assume the blended borrowing cost goes to that amount – which is well below the government's average borrowing costs since 1980. That would equal $1 trillion in interest payments due, per year. That's 100% of all income taxes paid in 2009.
  • Gary Edwards on 08 Apr 10
     
    Key Stat: The amount of the government's revenues that must go towards paying interest. The U.S. already has more debt than it can afford, which puts it at an enormous risk of a debt and currency collapse.  ... Our "short term" debt means we'll have to "roll over" roughly $4 trillion in the next 30 months. That's in addition to funding another $3 trillion or so in additional annual deficits. As of today, China is a net seller of Treasury debt. If we can't fund our debts in the bond market, the Federal Reserve will be forced to monetize our deficits by buying Treasury bonds. If that happens, inflation will soar and the price of gold will double or triple almost overnight. By the end of OBAMA!'s first presidency (2013), I believe the U.S. will owe roughly: $17.8 trillion in federal debt, $2 trillion in GSE debt/guarantees, $500 billion in FDIC obligations, and $500 billion in FHA obligations. My only big assumption is $1.5 trillion in additional deficits each year, which is what the president's budget also predicts.  Right now, it costs the U.S. government almost 5% to borrow for 30 years. Let's assume the blended borrowing cost goes to that amount - which is well below the government's average borrowing costs since 1980. That would equal $1 trillion in interest payments due, per year. That's 100% of all income taxes paid in 2009. This amount of debt isn't sustainable. Felix Zulauf, one of Europe's top money managers, "Eventually the U.S. will arrive at the point where, as Marc Faber says, interest payments on government debt all of a sudden go to 20%, 25%, 30% of tax revenue. And once you go above 30%, you are done. You go into default or your currency breaks down and your system collapses."  act now to protect yourself. If you wait until the last minute to get your assets out of the U.S., you'll never make it.
Gary Edwards

Americans Have Been Taken Hostage | Dylan Ratigan - 0 views

www.businessinsider.com/have-been-taken-hostage-2009-9

Dylan-Ratigan financial-crisis financial-oligarchs banksters Banksters

shared by Gary Edwards on 14 Sep 09 - Cached
  • Gary Edwards on 14 Sep 09
     
    A system where bank lobbyists have been spending in record numbers to make sure it stays that way. A system that corrupts the most basic principles of competition and fair play, principles upon which this country was built. It is a system that so far has forced the taxpayer to provide the banks with the use of $14 trillion from the Federal Reserve, much of the $7 trillion outstanding at the US Treasury and $2.3 trillion at the FDIC. A system partially built by the very people who currently advise our President, run our Treasury Department and are charged with its reform. And most stunningly -- it is a system that no one in our government has yet made any effort to fundamentally change.
Gary Edwards

The Right Way To Reform Wall Street: Let Stupid Firms Fail! - 0 views

www.businessinsider.com/errible-washington-idea-2009-9

financial-crisis financial-oligarchs banksters

shared by Gary Edwards on 18 Sep 09 - Cached
  • Gary Edwards on 18 Sep 09
     
    Let stupid firms fail. We need to get back to that. Yes, the fact that the "stupid firms" this time around included most of Wall Street shows that special rules of financial bankruptcy should apply so the whole system doesn't collapse.  But the firms need to be allowed to fail. What should the special rules of financial bankruptcy be? managements should be tossed compensation contracts and other liabilities should be torn up,  bonus pools should be zeroed until the firms return to annual profitability equity and preferred holders should be wiped out, and junior bondholders should get a major haircut through the immediate, forced conversion of debt to equity. All of this should happen not over years in the courts, but overnight--in the manner in which the FDIC seizes failing banks.  In such proceedings, all of Wall Street's idiocy enablers will lose their shirts: The folks who work the at the firms, the folks who lend money to the firms, the folks who invest in the firms and trust the firms' managements to be something other than morons. Losing your shirt generally has a sobering effect on decision-making.  As long as managers, lenders, and shareholders know they will lose their shirts, the next generation of Wall Street enablers will likely be far more careful and demanding than their predecessors, at least for a little while (and don't hallucinate that the Fed's new policy is anything other than temporary). 
Paul Merrell

New G20 Rules: Cyprus-style Bail-ins to Hit Depositors AND Pensioners | nsnbc internati... - 0 views

nsnbc.me/...-ins-hit-depositors-pensioners

banksters G20-summit deposits Cyprus bail-ins

shared by Paul Merrell on 02 Dec 14 - No Cached
  • On the weekend of November 16th, the G20 leaders whisked into Brisbane, posed for their photo ops, approved some proposals, made a show of roundly disapproving of Russian President Vladimir Putin, and whisked out again.
  • It was all so fast, they may not have known what they were endorsing when they rubber-stamped the Financial Stability Board’s “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” which completely changes the rules of banking. Russell Napier, writing in ZeroHedge, called it “the day money died.” In any case, it may have been the day deposits died as money. Unlike coins and paper bills, which cannot be written down or given a “haircut,” says Napier, deposits are now “just part of commercial banks’ capital structure.” That means they can be “bailed in” or confiscated to save the megabanks from derivative bets gone wrong.
  • Rather than reining in the massive and risky derivatives casino, the new rules prioritize the payment of banks’ derivatives obligations to each other, ahead of everyone else. That includes not only depositors, public and private, but the pension funds that are the target market for the latest bail-in play, called “bail-inable” bonds. “Bail in” has been sold as avoiding future government bailouts and eliminating too big to fail (TBTF). But it actually institutionalizes TBTF, since the big banks are kept in business by expropriating the funds of their creditors. It is a neat solution for bankers and politicians, who don’t want to have to deal with another messy banking crisis and are happy to see it disposed of by statute. But a bail-in could have worse consequences than a bailout for the public. If your taxes go up, you will probably still be able to pay the bills. If your bank account or pension gets wiped out, you could wind up in the street or sharing food with your pets.
  • ...1 more annotation...
  • In theory, US deposits under $250,000 are protected by federal deposit insurance; but deposit insurance funds in both the US and Europe are woefully underfunded, particularly when derivative claims are factored in. The problem is graphically illustrated in a chart from a March 2013 ZeroHedge post. OCC Chart (Image, upper left).
  • Paul Merrell on 02 Dec 14
     
    With commercial banks overloaded by investment bank derivative debt, a bank is the very last place one should park their money. See http://tinyurl.com/3oj7vbs and http://tinyurl.com/3ovf6ze FDIC insurance is now of value only to senior debtors, not to deposit account holders.
Paul Merrell

More Americans opting out of banking system - The Washington Post - 0 views

www.washingtonpost.com/...1-a31e-804fccb658f9_story.html

banksters statistics boycotts

shared by Paul Merrell on 16 Sep 12 - No Cached
  • Released Wednesday, the study found that 821,000 households opted out of the banking system from 2009 to 2011 and that the so-called unbanked population grew to 8.2 percent of U.S. households.
  • Paul Merrell on 16 Sep 12
     
    Interesting that the article includes much speculation about various reasons consumers are increasingly boycotting banks, but never mention distrust as a motive. 
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