Want Entire Industry To Become One Giant MF Global
by Bill Sardi: Stealth
Withdrawal of Wealth From China By Its Entrepreneurs Unwittingly
Helped China Avert Runaway Inflation. But That Practice Is About
To Be Halted.
Prior to the
housing market collapse of 2008, about 70% of the revenues of US
banks were comprised of profits made off of real estate loans. But
with a self-induced real estate bubble where lenders relaxed loan
requirements and offered low teaser interest rates to induce new
home buyers, and then palmed off bad loans onto the public ledger
via Fannie Mae and Freddie Mac, they were recklessly allowed to
keep speed processing home loans so banks could play fast and loose
with their depositorsí money which they were using as reserve capital
to make these loans.
When the banks
began losing real estate loans as a profit center they petitioned
to be allowed to invest their own money in Wall Street investments,
that is, take greater risks to make up for the lost profits from
the collapse of the real estate market. Thereafter a blur between
investment banks like the old Lehmann Brothers and Goldman Sachs
and regular consumer banks like B of A and Citibank was created.
invented debit cards and began charging transaction fees for people
to access their own money. This brought in billions in profits till
these fees were limited by regulators.
Federal Reserve chairman Paul Volcker wants to reign in the banks
on their speculative trading on Wall Street. The new Volcker rule
would take effect 5 months from now so bankers are lodging their
protests in advance of the date when the rule goes into effect.
basically says banks can do what they want with their own money,
but not if they want to be taxpayer supported. Basically, with all
of the recent bank bailouts, and the conversion of bank revenues
from real estate loans to stocks and bonds, the federal government
finds itself guaranteeing the trades these banks make. Without risk,
trading may be more reckless, knowing the government will bail out
the institution if it makes an investment that goes sour.
US banks cry
foul, saying the new Volcker rule will handcuff them, make them
less competitive with foreign banks (some which operate in the US),
and will result in fewer trades on the stock market which suggests
a measured collapse of the markets.
House Association, representing American banks, says: "the
proposal will severely limit banking entitiesí ability to hedge
their own risk." But ultimately the government is underwriting
that risk if it continues to offer bailout money, money at low interest
Itís like the
banks want to take their depositorsí money to the brink of temptation,
just like what happened at MF Global, where clientsí funds were
mingled with house funds to make speculative trades and enter into
credit default swaps. With $8.5 trillion of interest bearing accounts
at risk in Americaís 7436 FDIC-insured banks, Volcker sees trouble
ahead and wants banks to stop becoming gambling parlors. If banks
take undue risks and advance to the edge of insolvency, and they
are holding billions of dollars of depositorsí money, they could
force the government to once again underwrite their losses. Volcker
wants to eliminate that possibility.
is, just what should replace the lost revenues that American banks
once made in making home loans, debit card transaction fees and
market investments? Ben Bernanke recently made an overture that
the Federal Reserve would launch a new entity, a land bank, operating
with government guarantees and tax incentives, to acquire foreclosed
properties and put them on the market as rentals. This would further
bury American banks and any future possibility they could regain
revenues in the real estate home loan market.
So what is
the future of American banking? Gone are the days of conservative
banking. Playing fast and loose with the publicís money is the order
of the day. The public should be withdrawing their interest-earning
banked money out of accounts as rapidly as possible now that inflation
(7-10%: ShadowStats.com) far
exceeds the rate of interest offered on savings accounts at banks
(less than 1%). Series
I US Savings Bonds still are being offered at 3.06% interest,
which is still a net loss when taxes and inflation are calculated,
but a must smaller loss than the 0.9% interest being offered by
$8.5 trillion of reserve capital that American banks are holding
in saving accounts and there is nothing left but some empty shell
bank buildings, some ATMs and non-interest-bearing accounts that
businesses and individuals use to pay their bills. American banks
are fast becoming ghost institutions.
him mail] is a frequent writer on health and political
topics. His health writings can be found at www.naturalhealthlibrarian.com.
latest book is Downsizing
© 2012 Bill Sardi Word of Knowledge Agency, San Dimas, California.
This article has been written exclusively for www.LewRockwell.com
and other parties who wish to refer to it should link rather than
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