BANKERS WANT YOUR SAVNGS AS PART OF THEIR NEXT BAIL-OUT

Wed Dec 03, 2014 at 03:27 PM PST

Bankers Want Your Savings As Part of Their Next Bail-Out

by psychomaxFollow for psychomax

Keep a close eye on what savings you have left. The financial honchos have plans for your money.

Ellen Brown, who writes at The Web of Debt is the only blogger that I am aware of who writes about the neoliberal machinations related to preparing for the next giant bank crashes. In a recent post she describes the latest plan adopted by the G20 nations. I believe this is crucial information for many and so wish to broadcast it further, including some background not covered in her post.

Since the financial crisis of 2008 central bankers and regulators have been busy drawing up plans for avoiding the next bank melt-down. Here in the US, banks considered by the government Too Big To Fail (TBTF) were bailed out six years ago with our tax money on the arguable rationale that if they were permitted to fail, they would take the entire economy down with them. The crisis led to a loud outcry from taxpayers and many savvy experts. They called for a breakup of TBTF banks as the most effective way to avoid future failures and the economic turmoil they engender.

It is no secret that the financial contingent of the Economic Royalists are in the driver's seat worldwide. We need no more explanation than that to understand why the big banks, like Bank of America, Wells Fargo, JP Morgan Chase, were not broken up, contrary to the public interest. In fact, they are far larger today than they were in 2008, making the TBTF threat worse than ever.

So what plan have the geniuses come up with that both pacifies taxpayers and still saves the TBTF banks? You will be appalled. First, though, some explanation is in order. It is a little known fact that when we put money into a savings account at a bank it is no longer our money. Essentially we have loaned the money to the bank in return for an IOU and some paltry interest. In finance these deposits are referred to as unsecured debt. Theoretically. deposit accounts are insured by the FDIC for up to $250,000. The wrinkle is that the amount of money in the FDIC insurance fund is approximately $25 billion, while the total of deposits at US commercial banks is approximately $9,300 billion, yes that's $9.3 trillion The failure of just one mega-bank would easily wipe out that fund. Since the FDIC would be unable to keep failing huge banks solvent an alternative is required.

Enter the Financial Stability Board. In her blog post "New G20 Rules:Cyprus-Style Bail-Ins to Hit Depositors and Pensioners" http://ellenbrown.com/... Ellen Brown explains:

The Financial Stability Board (FSB) that now regulates banking globally began as a group of G7 finance ministers and central bank governors organized in a merely advisory capacity after the Asian crisis of the late 1990s. Although not official, its mandates effectively acquired the force of law after the 2008 crisis, when the G20 leaders were brought together to endorse its rules. This ritual now happens annually, with the G20 leaders rubberstamping rules aimed at maintaining the stability of the private banking system, usually at public expense.

At the G20 meeting last month in Australia, the FSB presented and received approval for their latest plan for conducting the "resolution proceeding", i.e. bankruptcy, for a troubled TBTF bank. Cutting to the chase, the pertinent part for my dear readers is that instead of their tax money going to bail out the banks, it will potentially be their bank deposit money! The FSB recommended that governments make statutory the confiscation of depositors' money (also known as unsecured debt) if the assets of the bank plus all secured debt is insufficient to keep them afloat. This has come to be known as a bail-in.

Further, the FSB has put our pension funds at risk as well. They require banks to hold a buffer of securities to be liquidated to prevent insolvency ahead of resorting to deposits. Among other instruments in these buffers are bonds in which pension funds are invested.

Let's suppose you have a good amount of cash in a Wells Fargo savings account. Furthermore, your pension fund is invested in bonds which WF owns in their emergency buffer account. The next financial crash occurs. The TBTF banks, now with greater risk exposure than ever, start tumbling. Heading for insolvency, bank regulators force WF to liquidate its assets and it's secured debt to raise cash. If that is insufficient the buffer securities will be sold off next. There goes a chunk of your pension fund's money. And if THAT is insufficient the regulators will go after the cash in large deposit accounts first, then, perhaps, get to yours.

The bottom line is, the government is preparing to legitimize the theft of our savings in order to prop up irresponsible and unscrupulous bankers. A far better solution, still, is to break up the TBTF banks proactively, thus avoiding the bankruptcies and the need to save the banks on the backs of the people.

Originally posted to psychomax on Wed Dec 03, 2014 at 03:27 PM PST.
Also republished by Community Spotlight.