Unknown to almost all Americans, there's a proposal (which some say could be effected now) that would wipe out customer demand deposits/savings in a failed, “systematically important” U.S. bank that is believed to be FDIC insured.
This research paper reviews the bailouts during the last financial crisis (which were later reported to be MUCH larger than initially thought), the Dodd-Frank law, and a concept called “bail-in” that was first implemented in Cyprus in 2013. We site many references the reader may consult for further investigation of our main points. As usual, we close with a historical quote that is extremely relevant today.
The opinions expressed herein, are those of Victor Sperandeo.
Brief History of the Post Lehman Financial Bailout:
In September, 2008 the U.S. government decided to let Lehman Brothers fail, just six months after they saved Bear Stearns (via a JP Morgan arranged take-over that was guaranteed by the Fed). This caused a cascading set of events that created a heart attack (crash) for many financial institutions and companies around the world, especially big global banks.
After meeting several times, Congress then voted a program into law called TARP or "Troubled Asset Relief Program," in an attempt to prevent a very severe recession from turning into a depression. $700 billion went to bailout banks and other financial institutions that were big losers of the Lehman bankruptcy.
The Fed also lent huge amounts of money to banks and financial institutions, but the actual amounts were not disclosed at the time. They were later!
On December 1, 2010, CNN reported that The Federal Reserve made $9 trillion in overnight loans to major banks and Wall Street firms during the financial crisis. The loans were made through a special loan program set up by the Fed in the wake of the Bear Stearns collapse in March 2008 to keep the nation's bond markets trading normally.
That HUGE amount of cash pumped out to the financial giants was not previously disclosed. All the loans were backed by collateral and all were paid back with a very low interest rate to the Fed -- an annual rate from 0.5% to 3.5% (nominal interest rates were much higher in Sept 2008 than in the last few years of ZIRP).
Senator Bernie Sanders, who authored the provision of the financial reform law that required the Fed's 2010 disclosure, said at the time:
"The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution."
But there was much more to the Fed's largesse than that! Forbes reported on September 20, 2011 that The Fed's $16 Trillion Bailouts Were Under-Reported.
“The media’s inscrutable brush-off of the Government Accounting Office’s recently released audit of the Federal Reserve has raised many questions about the Fed’s goings-on since the financial crisis began in 2008. The audit of the Fed’s emergency lending programs was scarcely reported by mainstream media – albeit the results are undoubtedly newsworthy.”
“The findings of the first ever Fed audit verified that over $16 trillion was allocated to corporations and banks internationally, purportedly for “financial assistance” during and after the 2008 fiscal crisis."
Yet the Fed, meanwhile, does not want any audits? Note that “the affaire” the Fed has with "the banks" may be a conflict of interest, as the Fed is owned by Private Corporations (e.g. Federal Reserve Banks and shareholders who remain secret).
This led to the passing of the "Dodd-Frank Wall Street Reform and Consumer Protection Act” on July 21, 2010. It was sold as stopping the government from bailing out the banks.
The concept called "too big to fail" was the theme of the law. It was used like "hope and change" - as a slogan to hook the public into a belief that the government would never again (hope) bail out Wall Street banks which would finally be accountable. The law's authors claimed there was not enough regulation (and that had to change).
Dodd-Frank suggested that if a bank fails it would be nationalized and allowed to go bankrupt with FDIC protection, up to $250,000 per account. The top management would be fired or even jailed if there was proof of wrong doing. All that's now changed!...continue reading the whole article by clicking here.