Tag: banks

Too big to jail

Karl Denninger considers the Attorney General’s recent admission that the big banks are above the law:

The Rule of Law works and guides a just society only because it applies to everyone.  Nobody gets to rape, rob, pillage or murder.  If you do, no matter who you are, you face the same punishment, the same process, the same sentence.

We all know there are disparities in the process and always have been.  But there’s a difference between the foibles of mankind — everyone has their bias, and there is no such thing as a human process that is flawless — and intentional, designed-in or willful refusal to prosecute certain people for acts that land others in prison.

The latter is the defining action of a dictatorship.

A dictatorship can only exist by declaring war upon the people.  When a certain subset of the population is given license to pillage or worse that is the very definition of “diktat” from which the term “dictatorship” comes.

Fast and Furious, incidentally, falls into this category as well.

This is an extraordinarily dangerous state of affairs and must not be permitted to continue.  The government and its actors have lost all moral and ethical appeal to fair play and the rule of law — by exempting certain people they have declared both themselves and those they exempted beyond the protections that exist in a civilized society.

I’ve previously pointed out that there is no longer “law” as such, in the United States any more.  Everything about the “nation”, which is no longer, properly speaking, even a nation anymore, is fraudulent, from its “money” to its system of “justice”.  Even something as simple and basic as openly fighting a “war” is now beyond its bloated, cancerous make-believe structure.

I wouldn’t call the present system a dictatorship myself.  Dictatorships are more open and direct.  It is better described as a simulatorship, which is to say, rule by pretense.  It is remniscent of the latter days of the Soviet empire, when the Russian people pretended to work and the Soviet government pretended to pay them.  In the latter days of the US empire, the federal government pretends its actions are within the limits set by the U.S. Constitution and the American people pretend to believe them.

If a corporate entity is too big to fail or too big to jail, then logic dictates it must be cut down to a size that permits both.  Remember, corporations are not capitalism, they are creations of government and if they can’t reasonably be imprisoned, they can certainly be “executed”.  And if real American people can be “legally” executed at the order of the president, then can there really be any doubt that artificial American people are also liable to termination on command as well?

This section of the American Banker article particularly struck home:

Many are still angry about the 2008 bank bailouts, and they now have an
on-the-record confirmation from Justice’s top official that the
department is treating big banks softly just because they are large.
Compare it to how law enforcement typically treats American citizens
when they break the law — often times by throwing the book at them — and
it’s easy to understand how that anger could grow into more popular
support for a big bank breakup.

For example, my father was imprisoned for 12 years after being accused of evading $1.6 million in taxes, penalties, and imaginary “interest” despite having paid something like $75 million in state and federal taxes over the previous 20 years and forcing the State of Minnesota to admit that its agents knowingly lied when they falsely claimed he was a resident and seized his house for not paying taxes he didn’t owe. Meanwhile, Congressional investigators estimate that the big US banks launder about $250 billion in drug money every year in addition to their $12 billion in estimated annual mortgage fraud.  When caught, they occasionally pay a monetary penalty calculated at a rate which, in my father’s case, would have amounted to about a $20,000 fine.

So, I can understand why many Americans support a big bank breakup and seeing corporate criminals treated with the same severity as actual human beings.  But it’s not going to happen, because the entire financial system is already on the verge of collapse and all of the insiders know it.  That is why the banks will continue doing whatever they want and the regulators and politicians will continue to look the other way, until the moment when a critical node fails and the entire system breaks down in a manner that can’t be blamed on anyone in particular.

Ireland bolts the stable doors

Long after the horses escaped with all the money:

Ireland’s government rushed through emergency legislation early on Thursday to liquidate the failed Anglo Irish Bank as it tries to secure a deal with the European Central Bank to ease the country’s debt burden….

President Michael D. Higgins will sign the bill into law later on Thursday. He
cut short a state trip to Rome to ensure he could consider it. Anglo Irish and its casino-style lending were at the heart of Ireland’s
financial crisis. The bank’s near collapse in 2008 pressured the government
into guaranteeing the entire financial sector, sucking it into a downward
spiral and in late 2010, a €67.5bn EU-IMF bailout.

Three of the bank’s former executives, including its former CEO, will go on
trial next year on fraud charges. Under Dublin’s plan, the €28bn in promissory notes will be replaced with
long-term government bonds, meaning that Ireland
can make more gradual repayments, a source familiar with the discussions
told Reuters. 

So, instead of simply letting the bank go into liquidation in 2008, the Irish government saddled the Irish people with nearly $100 billion in debt, and now the bank is going to go into liquidation anyhow.

In contrast, thanks primarily to the courage of the Icelandic prime minister, Iceland let its casino banks go bankrupt and resisted the global pressure to saddle the Icelandic people with the bankers’ debts.  Iceland has now put the debt bubble behind it and is growing again; the Irish can’t even make the upcoming payments on a debt that extends for another 10 years.

This is why the bankrupt US banks should have been allowed to fail back in 2008.  Bank bailouts are seldom a solution, they are almost always a simple matter of delaying the day of financial reckoning long enough for the parties responsible to successfully abscond with the gains they have collected from gambling with other people’s money.

Blowing away the backstop

Iceland wins a legal victory with serious international ramifications:

Iceland won a sweeping victory in a court fight over its
responsibilities to foreign depositors in Icelandic bank Landsbanki,
which failed in 2008. The court of the European Free Trade
Association on Monday said Iceland didn’t breach European Economic Area
directives on deposit guarantees by not compensating U.K. and Dutch
depositors in Landsbanki’s online savings accounts, known as Icesave
accounts.

Iceland has blown a large hole in the entire bankocracy.  First, it has shown that a country materially much better off to blow off the bankers, refuse to bail them out, and let them go under than accede to their demands.  Notice that Iceland is not having any trouble borrowing money despite the dire predictions of those running interference for the banks.

Second, it shows that the dubious legal claims about “debts” that are somehow assumed to be magically passed on to parties who were not involved in the debt contracts are false.  And third, it proves that the foreign “deposit guarantees” are absolutely nothing of the sort.

This is serious, because, as Karl Denninger observes: “There are other nations where demands have been made for citizens to cover other, non-citizen losses.  I can think of a few… like, for instance…. Greece…. What this decision does is provide a solid backstop to the opinion that such a guarantee program does not reach beyond the fund and into the general finances of the nation involved, nor can that nation be forced to do so retroactively.”

The first shots are fired

However, at the moment, it’s not violence, merely very loud political protest:

Rifle shots were fired early Monday into the Athens offices of Greece’s conservative party, which leads the fragile coalition government, causing no injuries but intensifying a wave of political violence in the debt-wracked country. 

Remember, the US is actually worse off than Greece, by some financial measures.  The only significant difference is that Greece can’t print money because the ECB won’t permit it, while the US can’t print money because the Fed won’t permit it.

I suspect these are the first shots to be fired in the great wave of political dissolution that is about to sweep over the world.

Obamateach and the post-college tax

After all, you didn’t build that university degree:

Student Loan debt in the U.S. recently crossed the $1 trillion mark,
with a good chunk of that owed to the U.S. government. In an attempt to
streamline the whole process, a soon-to-be-introduced bill would replace
the current system of debt collection with automatic payroll deductions
tied to the borrower’s income.

I wonder how long it will be before it will become illegal to pay for your own college, thus allowing Washington to tap directly into your paycheck perpetuity as compensation for the government investment in your K-16+ education.  We already have a working model for free education with the Obamacare model.  Obamateach is the obvious next step educational for a society moving rapidly Forward! into the 21st century.

Imagine what they’d find in New York

It sounds as if the Kabul Bank was an exemplary example of Western-style banking:

Afghan and American officials had for years promoted Kabul Bank as a prime example of how Western-style banking was transforming a war-ravaged economy. But the audit, prepared this year for Afghanistan’s central bank by the Kroll investigative firm, gives new details of how the bank instead was institutionalizing fraud that reached into the hundreds of millions of dollars and obliterated Afghans’ trust after regulators finally seized the bank in August 2010 and the theft was revealed.

Going further than previous reports, the audit asserts that Kabul Bank had little reason to exist other than to allow a narrow clique tied to President Hamid Karzai’s government to siphon riches from depositors, who were the bank’s only substantial source of revenue.

At one point, Kroll’s investigators found 114 rubber stamps for fake companies used to give forged documents a more legitimate look. And the auditing firms used by the bank never took issue with loan books that were “almost entirely fraudulent,” Kroll found, recommending that the Afghan government explore suing the last such auditor, A.F. Ferguson & Co., a private Pakistani firm with a franchise under PricewaterhouseCoopers.

What, one wonders, is the Federal Reserve’s reason to exist other than to allow a narrow clique to siphon riches from the American people?  Given the observable facts in evidence, it certainly can’t be the stated purpose of guaranteeing stable prices, much less the ex post facto rationale of assuring full employment.

At least the Kabul Bank had external audits, however fraudulent they were.  The Federal Reserve can’t even claim as much.

End the pretense

The UK’s central banker, Mervyn King, finally admits what was always apparent.  One wonders how long it will take Helicopter Ben to do likewise:

Warning that the next generation may have to live with the consequences of
past excesses “for a long time to come”, he said Britain’s banks needed to
drop the “pretence” that their debts will be repaid.

“I am not sure advanced economies in general will find it easy to get out of
their current predicament without creditors acknowledging further likely
losses, a significant writing down of asset values, and recapitalisation of
their financial systems,” he said.

“Only then will it be possible to return to a more normal provision of the
vital banking services so crucial to an economic recovery… Just as in
2008, there is a deep reluctance to admit the extent of the
undercapitalisation of the banking system in parts of the industrialised
world.”

He compared the situation to the “pretence that debts could be repaid” in the
1930s and added: “We must not repeat that mistake.”

They’ve already made the critical mistake, which was failing to shut down the UK’s zombie banks and attempting to prop them up with massive amounts of money printing, government-incentivized lending, and stock market pumping.  But further financial raping of the economy for the benefit of the banks isn’t going to restore them or the economy to health.

The first debate

He says it like it’s a good thing:

Obama has always relied on the big money men in private, while
disparaging them in public.  But what happens when he comes up against
one of them in the most public way possible?  Now we know the answer, and it ain’t pretty. The president appeared small and petulant and reactive.  Romney looked presidential and secure and proactive.

While Republicans are quite reasonably celebrating the fact that Romney demolished a hapless Obama sans teleprompter in the debate – disproving once again the notion that Obama is a supergenius master of rhetoric – they don’t seem to be thinking through the obvious implications of what they are witnessing.  Obama has never been more than a tool of those who have financially raped the nation.  Romney is one of the financial rapists.

How can anyone imagine Mitt Romney has any intention of fixing the very problems that he helped foster and from which he profited so massively?

Obama’s bag boy gets off

Corzine is officially deemed above the law:

A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives.

After 10 months of stitching together evidence on the firm’s demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.

Remember that excuse the next time you’re facing an audit. Just tell them it was the result of “chaos and porous risk controls” and that will eliminate any possibility of legal wrongdoing.

The end of the US banking system

Ann Barnhardt explains why it is time to not only get one’s assets out of the US financial markets, but the US banks as well.

What this [Sentinel ruling] means is that even if Jon Corzine is somehow dragged into court by private citizens, because you know damn good and well that the Justice Department will never, ever touch him, Corzine now has a legal precedent, likely from a bribed or otherwise coerced Federal Appeals Court, explicitly stating that an FCM can use customer deposits to pay its debts, and that the customers themselves are subjugated and have basically no legal right to their own monies, no matter what the law says, or what legal assurances, claims or guarantees are made to that customer about their funds held with an FCM or any other brokerage or depository institution. The “secured” party at the front of the line will always be the mega-bank who made the fraudulent loan using the stolen customer funds as collateral.

In other words, all customer funds in the United States are now the legal property of JP Morgan, Goldman Sachs, BNYM, or whichever megabank is the counterparty on the loans the FCM or depository institution takes out in order to fund its mega-levered proprietary in-house trading desks.

For the love of God, I don’t know what more there could possibly be to say to snap you people out of your normalcy bias trance. You have GOT to get ALL MONIES out of the financial system NOW. This ruling sets precedence for every depository institution, not just futures brokerages. It is now legal in the United States for any financial institution to steal customer funds, borrow money against those funds for the uber-levered proprietary trading use of the financial institution, and the customers have ZERO CLAIM TO THEIR OWN FUNDS once they are in the custody of the financial institution.

The court has ruled that once your money passes out of your PHYSICAL POSSESSION, and I mean PHYSICAL possession, it is no longer yours, and you have no legal claim or legal recourse to it when it is stolen. This includes BANK ACCOUNTS. Money in a bank is in the possession of the BANK, not you. Do you comprehend this? The entire system is utterly devoid of any integrity or genuine security and is breaking down catastophically before our very eyes. You HAVE to comprehend that your money sitting in an account is no longer legally yours. You have to force your brain to process and comprehend this, no matter how incomprehensible it may seem. IT IS OVER. This is Marxist hell. We have arrived.

This ruling and precedent will be used by every brokerage, every bank, every insurance company and every pension fund to deny you your money when the financial system finally collapses, be it on Monday, or be it two years from now.

This is the Reuters article to which she is referring. The reason the ruling is so disastrous is that it grants all depository institutions ownership of the funds on deposit with it. While this is a logical continuation of the Bankers First and Foremost policy we’ve been seeing from the federal government since 2008, it is burning down the village and salting the earth upon which it stood in order to save it, because there is now absolutely no sound reason to keep your money in a US bank.

Now, obviously, no banks are going to be dumb enough to take this ruling and run with it… unless it is a matter of their own survival. But the fact remains that a bank deposit is now legally considered no different than a gift from you to the bank, and depositors are now entirely dependent upon the bank’s good will to spend its money on their behalf.

I tend to suspect this ruling will be reversed upon appeal once the Powers That Be realize that saving the personal fortunes of Corzine and other failed bankers isn’t worth the price of destroying the US banking system. But if not, it should cause the largest banking run the world has ever known. I say “should” rather than “will”, because as we know, most people are idiots and will probably continue blithely assuming that it doesn’t matter what the fine print and the court rulings say, they’ve got a receipt showing they put their money in the bank, and money in the bank is safe, by definition.

On the other hand, I find this ruling particularly intriguing because I have observed that one can anticipate events, to a certain degree, by seeing through which hoops the elite institutions force the federal government to jump. While they wouldn’t have any reason to take such risks for Corzine and company, it would make a great deal of sense to do so if they are anticipating a U.S. financial collapse in the near-to-middle term.

For example, we can safely assume Romney will win the election November on the basis of the Goldman Sachs contributions. “Four years ago, employees of New York-based Goldman gave three-fourths of their campaign donations to Democratic candidates and committees, including presidential nominee Barack Obama. This time, they’re showering 70 percent of their contributions on Republicans.”