Wednesday, November 06, 2013

Bail-Ins: The Legal Framework is in Place to Continue Looting the American Public.

At the expense of the American public (devastating austerity and elimination of the middle-class), 2008 ushered in government bail-outs in order to preserve Wall Street's corrupt and bankrupt system., but what about government bail-ins (confiscation of bank deposits), the likes of which we saw occur in Cyprus, Greece? In addition to bail-outs, so far, we've been witness to severe austerity measures targeted at the masses, including sequestration, a dog-and-pony-show government shutdown, and massive cuts to food stamp that essentially puts a stranglehold on economic recovery (for the masses), not to mention the threat of default. There is no doubt that the intention is to strip away what is left of the social safety net at a time when its most needed. Meanwhile, J.P. Morgan, Goldman Sachs, Bank of America, Citibank, Deutsche Bank, etc., have not only evaded any and all consequences of their egregious actions, they are generously rewarded as they continue to gamble with taxpayer money. It doesn't take a rocket scientist to see what's going on here.

These austerity measures disproportionately affect children, seniors, and people with disabilities. According to the Center on Budget and Policy Priorities (CBPP), this recent $5 billion cut will average less than $1.40 per person per meal and jeopardize the strength of the current economic recovery. Moreover, according to the Center for American Progress (CAP) "each $1 billion dollar reduction in the Supplemental Nutrition Assistance Program eliminates 13,718 jobs," resulting in more than 68,000 job losses in the coming year.

Keep in mind that programs such as SNAP have what economists call a "multiplier effect"—in other words, "a dollar given to an entitlement recipient has amplified economic benefits. In this case, those consist primarily of the grocers who benefit when food stamp users shop in their stores. The estimated multiplier effect for food stamps is as high as 2 to 1."

The report, "Nourishing Change: Fulfilling the Right to Food in the United States," released by the International Human Rights Clinic (IHRC) at the New York University School of Law is timely as our government cut at least $5 billion-with many more cuts to come-- from the government's already inadequate $80 billion food stamp program, Supplemental Nutrition Assistance Program (SNAP), in the Farm Bill.  This report cites a study by the Center for American Progress, that calculates the "hunger bill" for the country, which includes the costs of treating illnesses and other medical conditions related to food insecurity, the impact of hunger on educational outcomes and lifetime earning potential, and the costs of running charity-based emergency food programs. For 2010, that bill came to $167.5 billion. For about half of that, $83 billion, the Center says we could extend the SNAP program to all food insecure households.

Okay, back to bail-ins.  It's the Dodd-Frank Act that passed in 2010-- it took up 848 pages at the time, as of July 2012 an additional 8,843 pages of rules were added, representing only 30% of the rules to-be-written. The estimate for the final length of the Act is 30,000 pages --that provides the legal framework for bail-ins.

According to the April 24, 2012 IMF report, conversion of bank debt to stock is an essential element of bail-in included in Dodd-Frank. “The contribution of new capital will come from debt conversion and/or issuance of new equity, with an elimination or significant dilution of the pre-bail in shareholders. ...Some measures might be necessary to reduce the risk of a ‘death spiral’ in share prices.” In the language of Dodd-Frank, this will “ensure that unsecured creditors bear losses.”
Under the existing legislation, the FDIC has the power to impose losses on unsecured creditors in the process of resolving failing banks. For example, the FDIC resolved Washington Mutual under the least-cost resolution method in 2008 and imposed serious losses on the unsecured creditors and uninsured depositors (deposit amount above USD 100,000). The Orderly Liquidation Authority (OLA) established under the Dodd-Frank Act further expands the resolution authority of FDIC. Subject to certain conditions, the FDIC now also has the powers to cherry-pick which assets and liabilities to transfer to a third party and treating similarly situated creditors differently, eg: favoring short-term creditors over long-term creditors or favoring operating creditors over lenders or bondholders. -- Economist, Nouriel Roubini
The U.S. is far from the only nation with provisions for bail-ins:

Bail-In Rules for Eurozone Banks Should Start In 2016

Bondholders Bail-in Shows Alternative Method to Rescue Banks

Bank Bail-in Rules Confirmed


But who cares, right? The stock market's soaring to new heights while income disparity continues to widen at unprecedented levels.

3 comments:

Anonymous,  12:56  

1) Even the best five star small local banks are LEVERAGED 10/1 on their assets. That means for every $1 in assets they have $10 in liabilities. And those are the BEST banks. You hear people talking about "derivatives" all the time? That's where the derivatives come into play. The financial structure is RIDDLED with them, like termites.

2) Even if the bank you use has somehow escaped this urge to speculate (over-leverage) with their assets, and is sound and solid, the FRN$ (federal reserve note "dollars") you have parked in the bank are completely at risk from inflation - CONTINUING inflation, which has eroded their purchasing power more than 95% so far. At this point it is STUPID to keep FRN$ in the bank. Spending your money on a wild trip to Vegas is a better use of the money than keeping it in the bank. Sounds crazy, right? IT ISN'T - at least YOU would be blowing your money on your own choices, and not just sitting there smugly thinking you were "saving money" while what you are REALLY doing is letting the government STEAL your purchasing power from you through inflation.

3) I am not an "expert," not a certified financial planner, chartered financial adviser or any of those other alphabet soup "professionals" whose apparent purpose in life is to help continue the FLEECING of plain ordinary Americans WHO WILL NOT TAKE RESPONSIBILITY FOR THEIR OWN FINANCES. I've never had a formal economics class in my life, despite finishing high school, a four year undergraduate degree, a masters degree, a 30-year career as a reference librarian and retiring (at age 52 - yes, I had a masters degree and my first full time professional job at 22). IF I had ever had a formal class in economics I'd be as broke as everyone else at this point, because ALL that has been taught in my lifetime in this country as far as economics is concerned is KEYNESIANISM - which is the theoretical basis behind the financial and economic MESS we are in right now, which is GOING TO GET MUCH WORSE before it's over.

5) What I AM doing is trying to pry people out of their economic blinders, which have been installed through a lifetime of misinformation, disinformation, mis-education and outright lies. It's not what you don't know that gets you in trouble, it's what you THOUGHT you knew that is WRONG that gets you in trouble. Well, unless you've read/heard/been taught Austrian economics, EVERYTHING YOU THOUGHT YOU KNEW ON THE SUBJECT OF ECONOMICS/MONEY IS WRONG. And if you KEEP doing what has gotten you WHERE YOU ARE, things will only get worse.

6) At the very least you need to be able to understand what is being done to you and how it's happening. If you understand the lies and where they originate you have a chance of not suffering so much damage in the coming difficulties.

Hank44,  13:09  

I believe Cyprus was the test case. They got away with it. Now expect bail-ins, savings taxes, confiscation, whatever will be necessary to fill the black whole of the banking industry. Put your mney under the mattress It’s becoming so blatantly clear; don’t say you were not prepared.

Anonymous,  13:17  

Let's see if I've got it straight. Wall Street orchestrated a crooked scheme of apparent financial recklessness that led to an economic crash, or a capitalist manufactured economic meltdown in order to rid itself of competition and cheated homeowners out of million if not billions or even trillions of dollars, wiped out 401Ks and wiped out other third party controlled savings, sucessfully robbing people around the world with impunity.

Then, without retuning a dime of this stolen wealth, the now impoverished by banker corruption are being punished for the actions of the rapatious capitalists by passing yet another ruthless capitalist’s dream of government assisted ‘legal’ theft via draconian austerity measures and outright theft by bail-out/bail-in.

In the past one could be certain that such corrupt conduct would cause the masses to raid the banks with pitchfork, tar and feathers to set things right, but now in an era of paramilitarized police sworn to “protect and serve” the ruling elite, technological bread and circuses, and a dumbed down citizenry, they will continue to implement their soft genocidal methods .

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