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Bail-ins for Banks Too Big to Fail

06 Sep

Maybe Not. [courtesy Google Images]

Maybe Not.
[courtesy Google Images]

Stanley Fisher is the former governor of the Bank of Israel, former chief economist at the World Bank, and current Vice Chairman of the Federal Reserve . According to the Daily Paul, (“The U.S. Plans To Bail-In The Banks—Federal Reserve Vice Chairman”) Mr. Fisher recently declared:

 

“. . . the United States is preparing a proposal to require systemically important banks to issue bail-inable long-term debt that will enable insolvent banks to recapitalize themselves in resolution without calling on government funding–this cushion is known as a ‘gone concern’ buffer.

“Mr. Fisher gave no details as to whom in the United States was preparing the bail-in proposal and what “bail-inable long term debt” is.”

 

•  First, Mr. Fisher implies that the US government is preparing to pass a law that will require those banks, but only those banks, that are “systemically-important” to issue “bail-inable long-term debt” instruments.

What are “systemically-important banks”? They must be the major banks (such as Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, State Street, and Wells Fargo) that were previously described as “too big to fail”.

More, these “systemically-important banks”:

 

 1) Must be insolvent; and,

2) Can’t expect help from government funding—before they can issue the “bail-inable long term debt” instruments.

 

These conditions imply that the Federal Reserve and federal government anticipate:

 

 1) At least one, probably several, and perhaps all of the “too big to fail banks” are going to become openly and undeniably “insolvent” in the near future;

2) The federal government will be too broke to save these insolvent banks with more “Quantitative Easing” (government funds); and,

3) Since government can no longer save the “too big to fail banks,” those banks are will failunless they can find a “savior” other than government.

 

Get that? Federal Reserve vice chairman Fisher has implied that some or all of the “too big to fail” banks will soon become insolvent and government will be too broke to bail them out.

The result of another Lehman-Brothers-like bank failure could be a collapse of the US and/or global economies.

When might this happen?

You can bet that the gov-co will do everything it can to postpone the insolvency of one or more “too big to fail” banks until after this year’s election in November. But any time after that election—say, first or second quarter of A.D. 2015—we might expect to see significant bank failures and economic chaos.

 

•  Second, in order to mitigate this coming economic chaos, the government is proposing a law that will “require” the “systemically-important banks” to “recapitalize” from a source other than government. What could that source be?

I can imagine only one possible answer: bank depositors.

Vice chairman Fisher’s remarks are evidence that the Federal Reserve believes a financial crisis may be approaching that is so severe that, as in Cyprus, the only way to keep the banks solvent is let them seize their depositor’s funds.

By passing a law that “requires” the “systemically-important banks” to seize their depositors’ funds, the government would give those banks a certain amount of plausible deniability.

I.e., if insolvent banks were required by law to seize their depositors’ funds, perhaps the depositors wouldn’t blame those banks for taking their funds and would instead blame the government for passing that law. If the depositors don’t blame the banks that seize their funds, those depositors might continue to do business with the insolvent (failed) banks and those banks might continue to hold enough customers to stay in business.

More, note that vice chairman Fisher’s description of the proposed law only appears to apply to the “too big to fail” banks. The biggest banks will be required to seize their depositors’ funds. The smaller banks might not be required to do so.

If the smaller banks aren’t required to seize their depositors’ funds, but do so anyway, those smaller banks won’t be able to blame the seizure on government laws. If the smaller banks have to take sole responsibility for the seizure, the smaller banks can expect to lose all trace of customer loyalty and perhaps be sued by virtually every depositor they have.

The costs of a plethora of lawsuits from depositors may be enough to destroy the smaller banks.

But if the “systemically-important banks” were “required” by law to recapitalize by seizing their depositors’ funds, they’d be protected by law from depositor lawsuits. Their depositors’ would have no remedy for the loss of their deposits other than to work against the reelection of the president, congressmen and senators who enacted the bill to legalize the taking of bank deposits by the “systemically-important banks”.

The result of this proposed law could very well be that the “systemically-important banks” will not only survive their insolvency by robbing their depositors, but may even be able to prosper by buying up smaller banks that are destroyed by depositors’ lawsuits if they seize depositor funds.

Get that? The result of this proposed law might tend to guarantee the survival and growth of the “systemically-important banks” that are insolvent and the destruction of the smaller banks. Banking services might thereby be consolidated into fewer and fewer, but bigger and bigger banks.

If that analysis were an accurate, then we could expect that the proposed law mentioned by Mr. Fisher to be supported and even initiated by the “systemically-important banks” as a means to not merely survive a coming economic calamity, but to emerge from that calamity with even more financial (and political) power than they had going in.

 

•  Third, we’ve all heard “doom and gloom” reports about a coming economic debacle. Federal Reserve vice chairman Fisher’s statement verifies that those reports are, in general, reasonable.

Insofar as the proposed program warns that the big banks can’t count on government to bail them out, the Federal Reserve at least hints that they anticipate a systemic financial crisis so catastrophic that the Federal Deposit Insurance Corporation might be wiped out and unable to provide funds to insolvent banks.

 

•  Fourth, if the biggest banks are allowed to issue “bail-inable long term debt” what does that term mean?

It means that the “systemically important banks” will be allowed to seize their depositors’ bank account funds and issue some sort of note in return that promises to repay those deposits someday, sometime in the distant future.

The bank’s depositors won’t be able to charge the biggest banks with theft because it will be declared by law that, in return for their savings, they’ll receive a genu-wine government-approved piece of paper (the “bail-inable long-term debt” instrument) that promises to repay those savings at some future (long-term) date.

This “bail-inable long term debt” instrument might even pay some modest level of interest.

Such a deal, hmm?

However, you can bet that before the day comes when the “bail-inable long-term debt” instruments are repaid, there’ll be a massive “reset” (devaluation) in the value of the fiat dollar. This devaluation will be legalized by government-enacted laws that declare, say, ten of your old dollars (that you had in your savings account before they were seized by your bank) to be worth only one new “dollar” paid back for your “bail-inable long-term debt” instrument.

If you had $100,000 in the bank when your funds were seized in return for a “bail-inable long-term debt” instrument, by the time (Two years? Three?) when it becomes legal for you to redeem that debt instrument, you might only receive $10,000 in purchasing power.

 

•  Although I ran for Place One of the Texas Supreme Court in A.D. 1992, I’m not a licensed attorney. Therefore, my notions on the legal implications of vice chairman Fisher’s comments should be taken with salt. Even so, I have a smidgeon of common sense and an occasional capacity for logic. Common sense tells me that vice chairman Fisher’s remarks indicate that the gov-co and “too big to fail” banks are colluding to legalize the theft of billions, probably trillions, of depositors’ dollars from their bank accounts.

If I’m right, those of you who keep your savings in banks do so at increasing risk.

The banks and gov-co are about to treat you like so many Indians and trade you $23 in shiny beads for Manhattan Island.

You’re about to be robbed.

Legally.

Big time.

 

Implications

1) The concerns about our economy being fragile and subject to serious crisis are valid.

2) Those of you who store your savings in a bank that’s “too big to fail” may believe it’s wise to do since those banks are “special” and won’t be allowed to fail—and therefore, your deposits are safe. However, if the new “bail-inable long term debt” law goes into effect, those “special,” “too big to fail” banks may be the worst place to store your savings since those are the banks that will be “required” by law to seize you savings to in order to save those banks rather than you.

3) Those of you storing your savings in a bank that’s “too big to fail”—or in any bank, for that matter—in the form of a digital or paper currency may want to start moving some or most of your funds out of those banks and into some physical form of savings that can’t be “legally” confiscated by the banks under existing or soon-to-be enacted “laws”.

 

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12 responses to “Bail-ins for Banks Too Big to Fail

  1. EDOMS THORN

    September 6, 2014 at 11:35 PM

    The Moral, Foreign Policy and Economic Dilemma that the Western Nations have found themselves in was foretold in the Bible. In my opinion, the KEY to understanding the N.W.O. is understanding EDOM (Rev. 3:9 Zionist “SELF STYLED” JEWS) and who True ISRAEL is.
    I have known that America is being Destroyed by “DESIGN” because “WE” in the Western Nations are True Israel, and Esau/EDOM has gained control of the Western Nations (ISRAEL) Economic, Foreign and Domestic Policies to turn the world against US and aide in our destruction! EDOM controls the Education System, and the filth and perversion from Hollywood and the lies and cover ups in the MS Media.

    EDOM is responsible for Multiculturalism and Forced Open Borders, and the Destruction of Nationalism World Wide! ALL that EDOM does and has us involved in, is in direct opposition to God, and Godly Principles!

    NOE lets pat attention to what the word of God said concerning ISRAEL(NOT JEWS)
    …”What America was”…
    Deuteronomy 28:12 The Lord shall open unto thee his good treasure, the heaven to give the rain unto thy land in his season, and to bless all the work of thine hand: and thou shalt lend unto many nations, and thou shalt not borrow.

    And WHAT America has become>>>
    Deuteronomy 28:43-44 The stranger that is within thee shall get up above thee very high; and thou shalt come down very low. He shall lend to thee, and thou shalt not lend to him: he shall be the head, and thou shalt be the tail”.

    And that stranger is EDOM. When the people decide that the facts do matter about who has gained control of the Western Nations Economic, Foreign and Domestic Policies, research these fact filled expose’s about EDOM.

    . …”For ESAU(EDOM) IS THE END OF THIS AGE, AND JACOB IS THE BEGINNING OF THE ONE THAT FOLLOWS”… (II Esdras 6:7-10). (That is the N.W.O. to the Reign of Messiah)

     
    • kanani

      September 10, 2014 at 8:10 AM

      Edom is also a tasty style ofcheese.

       
  2. skybluehigh

    September 7, 2014 at 1:12 AM

    Meanwhile, back at the glass outhouse, one would do well to avoid the mistake of thinking that a brokerage account, a credit union account, an offshore account, or any other USD holding account will escape the carnage. Any asset held in USD or payable in USD faces a triple whammy. The USD is the kicker. Other fiat currencies aren’t the answer either.

    It would also be wise to get out the stock, bond, money market, mutual fund, savings bond, etc agreement (all the paper work) and read it for the first time…yes, especially the small print. The large print giveth, the small print taketh away. One may find clauses to the effect that one’s “cash out” can be in something called “like shares”. Hmmmm…if one owns worthless shares, why would one want to be paid in more shares like the worthless ones or new shares that are just as worthless? Even if it’s absolutely payable in USD, why take the chance that they’ll be confiscated or paid off in worthless USD?

    The answer (hot damn, Virginia, c’mere, this one actually has an answer!), in my opinion, (never mind, Virginia, there’s a disclaimer) is silver where one can touch it 24/7.

     
  3. Toland

    September 7, 2014 at 3:15 AM

    Make darn sure your bank account is not over the $250,000 limit of coverage by FDIC insurance, so that at least YOU (if not your bank) can claim a bail-out from the government when DOOMSDAY arrives.

    “FDIC insurance is backed by the full faith and credit of the United States government.” (http://www.fdic.gov)

    Thus, the law requires the FDIC to pay out when any bank depositor makes a legitimate insurance claim. The “full faith and credit” language also refers to the unlimited supply of dollars that can be summoned from the Federal Reserve for this purpose.

     
    • skybluehigh

      September 7, 2014 at 3:27 AM

      You are joking, aren’t you?

       
    • moon

      September 7, 2014 at 1:10 PM

      Toland, you may not want to bet the farm on the “dollar” or “full faith and credit…”.

       
  4. MPK

    September 8, 2014 at 1:39 AM

    There is nothing new under the sun that shall not be known, and know I do. As for all of you!

    Well’ Old news only gets repeated on something everyone knows can happen, has been planned to happen, and one day will.

    Its unfortunate that you can’t keep your money under the mattress, or in a shoe box, least the criminals would have a field day of having xmass come early for them. Simply put’ a peoples bank should have been implemented a long time ago, as Governments and the federal system have failed the people, and the people have failed each other in the land of the greedy, monopoly, vice, murder, rebellion and so on to corruptions in the highest parts of the land and throughout other nations of the world.

    Yes’ Other nations are just as guilty of their crimes as well. least we forget that the devil also calls himself a Christen, a Muslim, an Atheist, as well as a Politian, a Prince, a King, a Queen, a Pope, a President, a Prime Minister, all high society type criminals non the less, and that includes any and all mans governmental systems, as much as the Federal Banking System world wide is and showing its hand to be. Leaders leading the many to their doom. This just shows the world is truly without a true leader, a good man, a true man to the people, and to the nations to follow, to ask help from, a man of God, a man of true faith, a man of peace. Yes’ all you have as leaders are but shells, empty, devoid of goodness, kindness, helpfulness. All you have are, but selfish men in power, boy’s with toys, to kill, destroy, and who take pleasure in the pain that they cause for the many at their masters commands.

    Divided you all are, and always will be, which is the key to rulership over you all. Remember this’ A true good man’ is a dead man if he dares to take a stand, and most of the living are but Satan’s pawns, and playthings.

    So’ Out with the old and in with the new it shall be, as all of you will see.

    No its too late, for the bell tolls now’ and enemy is at the gates. God bless the true children of God, and keep them safe, and dam all those who have dammed your nation to hell, and the traitors that you have voted into power, and the ones in secret societies’, that you have allowed to be, and over you all, for the flood is coming, and the dam is cracking, and their is no one but your selves to try and save you. What you have sowed and have allowed to be sown, so you all shall reap, one and all into the very dark deep.

    “MPK”. If you don’t know what it means, then God can’t and will not even help you’ for you don’t even know its time. This last generation will not pass until all things are completed’ and when did it start? I know, but the point i make is that you don’t, simply because your ignorant and God does not forgive self-made ignorance.

    They suppled the shovel long ago, only you don’t know you have been digging your own hole to lay in it and they only have to push the dirt into it. Buried and forgotten, that’s what you shall be to them. Can you handle the real truth? don’t answer because most of you are already dead in the head and your answers are but from true ignorance, or from what they supply you with what they call intelligence, and their knowledge, but it will only show unto others as to how mislead you are and how deeply buried you have become. There is Satan’s logic, Mans logic, and Gods logic, which one will you use. I test all three, to know which one is the correct one, but most operate on only the first two, never knowing the last one even exist.

    Wake up’ and see the daisies on your gave site. Take a stand, and understand, or die for all eternity. Your choice.

    As for the young’ well they are as good as dead’ with Satan as their mentor and their guiding logic of greed as a helping hand to fame and fortune at the price of others and themselves. Woe is to the world, and woe as to unto the people and the nations, for they know what they do and unto others.

    At the age of seven my two best friends were two American boys, and their father was the American ambassador here in Australia, in Sydney until they were tragically killed and that is over 50 years ago. I don’t hate American only the way they are conducting themselves over world affairs and towards their own people. Something must be done to right the wrongs otherwise the future will be the way it shall be, yet man can change that as he was given FREEDOM to do so. Have the people of this world so forgotten GOD’s words and why it was written, is their so little understanding, wisdom, true intelligence left now. Tell me that this is not so’

    FREEDOM IS’ to do good, and what is right, but not what it has chosen to do instead, and continues to do so, by the power of might, which is not right nor in the interest of GOD or MAN and only helps Satan’s further his plans.

    But then the temptations are at their greatest, the rewards are but for the few, and seeing that the flesh is weak, and so are the minds of the many do not see the dangers coming, But alas this still this is no excuse to be wicked unto GOD your father, his children, nor of the warnings known to come.

    MPK.

     
    • skybluehigh

      September 8, 2014 at 9:59 PM

      MPK, you might want to see someone about that.

       
  5. Tamina

    September 28, 2014 at 3:03 AM

    As a purely academic exercise, can any of you envisage how individuals on their chosen ground, would live if freed from the nation state ideologies of usury ? These man made laws of financial
    command & control have been successfully employed over these last three hundred + centuries by men intent on building earthbound Empires. We are all slaves to an outworn and faulted religion of
    exchange motivated by the will to power over others and consequently, false Profits.

    How’s about a New Paradigm, anyone ?

     
    • Adask

      September 28, 2014 at 4:14 AM

      How’s about an Old Paradigm? How ’bout we use gold or silver coin for money (which can’t be mass produced by central banks but does appear to be approved by the Bible) and then have a “Jubilee” every 50 years when all debts are forgiven (again, Bible recommended). The significance of the Jubilee may not merely be that the great unwashed have their debts forgiven every 50 years, but also that the lenders are at least diminished in power and perhaps even wiped out every 50 years. Result? If all debts were cancelled every 50 years, banking behemoths like the Rothschild family banks might not be possible. If these huge banking institutions/families couldn’t be established so as to last for a century or more, the world might be a more agreeable place for most people.

       
      • moon

        September 28, 2014 at 6:02 PM

        You may soon see a version of gold/silver trading along with the Jubilee forgiveness…not by choice, but by force…natural force.

         

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