BANKING IN AMERICA

Dear George...On the surface - one might consider banking as a noble enterprise... However, for those 'still' in recovery mode from the 2008 Financial Crisis--the word 'noble' doesn't first spring to mind. And if you believe the 2010 Dodd-Frank Act was truly, Wall Street Reform and Consumer Protection--then you must also believe in the Tooth Fairy...

Once upon a time on a distant planet in a galaxy far, far away [and it matters not if you subscribe to Evolution, Reincarnation or Darwin] bankers landed here. And, the Universe has yet to unfold as it should - let alone recover.

Fact is, early bankers and financiers were little more than well dressed pirates who made the first boatload of  prison-colonists dumped on the shores of Australia resemble British gentry. But nothing our bankers have done since is more impressive than the image they have managed to stamp on our minds of their own unsullied history. A history supposedly steeped in tradition, integrity and stability. 

Tradition: a popular, but all too prevailing misconception is that banks strive to serve. Fiddlesticks! Banks were always and are in the retail business. Banks buy and sell money and they do it for a profit. [Buyer beware absolutely applies.] Banks buy/hold Aunt Helen's CD for five years at 0.8% then sell her cash-equity [with others] as a car loan to her neighbor Sid for 8% depending on his credit rating. 

Another legend is that banks keep your funds safe. Ugh!  Remember Dodd-Frank?  It's a complicated law, but a simplified part of that slippery piece of legislature affects you and me; "...a U.S. bank may take its depositors funds [our checking, savings, CD's, IRA & 401k accounts]and use those funds when necessary to keep itself afloat..." Banks can't go under, but depositors 'shall' be sacrificed at the bank teller's window. For a recent example--got any friends or relatives in Cyprus? In 2013 in a process known as a 'bail-in' a percentage of all deposits exceeding 100,000 euros became seized funds. The process converted cash exchanged for equity shares. [Shares/paper redeemable in the future as/when the bank allowed.] Essentially a Greek Cypriot who went to bed Friday night with 200,000 or more in their account woke up Monday morning to half.

Integrity: t'is also rumored that banks know what they're doing. This too is duck-dodo. Only the tellers know what they are doing. All of the other goop created by high priced banking brass is a lot of lucky guesses and sometimes not so lucky--if you were a recipient of policies for which Wells Fargo has been penalized by regulators. Wells Fargo is a repeat offender with a frightening proportion of questionable inspiration that seems to have come from the stars, hunches or the comics.

Stability: is a builtin feature to mostly protect the banks. Why? Because [besides an efficient lobby] bankers golf etc...with high level government bureaucrats and elected officials, but we, living on Main Street do not. 

Like anything else stability is only possible with ethics and historically banking/money/control/prestige/etc  has been shaky...We don't need to go back to the Roman Empire, only to Sir Thomas Gresham, a merchant in the mid 16th century to find banking double talk; "Bad money drives out good..." Translation: currency issued by shaky governments can outnumber currency based on a standard. And if you don't believe that's true then how many new regulation 'patches' has our economy needed since Nixon took the U. S. dollar off the gold standard in 1971?

Inflation was blamed for that gold move just as inflation was used to explain why Canadian and U.S. mints stopped issuing silver coins in 1965. But two major advantages came into play with the silver and gold decisions: 1. steadily both precious metals slipped from the hands of Main Street [majority middle class] and back under the control of those who wished to keep more control; 2. off the gold standard essentially allowed the U.S. Federal Reserve to move-the-goal-post of interest rates when they determined rates should be up or rates should be down. Regardless of the price we might pay for a loaf of bread...

Britain and Europe made the same moves right after WWII for 'economic recovery' reasons, but after attaining economic recovery, never went back. Once governing/banking entities take-from they do not return-to...But those in charge of money-manipulation strive to make the financial capture, gradual so Main Street doesn't notice immediately. However, in their/banker's enthusiasm for more money/control/prestige-- high on the drug called greed they have gone too far too fast. Stock values at year end 1928 were much like they are now with a real value in excess of production, by the mid new year 1929 the consumer marketplace had already absorbed as much in the way of affordable goods as limited incomes could.

It took 25 years for America to recover, but the difference from then to now is banks offered bonds and treasuries and savings accounts that paid fair interest. Today none of that exists--the only place for Main Street to put money is in stocks regardless of hype, but haven't we seen this repeat before...            

After the death of Louis XIV, France was on the verge of bankruptcy and an enterprising Scotsman named John Law convinced the new king that an expansion of credit would promote and restore prosperity...

In 1716 John Law was granted a bank charter and allowed to issue notes as currency--mostly in the form of loans to the French government. [Remember; Bad money drives out good?] Anyway, the French government used the notes/paper to pay off creditors and in return accepted those same notes as legal tender for the payment of taxes. [Something like the brilliant folks at our U.S. Federal Reserve buying our U.S. Treasuries.] Just a little hocus-pocus because John Law's 'currency' had nothing behind it except some fairly intense prayer. As the transactions kept cycling it was a few years before anyone recognized the structure was an illusion. 

[Pyramid in French is spelled pyramide, but with or without the 'e' still means the same.] Worthless paper, backed by expensive/real debt soon exposes an illusion which is what a 1.9Trillion stimulus package marketed by our current Congress truly means for today's dollar value.

It's not just banking artifice from our history--current regulations mean zilch-zip-nada when the business of banking has an effective lobby. Here and traveling the globe, anywhere there is a banking system, there is motivation for individuals and governments to--well let's be kind and call it juggle...

In 1979 the Federal Reserve [that can alter interest rates in a single bound/move the goal post] raised the discount rate they charged banks from 9.5% to 12%--to tackle inflation [caused] by domestic stimulus spending for President Lyndon Johnson's "Great Society" programs, followed by military spending for the Vietnam War.  However, banks with a Savings & Loan charter had issued long-term loans at fixed rates lower than the new higher rates they suddenly had to pay. Also the S&Ls were obligated to pay interest for savings accounts and long term Certificates of Deposit [CDs] at higher rates than they could now offer in order to attract new depositors. Solution? Enter a brilliant offering aptly named Junk Bonds that got by the Securities Exchanged Commission [SEC] and Federal Trade Commission [FTC]. Junk Bonds are high risk, but also offer high return - if you have steady nerves.

The FTC Act was signed into law in 1914 by Woodrow Wilson: "Outlaws methods of competition and unfair acts or practices that affect commerce..." [Didn't work so well prior to 1929 did it.] Then  in 1934 President Franklin Roosevelt created the Securities Exchange Commission to: "Protect investors and national banking system against market manipulation." The problem faced by Main Street America is that national banks are in on a great deal of market-manipulation.

The 1980 Deregulation and Monetary Control Act signed by President Jimmy Carter allowed adjustable-rate mortgages and authorized lenient accounting-oversight [like the FAA oversight of Boeing]. That timing merged with a gutsy Junk Bond fraud by folks like Michael Milken and Carl Icahn, created a perfect petri dish in which to grow financial fungi. Voila! The Savings and Loan Crisis and second most significant bank collapse since 1929. The S&L crisis took down some of those responsible like Neil Bush [yup same family] and Charlie Keating [defended by five senators, two of whom were John McCain and John Glenn]. But mostly middle America - lost huge-huge-huge. Between 1986 and 1995 the total cost was 160 billion with taxpayers paying 132 billion [sound familiar] while the surviving S&L industry paid 28 billion.

Ahhh, but anyone born before 1995 knows the American banking saga gets even more rousing...At this point in our banking-soap-opera any rational person would expect there were enough banking history lessons already learned. However since little of the previous impact fell on a majority of perpetrators [only unsuspecting investors and taxpayers] learning from lessons doesn't appear in the business of banking. 

Case in point explain; Derivative or Credit-Default-Swap...

As the 20thCentury became the 21stCentury in real estate/banking terms no one who sold either of these financial-instruments understood what they were selling - they only understood there were lucrative fees and commissions for selling them. Oh swell!  A Derivative is a contract/instrument with a value that can be 'derived' from commodities, precious metals, currency, stock indices [like: Forwards, Futures, Options, Swaps] and mortgages. Okay--you may need more oxygen by now, but hang in there. A Credit-Default-Swap is basically an insurance policy or an 'out' that allows an investor to 'swap' a worrisome investment risk for another investment as an 'offset'. 

Toooo many of those worrisome-mortgages, were granted to toooo many people with marginal credit and/or work histories for toooo many over valued houses. What that created only 13 years after S&L recovery, was a wee financial imbalance that came to a head in 2008. This time the cost to the generously kind American taxpayer [10 million of whom lost their homes] was 12.8 trillion including 498 billion in direct bailout payments added to 8 years of GDP loss recovery. [Should elected leadership have paid the 498 billion directly 'to' taxpayers instead of banks and industry? The population in 2008 was 304Million so the payout to Main Street could have been $1,638,157 million per man, woman and child. Interesting concept...]

Now it's 2021 and what in the name of all that makes sense is a Bitcoin or any of the other eight techno-currencies?  P-l-e-a-s-e!  With today's technology no one needs to print pyramid-style backed paper so Main Street can lose their pension money - promoters can simply create investment from 'air' in the form of cryptocurrency. Using the SEC's own definition of a Pyramid Scheme: an investment fraud in which the business model returns are typically through recruiting new members. There's no product or 'value' added only hype to entice more patron/investor money. 

Barely fifteen years ago most government projects, cost in the millions then soon after the 2008 [global] Financial Crisis the cost of most projects became billions--now the cost of nearly everything that needs attention is in the trillions! Wow, is that inflation? But most bank rates for a 30 year fixed rate mortgage is 2.467%. Mr. or Ms. Main Street might qualify for a home loan however, the cost of that loaf of bread is a worry.

And Covid19 has raised the financial stakes for every single country [including China and Russia] that may very well set us all up for a heart-stopping high wire act like we experienced in 2008. But Congress continuing to raise their debt-ceiling is like each of us with the ability to raise our own credit limit every time we max-out our credit card. With that bank bail-in [a bail-out renamed] on the Mediterranean Island of Cyprus, a precedent has been made. And 'who' would be expected to 'pay' again? Hopefully if you have read to this point you know exactly 'who' is expected to 'pay'...But next time perhaps those [golf buddies] responsible should go to prison and all payments should go to the Main Street taxpayer? [Interesting concept...] 

https://medium.com/@BraveNewFilms.org/heres-how-to-contact-all-535-members-of-united-states-congress-call-email-tweet-20b8a1c54195

*Sherrie Todd-Beshore is a mystery suspense novelist and former journalist...

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