The Fed leaped into action when the Silicon Valley Bank (SVB) failed, and Congress quickly agreed they were derelict in their duties. No one asked why the Fed doesn’t act to keep us safe?
The Fed’s website tells us:
“What is the purpose of the Federal Reserve System?
The Federal Reserve System,…’the Fed,’ is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.”
The Fed’s responsibilities include:
- Conducting the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.
- Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers.
- Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.”
The Fed is an independent company, owned by “member banks. Their bank regulatory responsibility, to keep our financial system safe means “regulating themselves.” The Fed is a conflict of interest between the wolves (banks) and the sheep (us). For example, Greg Becker, SVB president and CEO also served as a director of the San Francisco Fed when the bank failed.
Thomas Jefferson warned us:
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered….”
History.com explains that President Roosevelt enacted the Glass-Steagall Act during his first 100 days in office:
“The Glass-Steagall Act,…was landmark banking legislation that separated Wall Street from Main Street by offering protection to people who entrust their savings to commercial banks.
…. (25% of Americans) lost their life savings (because) U.S. banks shut down.
…. The Glass-Steagall Act prohibited bankers from using depositors’ money to pursue high-risk investments.
…. Many blamed the economic meltdown in part on financial-industry shenanigans and loose banking regulations.”
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Who led the fight to repeal Glass-Steagall?
The Washington Post tells us:
“Federal Reserve Board Chairman Alan Greenspan, lining the Fed up with other federal bank regulators,…called on Congress to repeal a 54-year-old law that separates commercial banking from securities underwriting.
…. Greenspan said that the Fed believes banking can be tied to securities underwriting without subjecting federally insured deposits at banks to the risks inherent in the stock market.
…. As to potential conflicts of interest between those who lend to companies – commercial banks – and those who raise money for those companies in the stock and bond markets – securities firms – Greenspan said, ‘We’re never going to make everybody honest, but the number of safeguards we would put in the system are adequate.’
…. Greenspan said. The…structure would be the best way to ensure that, if a securities firm fails, a court would not try to ‘pierce the corporate veil’ by seeking to get at federally insured deposits in the bank subsidiary.
…. He said the nation’s largest banks and securities firms would not be interested in merging with each other because such marriages would prove ‘unprofitable and uneconomical.’”
The sheep were protected well, until the Glass-Steagall Act was repealed in 1999.
Big Al was wrong on all counts.
Banks quickly gobbled up smaller banks, merged with investment houses, growing to outrageous proportions. Less than a decade later, these casino banks were bailed out with trillions of dollars. We (sheep) were told it was necessary to “protect their depositors.” It was a lie, the bailout covered high-risk investment losses with our money.
Who is the head wolf?
The Fed Chair (wolf in sheep’s clothing) did nothing to regulate the banks, allowing the top banks to grow to the esteemed status of “Too Big To Fail.” Protecting the wolves takes priority over the sheep.
Insider Intelligence shows us:
Wall Street On Parade (WSOP) does the math: (Emphasis mine)
“Just four banks own…39 percent of the total assets owned by all 4,746 federally-insured banks and savings associations in the country.
…. The Fed has effectively seized control of the nation’s economic future, transferring wealth from the farms, small businesses and factory floors of America to the trading floors on Wall Street.”
It’s much easier to devour sheep when you have almost 40% of them in a corral.
Better Markets shows how wrong Big Al was:
“Six of the nation’s largest banks-Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo-have amassed more than $1 billion in fines in 35 cases in just the last 15 months.
…. The tally is now…nearly $200 billion in fines and other monetary sanctions. And the violations include every conceivable type of financial misconduct, from money laundering and market manipulation to fraud and foreclosure violations.”
The Fed made sure no one went to jail.
WSOP adds:
“Wall Street mega banks have a long history of talking a good game while surreptitiously doing deceitful things behind a dark curtain. Let’s not forget that some of the biggest names on Wall Street, in the leadup to the financial crisis of 2008, were driving the U.S. housing market deeper into despair by shorting (making bets against) the residential mortgage bonds they had sold to their own customers as solid investments.”
Talk a good game while being deceitful…
“We’ve been very, very clear that we will not allow inflation to rise above 2%.” — Ben Bernanke
“The American banking system is really safe and well-capitalized. It’s resilient. In the aftermath of the 2008 financial crisis, new controls were put in place, better capital and liquidity supervision, and it was tested during the early days of the pandemic and proved its resilience. So, Americans can have confidence in the safety and soundness of our banking system.” — Janet Yellen
The issue is NOT the tools available for the Fed; but their refusal to use them to keep our banking system safe.
Americans For Financial Reform spills the beans about the current Fed head: (Emphasis mine)
“Federal Reserve Board Chair Jerome Powell has presided over a broad deregulatory agenda since 2017 that has made our financial system less resilient, while also fortifying its role as a driver of wealth and income inequality.
…. This wave of deregulation has allowed Wall Street to increase speculation and profits but put the rest of us at risk.
The Powell Fed…
- weakened core supervisory tools that federal bank regulators have always used to monitor bank risk-taking and compliance with laws.
- turned off some of the early warning systems regulators used to detect emerging risks to the financial system.
- provided a financial lifeline to banks and allowed many of them to distribute capital to their shareholders.
- lowered the equity capital minimums that are shock absorbers against the kind of losses that have triggered bailouts of the financial system.
- weakened liquidity rules that provide crucial defenses for banks against market disruptions and potential Depression-like bank runs.
- allowed very large banks to lower their capital cushions and liquidity, leaving them more vulnerable to shocks.
- dumbed down the (stress) tests, and even revealed the criteria to banks beforehand,…allowing banks to camouflage risk-taking.
- relaxed rules that would curtail risky derivative activities by banks.”
How many millions will Powell earn in speaking fees; thanking him for a job well done? Just saying….
The Fed’s Zero Interest Rate Policy (ZIRP) removed the need for banks to compete for capital, punishing savers, while banks bet trillions on very high-risk investments.
John Mauldin sums it up:
“ZIRP…left many retirees in desperate positions, and it wasn’t an accident. It was a planned, intentional policy that started badly and only got worse.”
Risk?
Paul Craig Roberts said, “That 5 US banks have risk exposure that is twice the size of the GDP of the entire world.”
Derivates are a form of insurance; one party buys the coverage and transfers the risk. The big banks are functioning like unregulated insurance companies. These five “too big to fail” banks have no ability to cover the outrageous risks; knowing taxpayers will be forced to pay for their mistakes.
What to do?
Keith Fitz-Gerald suggests:
“My plan would be super simple.
1. Banks have 60 days to decide if they’re an investment, merchant, or commercial bank.
2. Bring back Glass-Steagall. Individual—read mom-and-pop—customer deposits are no longer allowed as collateral.
3. Any bank engaging in derivatives or other “investments” instead of actual banking does not receive a government backstop. Period.
Banking should be boring, not an abuse of public trust.”
G. Edward Griffin nails it:
“The Federal Reserve is a cartel- it’s a banking cartel. And like all cartels, it only has one purpose – and that is to serve the benefit of the members of the cartel, period.”
The Fed refuses to regulate the banks; Congress refuses to oversee the Fed – they have betrayed our trust. The wolves are devouring the wealth of the nation.
Bill Bonner opines:
“But for now, if there’s one thing our elites all agree about, it’s that no major changes are urgently needed. They like the system as it is. No redistribution of power…or money…required.”
The government is more concerned with regulating light bulbs, than protecting their flock. How much longer before the sheep storm the palace?
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On The Lighter Side
When friend Chuck Butler proofed this article he commented, “Dennis, you said what needed to be said, but came off a bit harsh.” I’m sorry, I don’t mean for it to be that way.
Friends and family alike often comment about the hours I spend researching and writing a FREE newsletter, questioning my sanity and use of my time. As I read some of the research articles I noted, I feel my blood pressure rising, and I will stop and take a break.
What seems so clear to me, is being ignored by much of the media and political class; might I be wrong? Does the Fed really have our best interests at heart, and all is under control?
Glass-Steagall worked for decades, what would it hurt to reinstate it?
For those who have asked, feel free to share our articles with anyone you wish – including your elected representatives.
Quote of the Week….
“We do know that the Federal Reserve System must be abolished. The creature has grown large and powerful since its conception on Jekyll Island. It now roams across every continent and compels the masses to serve it, feed it, obey it, worship it. If it is not slain, it will become our eternal lord and master. Can it be slain? Yes it can. How will it be slain? By piercing it with a million lances of truth. Who will slay it? A million crusaders with determination and courage. The crusade has already begun.”
— G. Edward Griffin, The Creature from Jekyll Island.
And Finally….
My wife Jo sent me a cool video, “Funny, Weird and Stupid Signs that Got Our Attention”. I can’t show them as I don’t want to violate any copyright laws.
Here is the text of some that cracked me up:
- Anyone have plans to stare at their phone somewhere exciting this weekend?
- No trespassing, we’re tired of hiding the bodies.
- Do not walk on rocks. If you do, and file suit claiming injury, this sign will be marked “Exhibit A”.
- Tombstone engraved, “Died from not forwarding that email to ten people.”
- Picture of a buffalo, “Do not pet the fluffy cows.”
- Is there life after death? Trespass here and find out.
- Hey girl, unless he wears a diaper, you can’t change him.
- Just sold my homing pigeon on eBay for the 22nd time.
- Today’s work-from-home tip: Blowing on the wine in the mug will help convince your zoom meeting that your tea is hot.
- We have the right to remain silent, but few have the ability.
And my favorite:
- COMPARE AND SAVE – Trojan Condoms $3.25, Huggies Diapers $22.00.
Until next time…
Dennis Miller
“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken
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