Friday, April 10, 2009
Would You Be Outraged If Only 5 or 6 Banks Were The Cause Of All Our Economic Problems? Well, And Obama, Of Course!
What if this handful of banks was so powerful, so influential in politics to both parties, that they demanded and received special treatment from the government?
F. William Engdahl has a must-read piece at the Asian Times, titled, Geithner's Dirty Little Secret:
Geithner['s] proposal, his so-called Public-Private Partnership Investment Program, or PPPIP, is not designed to restore a healthy lending system that would funnel credit to business and consumers. Rather it is yet another intricate scheme to pour even more hundreds of billions of dollars directly to the leading banks and Wall Street firms responsible for the current mess in world credit markets, without demanding they change their business model.
Yet, one might say, won't this eventually help the problem by getting the banks back to health?
Not the way the Barack Obama administration is proceeding. In defending his plan on US TV recently, Geithner, a protege of Henry Kissinger and before his present posting president of the New York Federal Reserve Bank, argued that his intent was "not to sustain weak banks at the expense of strong". Yet this is precisely what the PPPIP does. The weak banks are the five largest banks in the system.
The "dirty little secret" that Geithner is going to great degrees to obscure from the public is very simple. There are only at most perhaps five US banks that are the source of the toxic poison causing such dislocation in the world financial system. What Geithner is desperately trying to protect is that reality. The heart of the present problem, and the reason ordinary loan losses are not the problem as in prior bank crises, is a variety of exotic financial derivatives, most especially credit default swaps.
What Geithner does not want the public to understand, his "dirty little secret", is that the repeal of Glass-Steagall and the passage of the Commodity Futures Modernization Act in 2000 allowed the creation of a tiny handful of banks that would virtually monopolize key parts of the global "off-balance sheet" or OTC derivatives issuance.
Today, five US banks, according to data in the just-released Federal Office of Comptroller of the Currency's Quarterly Report on Bank Trading and Derivatives Activity, hold 96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default.
The top three are, in declining order of importance: JPMorgan Chase, which holds a staggering $88 trillion in derivatives; Bank of America with $38 trillion, and Citibank with $32 trillion. Number four in the derivatives sweepstakes is Goldman Sachs, with a mere $30 trillion in derivatives; number five, the merged Wells Fargo-Wachovia Bank, drops dramatically in size to $5 trillion. Number six, Britain's HSBC Bank USA, has $3.7 trillion.
After that the size of US bank exposure to these explosive off-balance-sheet unregulated derivative obligations falls off dramatically. Continuing to pour taxpayer money into these five banks without changing their operating system, is tantamount to treating an alcoholic with unlimited free booze.
Geithner and Wall Street are desperately trying to hide this dirty little secret because it would focus voter attention on real solutions. The federal government has long had laws in place to deal with insolvent banks. The Federal Deposit Insurance Corporation (FDIC) places the bank into receivership, its assets and liabilities are sorted out by independent audit. The irresponsible management is purged, stockholders lose and the purged bank is eventually split into smaller units and when healthy, sold to the public. The power of the five mega banks to blackmail the entire nation would thereby be cut down to size. Ooohh. Uh Huh?
It is a small monopoly of banks that not only hold a great percentage of toxic assets, it is a small monopoly of banks that are blackmailing the American taxpayer by insisting they be bailed out. No, they should be allowed to fail, split up, disbanded, their assets sold to the highest bidder or absorbed by banks and institutions that are in a financially healthy position.
You Liberals out there...you really need to read the linked story - you're having the wool pulled over your eyes and you keep shouting, "pull harder, pull more, I want to be blind, brainwashed and barefoot."
And why was Geithner not providing adequate overview of their operations as chief of the New York Federal Reserve Bank?
Great article, keep up the good work
You are asking some questions that no Dem has bothered asking. No MSM'er has bothered asking. The answers would be too embarassing for the Kenyan in the White House.
Yeah...I am guessing that those who read the story aren't surprised and the MSM and Obama Admin are doing their best to not mention that it's only a handful of banks who've fucked us up royally.
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