IN AMERICA

BANKING & OTHER 'JUNGLE' ADVENTURES

On the surface - one might consider banking as a noble enterprise... However, for those who 'still' haven’t recovered from the 2008-2009 Financial Crisis--the word 'noble' doesn't immediately spring to mind. And if you believe the 2010 Dodd-Frank Act was truly, Wall Street Reform and Consumer Protection--then you also believe you can trust all print and TV journalism...

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 emerged. 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: 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 1-2-5 years at 4.36% then sell her money [added to others] as small loans [car, boat, motorcycle] to her neighbor Sid for 12.5-15% depending on his credit rating.

Integrity: 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, IRA & 401k accounts] and use those funds when necessary to keep itself afloat..." It’s a built-in feature to protect the banks. Why? Because [besides an efficient lobbing system] bankers develop close bonds with high level government bureaucrats and elected officials, but we, living on Main Street - do not.

Banks can't go under, but depositors 'shall' be sacrificed at the altar of a 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.

Stability: banks know what they're doing. This too is duck-dodo. Only the tellers know what they’re 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 was penalized by regulators. Wells Fargo is a repeat offender with a frightening proportion of questionable inspiration that seems to have come from reading the stars, gut hunches or shuffling Tarot cards.

Like anything else stability is only possible with ethics and historically banking [money-control] 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 a GDP government policy can outnumber currency based on a standard. And if you don't believe that's true then how many new financial 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 [mostly middleclass] 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...

Once government and 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 the bank’s enthusiasm for more money-control—high on the drug called greed they often go 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. [The consumer didn’t shop with credit cards then.]

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 back in stocks - regardless of hype, but haven't we seen this story 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 French 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.

Pyramid Scheme in French is schema du pyramide and still means worthless paper, backed by expensive-real debt that soon exposes ruse. Something similar to what a 1.9Trillion stimulus package marketed by the previous Congress truly created for the U.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...Triple ledger accounting.

In 1979 the Federal Reserve [that can alter interest rates in a single bound] 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 slid by the Securities Exchange Commission [SEC] and Federal Trade Commission [FTC]. Junk Bonds are high risk but also offer high return - if you have steady nerves and can live long enough to ‘see’ that higher return.

The FTC Act 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 to avoid 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 the very entities behind 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: role your eyes] the FAA oversight of Boeing. Anyway - that timing merged with a gutsy Junk Bond fraud by folks like Michael Milken and Carl Icahn, who 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] but not Charlie Keating, defended by five senators, two of whom were John McCain and John Glenn. 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 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 hit the very perpetrators [only unsuspecting investors and taxpayers] learning lessons doesn't show up 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 promoted either of these magical, financial-instruments understood what they were. Brokers only understood the lucrative fees and commissions for selling them. *Derivative : a contract-instrument with a value that can be 'derived' from commodities, precious metals, currency, stock indices like: Forwards, Futures, Options] and mortgages. You may need more oxygen now but hang in there. *Credit-Default-Swap: an insurance policy or an 'out' that allows an investor to 'swap' a worrisome investment risk for another investment as an 'offset'. [See again: “Bad money drives out good.”]

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 [in addition to 10 million people who 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 and insurance? The population in 2008 was 304Million so the payout to Main Street could have been $1,611,658 million per man, woman and child. [Interesting concept...]

Skipping to 2018 - what in the name of all that makes sense is a Bitcoin or any of the other ‘financial-weed’ techno-currency? 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 an algorithm labeled something-currency. Using the SEC's definition a Pyramid Scheme is: 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/recruit [more new-members] investor money. [This means the last new member/investor ‘you’ - may not have a chair when the music stops.]

Barely fifteen years ago typical government projects, cost in the millions then about five years after the 2008 [global] Financial Crisis the cost of most projects became billions--now the cost of too many projects [like infrastructure] is in the trillions! Wow, is that inflation? Bank rates since 2021 for a 30-year fixed rate mortgage more than doubled. Mr. or Ms. Main Street may qualify for a home loan however the cost of produce is a worry.

And Covid19 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. Congress continuing to raise our debt-ceiling is no ceiling. It’s like each of us with the ability to raise our own 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 set. And 'who' would be expected to 'pay' again? Though next time those elected - answerable to “us” - should perhaps send their responsible banking golf-buddies to prison and then all re-payments go to “us” - you and me - Main Street taxpayer? An alternate idea…?