They are not only “too big to fail,” but too big to contain.
The derivatives have not been stopped or controlled; leveraging ratios are still out of control; and bank runs could happen at anytime, subjecting big banks to desperate calls on cash they would be unable to fulfill; apparently everything they have is loaned out and sometimes demanded back “each and every day.”
The entire thing is a dangerous high wire act that looms over our otherwise ordinary lives with great peril.
The Corporate Reform Coalition (CRC) did a study titled Still Too Big to Fail (PDF)that underscores the dangers of the current funny money schemes and the fact that even the weak-kneed requirements of the Dodd-Frank “Wall Street Reform Act” have not been fulfilled.
“The top six bank holding companies are considerably larger than before, and are still permitted to borrow excessively relative to the assets they hold,” the report states. “They are dangerously interconnected and remain vulnerable to sudden runs, because they borrow billions of dollars from wholesale lenders who can often demand their cash back each and every day.”
It goes on: “Banks can still use taxpayer-backed insured deposits to engage in high-risk derivative transactions here and overseas. Compensation incentives fail to discourage mismanagement and illegality, given that when legal fees, settlements, and fines mount, it is usually the shareholders, not the corporate executives who pay.”
And, the report warns, “[s]hould one of these giant banking firms fail again, it appears that the damage will not be contained.”
“Avoiding another meltdown depends on the will of federal regulators to use the new powers they were granted in the Dodd-Frank Wall Street Reform and Consumer Protection Act,” said Jennifer Taub, author of the report and professor of law at Vermont Law School. “If they behave as if they are beholden to the banks, we will likely face a more severe crisis in the future.”
So, we are admittedly completely vulnerable to another devastating economic meltdown… and virtually nothing can stop the contagion completely pandemic and global in proportions.
Brace yourself and breathe.
Among the many other details setting the stage for another market conniption fit and another round of banksters behaving badly is the Federal Reserve, which is not only set to drop a bomb if it announces a rate increase, but who are scrambling to keep their power unchecked and unwatched by the public sector.
Washington lawyers are introducing legislation attempting limit the Fed’s ability to unleash the floodgates and use “emergency loans” as a means of pipeline-delivered liquidity for the ‘Too Big to Fail Banks’ – rightly criticized as a “backdoor bailout.”
This easy money continues today under QE3 and has driven investor interest rates to below 0%, shafting savers, pensioners, insurance holdings and middle class America in general.
This on-going “emergency” to manipulate the money supply is reaching catastrophic proportions.
While no single act of Congress is going to reverse the magnitude of these economic events, the unprecedented power of the Federal Reserve undoubtedly deserves scrutiny:
The Federal Reserve’s ability to give emergency loans to distressed institutions in a crisis would be restricted under legislation being prepared by lawmakers who want to stop “backdoor bailouts”.
The Fed contained panic during the crisis by offering emergency loans to institutions facing liquidity crunches. But, after the meltdown, Congress introduced restrictions to prevent the bailout of single struggling entities, while preserving Fed powers to provide liquidity to groups of firms.
And voices from the Federal Reserve are ready to scream about the sky falling if their power is threatened:
Jerome Powell, a Fed governor, said in February that “it would be a mistake to go further [than the Dodd-Frank amendments] and impose additional restrictions.”
He added: “Because we cannot anticipate what may be needed in the future, the Congress should preserve the ability of the Fed to respond flexibly and nimbly to future emergencies.”
So, everything is at risk. Nothing has changed. Our lives are at risk. And later they will say no one saw it coming, even though everyone is pointing out how ominous and foreboding things already look.
This article is brought to you courtesy of Mac Slavo.