Saturday, December 10, 2011


submitted ago by JimMarch
The previous world record robbery was the Mongols stealing China. A robbery on a vastly larger scale in terms of the percentage of the world's wealth has been carefully planned.
It involves our old "friends" the "too big to fail" banks.
Start with the preliminaries that have already happened:
1) In 1999 banks gained the ability to gamble on the derivatives market. Banks gambling was a major cause of the Great Depression (led by Goldman-Sachs) and so the Glass-Steagall act separated "bank" from "investment house" (gambling on the derivatives market and others). Since 1999 that separation was torn down. It's already had disastrous consequences but the other shoe hasn't dropped yet.
2) In 2005 the banksters re-wrote the bankruptcy rules. The bill was laughably known as the "Bankruptcy Abuse Prevention and Consumer Protection Act", and toughened bankruptcy rules for students and ordinary consumers even more. But it did something else nobody noticed at the time.
It created a "Chapter 15 bankruptcy process" for "international financial institutions".
Download the bill in PDF form from here: (click on "text of legislation" and then the PDF "as passed")
On page 157 (PDF page numbers) it sets rules for a "chapter 15":
§ 561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15
(a) Subject to subsection (b), the exercise of any contractual right, because of a condition of the kind specified in section 365(e)(1), to cause the termination, liquidation, or acceleration of or to offset or net termination values, payment amounts, or other transfer obligations arising under or in connection with one or more (or the termination, liquidation, or acceleration of one or more)— (1) securities contracts, as defined in section 741(7); (2) commodity contracts, as defined in section 761(4); (3) forward contracts; (4) repurchase agreements; (5) swap agreements; or (6) master netting agreements, shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by any order of a court or administrative agency in any proceeding under this title.
So all of those various financial deals such as a "swap agreement" or "forward contract" get paid first BEFORE anybody else the bank owes money to - such as, say, depositors?
But what's a "forward contract"? Well that's defined in the same law, page 129 for "FDIC insured institutions":
(d) DEFINITION OF FORWARD CONTRACT.— (1) FDIC-INSURED DEPOSITORY INSTITUTIONS.—Section 11(e)(8)(D)(iv) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iv)) is amended to read as follows: (iv) FORWARD CONTRACT.—The term ‘forward contract’ means— (I) a contract (other than a commodity contract) for the purchase, sale, or transfer of a commodity or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade, or product or byproduct thereof, with a maturity date more than 2 days after the date the contract is entered into, including, a repurchase transaction, reverse repurchase transaction, consignment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or any other similar agreement;
"Or product or byproduct of" includes what we now call derivatives. When this was written in 2005 we didn't understand just how evil terms like "swap" or "hedge" or "derivatives" are, so nobody was paying attention when the lobbyists wrote and passed this.
But now? Well we now know that the global "derivatives market" is gigantic, with over a quadrillion (thousand trillion!) dollars worth of pure unregulated trans-national gambling debts floating around. Now, the good news is that this number (and estimates range from a $1quadrillion to 1.5quadrillion total worldwide derivatives market/casino) is actually over-stated. As one financial blog puts it:
To understand the concept of "notional value," it's useful to have an example. Let's say you borrow $1 million to buy an apartment and the interest rate on that loan gets reset every six months. Meanwhile, you turn around and rent that apartment out at a monthly fixed rate. If all your expenses including interest are less than the rent, you make money. But if the interest and expenses get bigger than the rent, you lose.
You might be able to hedge this risk of a spike in interest rates by swapping that variable rate of interest for a fixed one. To do that you'd need to find a counterparty who has an asset with a fixed rate of return who believed that interest rates were going to fall and was willing to swap his fixed rate for your variable one.
The actual cash amount of the interest rates swaps might be 1% of the $1 million debt, while that $1 million is the "notional" amount. Applying that same 1% to the $1.2 quadrillion derivatives market would leave a cash amount of the derivatives market of $12 trillion -- far smaller, but still 20% of the world economy.
Jim again - $1.2quad is their guess but others range from a low of $1guad to a high of 1.5.
3) So the big banks all dove headfirst into derivatives. Here's a list of all the big banks that have MORE money floating around in derivatives than they do deposits:
JPMorgan - Citi - BAC ("Bank America Corp", parent to BofA and Merill Lynch) - Goldman Sachs - HSBC - Wells Fargo - Morgan Stanley - Bank of New York Mellon - State Street Bank Trust - PNC Bank - Suntrust - Northern Trust - Regions Bank - TD Bank USA
Bank of America deserves special mention. Merrill Lynch is supposed to be the gambling house side of the overall operation. They racked up $80tril in derivative-based potential debts - far bigger than the world's yearly income. And since a lot of it was based on the European market, they recently transferred that steaming pile of shit to the BofA books to assure nervous bookies that it was at least backed by US taxpayers via the FDIC and the like. Or, at least that was the story. I'm not so sure now, read on...
So how does the robbery go down?
Well, how easy would it be to deliberately lose money in an unregulated casino? Whoops. And done in a max-evil fashion, such loses could be a LOT more than just 1% or so.
So you're high up in a major bank. You rig a series of bets to fail with a partner elsewhere - US is possible, overseas would be safer. You crash the bank - that's easy, either use the fake gambling debts themselves or suddenly reveal a bunch of off-balance-sheet paper that's been hidden away, or wait for a major crash in Europe or China to act as a convenient trigger. (Hell, if you're Goldman-Sachs doing this you get Greece to improperly hide a bunch of their debt to keep the gravy train running for a while more as G-S actually did!) And then you declare bankruptcy, and "poof":
Everybody's money goes poof on a massive scale, because the gambling debts get paid first and per US law, no court or agency can do a damned thing about it.
This is also why the debts were transferred from Merill Lynch to BofA the bank - they're clearly an "FDIC institution" so the definition of "forward contracts" clearly applies to them when they go into Chapter 15.
Not if - when. Because it will be way, way too easy to pull this stunt and conduct the biggest bank robbery ever. The ghost of Jesse James is getting a cosmic woody just thinking about it.
a) Bring back Glass-Steagall.
b) Revoke the whole "chapter 15" thing.
c) Ban all instances of off-balance-sheet money OR debts. This is what ultimately took down Enron, it was a huge factor in Greece (where Goldman-Sachs taught them how to "look less in debt") and it is still going on.
d) Bring back a right of private prosecution of all federal banking laws so that whoever gets screwed can apply both civil and criminal punishment. As just one example: Jon Corzine the former Goldman-Sachs chief, former New Jersey governor and the guy at the helm of MF Global when it blew sky-high just testified before Congress that he has no idea where $1.2bil went. Well that's impossible, because under the last major federal "reform" law (Sarbanes-Oxley Act of 2002) as CEO he was required to sign off that he personally knew that the financial controls in place were effective. Since they visibly were not given his confession, he signed a document under penalty of perjury and lied through his teeth. Yet he didn't take the fifth because he knows that major banksters don't get prosecuted. Esp. when they have the kind of connections he has. So private lawyers representing screwed clients are going to have to do the job the "prosecutors" won't because they're bought and paid for.

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