The Wall Street Reform and Consumer Protection Act of 2010 is better known
as "The Dodd-Frank Act" to the American public. What the American public does
not know about, is that it codifies a "bail-in" provision that ensures that
the United States can conduct the type of bail-in that we saw in Cyprus.
The bank bailouts of 2008 and 2009 will now be history as Dodd-Frank authorizes
the Federal Deposit Insurance Corp. to recapitalize failed financial institutions
by confiscating customers' deposits.
A bail-in takes place before a bankruptcy under current regulations, regulators
would have the power to impose losses on bank depositors while leaving other
creditors of similar stature, such as derivatives counter-parties untouched.
If your bank goes bust then your deposits/savings will be taken from you and
turned into shares of the bank. You have no say in the matter because in legal
terms, as a bank depositor, you are just an unsecured creditor of the bank.
A derivative is a contract between two or more parties. Its value is determined
by fluctuations in the underlying asset. The most common underlying assets
include stocks, bonds, commodities, currencies, interest rates and market indexes.
Most derivatives are characterized by the use of high leverage. Smart investors
like Warren Buffet view derivatives as "financial weapons of mass destruction,
carrying dangers that, while now latent, are potentially lethal." At this point
in time, I certainly agree with him 100%. I blame derivative instruments like
collateralized debt obligations (CDOs) and credit default swaps (CDSs) for
the financial crisis in 2008.
The name "derivative" reflects a sense that derivatives somehow derive value
at one or more future points in time based on observable events such as prices,
interest rates, exchange rates, indexes, events of default.
The real problem with derivatives has to do with overexposure by the banks
and "uninformed investors. I believe derivatives can add value to companies
as long as the corporate leaders at those companies use restraint and hold
a limited amount.
Derivatives may not be a financial instrument that the average investor wants
to try on thier own, but derivatives can add value to society when used appropriately
and in moderation.
A bail out is when the government steps in so that the financial institution
can avoid bankruptcy or insolvency and is not able to continue operations It
may take the form of a direct transfer of capital. In September of 2008 the
insurance conglomerate AIG found itself in serious financial problems the Federal
Reserve bailed it out by extending $85 billion (and eventually $182 billion)
in credit to the company. Proponents of bailouts say that they keep an economy
afloat when an industry thought too big to fail otherwise would collapse. Many
opponents contend that bailouts are inefficient and non-competitive companies
ought to fail.
RELATED: "Details
About This Financial Crisis & What To Do"
Dodd Frank was passed in the aftermath of the crisis to avoid another speculative
bubble.
The key fact of Dodd-Frank, Title II of the Act to establish an Orderly Liquidation
Authority, which vests the FDIC with the authority to conduct a European-style
bail-in. The preamble to the Dodd-Frank Act claims "to protect the American
taxpayer by ending bailouts." This is done, through "bail-in", which is a critical
feature of the internationally established regime of what is called cross-border
bank resolution.
It claims to protect the American taxpayer by ending bailouts. That is done
by implementing "bail-in" to stave off financial collapse, but is this constitutional?
The Dodd-Frank Wall Street Reform and Consumer Protection Act took up 848
pages and contained 383,013 words. In July 2012 an additional 8,843 pages of
rules were added, representing only 30% of the rules to-be-written. The estimate
for the final length of the Act is 30,000 pages. The six largest banks in the
U.S. spent $29.4 million lobbying Congress in 2010, and flooded Capitol Hill
with about 3,000 lobbyists--a ratio of 5 lobbyists per 1 congressman The Dodd-Frank
Wall Street Reform and Consumer Protection Act currently stands as the single
longest bill ever passed by the U.S. government. The length of the bill was
intended to intimidate members of Congress and the public as well.
Title I of the Dodd-Frank Act requires each banking entity to periodically
submit to the FDIC and the Federal Reserve a resolution plan that must address
the company's plans for its rapid and orderly resolution under the U.S. Bankruptcy
Code.
Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve
by establishing the orderly liquidation authority (OLA). Under the OLA, the
FDIC may be appointed receiver for any U.S. financial company that meets specified
criteria, including being in default or in danger of default, and whose resolution
under the U.S. Bankruptcy Code (or other relevant insolvency process) would
likely create systemic instability.
Title II requires that the losses of any financial company placed into receivership
will not be borne by taxpayers, but by common and preferred stockholders, debt
holders, and other unsecured creditors, and that management responsible for
the condition of the financial company will be replaced. Once appointed receiver
for a failed financial company, the FDIC would be required to carry out a resolution
of the company in a manner that mitigates risk to financial stability and minimizes
moral hazard. Any costs borne by the U.S. authorities in resolving the institution
not paid from proceeds of the resolution will be recovered from the industry.
Dodd-Frank, Title II, Sec. 209 (b):
If claims are made against a firm, they will be paid in this order:
- administrative costs
- the government
- wages, salaries, or commissions of employees
- contributions to employee benefit plans
- any other general or senior liability of the company
- any junior obligation
- salaries of executives and directors of the company; and
- obligations to shareholders, members, general partners, and other equity
holders
The liquidation during resolution is done at the discretion of the receiver,
the FDIC, on the basis of salvaging what is, in its view, most important for
financial stability. Under Title II, Sec. 9 E, it is stated that the FDIC, "shall,
to the greatest extent practicable, conduct its operations in a manner that--..(iii)
mitigates the potential for serious adverse effects to the financial system."
When you deposit money in a checking or savings account, that money no longer
belongs to you. Technically and legally, it becomes the property of the bank,
and the bank just issues you what amounts to an IOU. The bank considers this
as an unsecured debt.
You will have to stand in line behind trillions of dollars of derivative payouts
before your checking and savings accounts will be made available to you. Both
the Bankruptcy Reform Act of 2005 and the Dodd Frank Act provide special protections
for derivative defaults, giving them the legal right to demand collateral to
cover losses in the event of insolvency.
Reinstating America's traditional banking act is crucial to protecting U.S.
depositors by rebuilding the wall of separation between commercial banks and
investment banking which would dissolve the "mega super market" banks.
Glass-Steagall was repealed by Congress and President Clinton in 1999 under
pressure from Wall Street speculators who needed access to Main Street's commercial
bank deposits. Less than 10 years later, Wall Street suffered a financial collapse
that required hundreds of billions in taxpayer bailouts to the country's largest
banks.
If implemented as an act of the United States, an act of the sovereignty of
the United States, (Glass-Steagall) would effectively override Dodd-Frank.
It would override this bail-in regime as soon as it is implemented.
This Act needs to be nullified or the result of its enactment will be the
mass destruction of U.S. citizens through economic means. The fact is this
has NOT been openly disclosed to bank depositors or the general public.
This legislation will result in the mass destruction of the citizens of the
United States through economic deprivation, through the collection and extraction
of funds done in such a way as to leave the US Bank holders subject to become
extremely desperate to the point of extermination.
The United States of America has been a free and sovereign nation, based upon
a foundation of law. What underlies the founding laws of the nation is the
issue of its "Right". The right of the nation to govern itself and to govern
in a way that upholds the right of each citizen to his or her life, is the
most fundamental value in law.
As of 2010, the total world derivatives had a value of $1.2 quadrillion, approximately
20 times the world GDP. Because of the lack of clarity of the derivatives markets,
the exact numbers are virtually impossible to produce. However, the Bank for
International Settlements quoted global OTC derivatives - derivatives that
have a paper-trail--at $632 trillion as of December 2012.
Dodd-Frank, will deprive the citizens of the United States of those rights
guaranteed to them under the Constitutional Law to their right to life. They
will be deprived of their right to petition their government, they will be
deprived materially and certainty that many will be deprived of their lives--by
violence, poverty, starvation, extreme want, or suicide.
This Act establishes a Cyrus style bail-in mechanism that would enable the
government to transfer enormous amounts of wealth from the collapsing banks
into the hands of a private cartel that control the new Orderly Liquidation
Authority.
The FDIC will be held accountable for losses to banks via the risky derivatives
estimated in the HUNDREDS of TRILLIONS of dollars. This would BANKRUPT the
U.S. government.
It's time to REPEAL this monstrosity and PASS H.R. 129 or S.985 Restore Prudent
Banking Act of 2013, which represents the return of Glass Steagall - separating
investment banking from commercial banking.
In my view, we cannot wait for the next banking crisis to occur, this is a
fraud developed by the banking industry to STEAL more of our money and why
I have recently started to accumulate
physical metals here (gold and silver) and having it stored with a third
party vault out of the banks grasp as an insurance plan for worst case scenario.
Each week I will break down and discuss the major problems unfolding in both
the United States and Internationally. While it makes me sick to my stomach
thinking about what can and will likely happen and the result it will have
on the economy and our lifestyles, the only thing we can do is prepare ourselves
and position our capital properly to avoid and or profit from the next financial
crisis and bear market in stocks.
