The process leads to the centralization and
bureaucratization of everything, not just the government. Big corporations,
paying lower interest charges than their smaller competitors, end up providing
the majority of goods and services. This is why we see the same brands and
chains everywhere.
Because the money supply “tax” needs to be
paid to private banks, corporations are constantly looking for ways to cut
costs, which often means firing people and replacing them with robots.
Workers and ordinary consumers, on the
other hand, get trapped. They have no choice but to meet high interest payments
on credit card loans and mortgages, while the prices of goods, and anything
they might invest in, shoot through the roof.
The
Solution
Of course, it doesn’t have to be this way.
If banks did not have the privilege of creating money out of nothing, and
instead had to source their loans from real savings, their incentives would
change immediately. It would also help if there were no government bailouts.
In that case, investment would equal real
savings and would by definition be limited, because savings require a reduction
in consumption. This is harder to achieve than simply printing money. Resources
would, therefore, be economized. Opportunities for accumulating extravagant
wealth, while still present, would also be reduced, and there would be a
natural tendency toward a more even wealth distribution—not one engineered by a
centralized bureaucracy.
Honest
banking and honest money have existed before in history.
If banks and borrowers had skin in the
game, capital allocation decisions would be examined not according to the “love
for money” principle, but rather according to how productive the investment
would be.
More productivity means producing more with
less, thus saving natural resources. Less capital investment would mean more
room for humans to participate in the economic process. Prices for capital and
goods would be more stable.
This is not a dream, nor a vision of Utopia.
Honest banking and honest money have existed before in history. The first step
to solving this problem is to become aware of the problem.
This article is part of a
special Epoch Times series on the Federal Reserve. Click here to see all articles.
Views expressed in this article
are the opinions of the author and do not necessarily reflect the views of The
Epoch Times.
$2,198,468,000,000:
Federal Spending Hit 10-Year High Through March; Taxes Hit 5-Year Low
(Getty Images/Ron Sachs-Pool)
(CNSNews.com) - The federal government spent $2,198,468,000,000
in the first six months of fiscal 2019 (October through March), which is the
most it has spent in the first six months of any fiscal year in the last
decade, according
to the Monthly Treasury Statements .
The last time the government spent more in the
October-through-March period was in fiscal 2009, when it spent
$2,326,360,180,000 in constant March 2019 dollars.
Fiscal 2009 was the fiscal year that began with President George
W. Bush signing a $700-billion law to bailout the banking industry in October
2008 and then saw President Barack Obama sign a $787-billion stimulus law in
February 2009.
At the same time that the Treasury was spending the most it has
spent in ten years, it was also taking in less in tax revenue than it has in
the past five years.
In the October-through-March period, the Treasury collected
$1,507,293,000,000 in total taxes. The last time it collected less than that in
the first six months of any fiscal year was fiscal 2014, when it collected
$1,420,897,880,000 in constant March 2019 dollars.
The difference in the federal taxes taken in and the spending
going out resulted in a federal deficit of $691,174,000,000 for the first six
months of the fiscal year.
During those six months, the Department of Health and Human
Services spent the most money of any federal agency with outlays of $583.491
billion. The Social Security Administration was second, spending $540.426
billion. The Department of Defense was third, spending $325.518 billion.
Interest on Treasury securities was third, coming in at $259.687 for the
six-month period.
Both individual and corporation income taxes were down in the
first six months of this fiscal year compared to last year. In the first six
months of fiscal 2018, the Treasury collected $736,274,000,000 in individual
income taxes (in constant March 2019 dollars). In the first six months of this
fiscal year, it collected $723,828,000,000.
In the first six months of fiscal 2018, the Treasury collected
$80,071,070,000 in corporation income taxes (in constant March 2019 dollars).
In the first six months of this fiscal year, it collected $67,987,000,000.
(Historical budget numbers in this story were adjusted to March
2019 dollars using the Bureau of Labor Statistics inflation calculator.)
(Table 3 from the Monthly
Treasury Statement ,
seen below, summarizing federal receipts and outlaws for the past month and for
the fiscal year to date and compares it to the previous fiscal year.)
After Lehman's
Collapse: A Decade of Delay
Now that the 2018
midterms are over, folks can address the elephant in the room. If one tuned
into Fox Business midday on January 7, one heard legendary corporate raider
Carl Icahn dilate on the dimensions of the pachyderm, which he pegged at $250
trillion. That’s the size of worldwide debt. But can that be right -- it’s
more than eleven times the official U.S. federal government’s debt? And in case
you didn’t notice, it is a quarter of one quadrillion bucks. Pretty soon we’ll
be talking real money.
Icahn’s $250T quotation
for worldwide debt came out last year. On September 13, Bloomberg ran
“ $250 Trillion in Debt: the World’s
Post-Lehman Legacy ” by Brian Chappatta, who draws off data from the Institute of International Finance ’s July 9 “Global Debt
Monitor,” (to read IIF reports, one must sign up). Chappatta wonders how the
world’s central bankers can “even pretend to know how to reverse what they’ve
done over the past decade”:
[Central banks] kept
interest rates at or below zero for an extended period […] and used bond-buying
programs to further suppress sovereign yields, punishing savers and promoting
consumption and risk-taking. Global debt has ballooned over the past two
decades: from $84 trillion at the turn of the century, to $173 trillion at the
time of the 2008 financial crisis, to $250 trillion a decade after Lehman
Brothers Holdings Inc.’s collapse.
Chappatta breaks global
debt down into four categories: financial corporations, nonfinancial
corporations, households, and governments. In every category, global nominal
debt rose from 2008 to 2018, with the debt of governments hitting $67T. In the
important debt-as-a-percentage-of-gross-domestic-product measurement, three of
the categories rose while only financial corporations fell, “leaving their
debt-to-GDP ratio as low as it has been in recent memory.” Global banks seem to
be “healthier and more resilient to another shock.” After reporting on
worldwide debt, Chappatta then looks at U.S. debt.
What’s interesting about
debt in America is that as a percentage of GDP, households and financial
corporations have sharply reduced their debt. It is only government in America
that has seen a sharp debt-to-GDP uptick, and it was quoted at more than 100
percent of GDP. That’s rather higher than for all government debt worldwide.
Besides the massive
racking up of debt over the last decade there’s something else that should
concern us: the massive creation of new money. One of the ways money is created
is when central banks engage in the “bond-buying programs” that Chappatta
refers to. We call such programs “quantitative easing.” When the Federal
Reserve buys assets, like treasuries and mortgage-backed securities, it needs
money. So the Fed just creates the money ex nihilo .
Since the U.S. isn’t the
only nation that has been busy buying bonds and creating money, one might
wonder just how much money there is in the world. In June of 2017,HowMuch put
out “ Putting the World’s Money into
Perspective ,” which is a nice little graphic that puts the category “All
Money” at $83.6T.
In November of
2017, MarketWatch ran “ Here’s all the money in the world, in
one chart ”
by Sue Chang, who in her short intro to the chart has some interesting things
to say about global money, including cryptocurrencies. She writes of “narrow
money” and “ broad money ” and pegs the latter at
$90.4T, (or what Sen. Everett Dirksen would call “ real money ”.) If you want to
examine Chang’s chart more closely, I’ve “excised” it here for your
convenience; don’t miss the notes on the right margin. (Because its depth is
13,895 pixels, you might want to just save the chart to your computer rather
than print it off.)
So, in addition to an
historic run-up in debt, there’s been a monster amount of new money created.
Chappatta calls it the “grandest central-bank experiment in history.” His use
of “experiment” is apropos, as one wonders whether the world’s central bankers
and their economists really know what they’ve been doing.
One ray of hope might
just be President Trump’s choice of Jerome Powell as Chairman of the Federal
Reserve, (Trump has such good instincts about people). One can get a sense of
the man from his January talk with David Rubenstein at the Economic Club of
Washington, D.C. ( video and transcript ). It’s refreshing that
Mr. Powell disdains the “Fed speak” used by his predecessors.
Chappatta’s article is
quite worth reading, and it’s not very long. The charts are user-friendly,
although animated ones are a bit “creative.” The last section, “China Charges
Forward,” is especially worthwhile.
This is the post-Lehman
legacy. To pull the global economy back from the brink, governments borrowed
heavily from the future. That either portends pain ahead, through austerity
measures or tax increases, or it signals that central-bank meddling will become
a permanent fixture of 21st century financial markets.
Given those
alternatives, let’s try a little austerity. But austerity would entail spending
cuts, and Congress has a poor history in that regard. In fact, since fiscal 2007,
the year before the financial crisis, total federal spending has gone from
$2.72T a year to more than $4T. While austere citizens deleverage and get their
fiscal affairs in order, Congress shamefully borrows and spends like never
before.
Congress’ solutions are
to bail out, prop up, and do whatever it takes to avoid reforming what it has
created. So they farm out their responsibilities to the Federal Reserve.
Indeed, in the July 17, 2012 meeting of the Senate Banking Committee (go
to the
53:50 point of this C-SPAN video ), Chuck
Schumer told Federal Reserve Chairman Ben Bernanke the following:
So given the political
realities, Mr. Chairman, particularly in this election year, I'm afraid the Fed
is the only game in town. And I would urge you to take whatever actions you
think would be most helpful in supporting a stronger economic recovery… So get
to work, Mr. Chairman. (Chuckles.)
So the Fed is “the only
game in town” because there are only monetary solutions for the economy, right?
There aren’t any fiscal solutions, as they would involve Congress, and Congress
is busy running for re-election, right? Sounds like you’re abdicating your
responsibilities, Chuck.
"The Federal Reserve is a key mechanism for perpetuating this
whole filthy system, in which "Wall Street rules."
Wall Street rules
The Federal Reserve
sent a clear message to Wall Street on Friday: It will not allow the longest
bull market in American history to end. The message was received loud and
clear, and the Dow rose by more than 700 points.
Responding to
Thursday’s market selloff following a dismal report from Apple and signs of a
manufacturing slowdown in both China and the US, the Fed declared it was
“listening” to the markets and would scrap its plans to raise interest rates.
Speaking at a
conference in Atlanta, where he was flanked by his predecessors Ben Bernanke
and Janet Yellen, both of whom had worked to reflate the stock market bubble
after the 2008 financial crash, Chairman Jerome Powell signaled that the Fed
would back off from its two projected rate increases for 2019.
“We’re listening
sensitively to the messages markets are sending,” he said, adding that the
central bank would be “patient” in imposing further rate increases. To
underline the point, he declared, “If we ever came to the conclusion that any
aspect of our plans” was causing a problem, “we wouldn’t hesitate to change
it.”
This extraordinary
pledge to Wall Street followed the 660 point plunge in the Dow Jones Industrial
Average on Thursday, capping off the worst two-day start for a new trading year
since the collapse of the dot.com bubble.
William McChesney
Martin, the Fed chairman from 1951 to 1970, famously said that his job was “to
take away the punch bowl just as the party gets going.” Now the task of the Fed
chairman is to ply the wealthy revelers with tequila shots as soon as they
start to sober up.
Powell’s remarks were
particularly striking given that they followed the release Friday of the most
upbeat jobs report in over a year, with figures, including the highest
year-on-year wage growth since the 2008 crisis, universally lauded as
“stellar.”
While US financial
markets have endured the worst December since the Great Depression, amid
mounting fears of a looming recession and a new financial crisis, analysts
have been quick to point out that there are no “hard” signs of a
recession in the United States.
Both the Dow and the
S&P 500 indexes have fallen more than 15 percent from their recent highs,
while the tech-heavy NASDAQ has entered bear market territory, usually defined
as a drop of 20 percent from recent highs.
The markets, Powell
admitted, are “well ahead of the data.” But it is the markets, not the “data,”
that Powell is listening to.
Since World War II,
bear markets have occurred, on average, every five-and-a-half years. But if the
present trend continues, the Dow will reach 10 years without a bear market in
March, despite the recent losses.
Now the Fed has stepped
in effectively to pledge that it will
allocate whatever resources
are needed to ensure that no
substantial market
correction takes place. But this means only that when the
correction does come, as it inevitably must, it will be all the more
severe and the Fed will have all the less power to stop it.
From the standpoint of
the history of the institution, the Fed’s current more or less explicit role as
backstop for the stock market is a relatively new development. Founded in 1913,
the Federal Reserve legally has had the “dual mandate” of ensuring both maximum
employment and price stability since the late 1970s. Fed officials have
traditionally denied being influenced in policy decisions by a desire to drive
up the stock market.
Federal Reserve
Chairman Paul Volcker, appointed by Democratic President Jimmy Carter in 1979,
deliberately engineered an economic recession by driving the benchmark federal
funds interest rate above 20 percent. His highly conscious aim, in the name of
combating inflation, was to quash a wages movement of US workers by triggering
plant closures and driving up unemployment.
The actions of the Fed
under Volcker set the stage for a vast upward redistribution of wealth,
facilitated on one hand by the trade unions’ suppression of the class struggle
and on the other by a relentless and dizzying rise on the stock market.
Volcker’s recession,
together with the Reagan administration’s crushing of the 1981 PATCO air
traffic controllers’ strike, ushered in decades of mass layoffs,
deindustrialization and wage and benefit concessions, leading labor’s share of
total national income to fall year after year.
These were also decades
of financial deregulation, leading to the savings and loan crisis of the late
1980s, the dot.com bubble of 1999-2000, and, worst of all, the 2008 financial
crisis.
In each of these
crises, the Federal Reserve carried out what became known as the “Greenspan
put,” (later the “Bernanke put”)—an implicit guarantee to backstop the
financial markets, prompting investors to take ever greater risks.
Since that time, the Federal Reserve has carried out its
most accommodative monetary policy ever, keeping interest rates at or near zero
percent for six years. It supplemented this boondoggle for the financial elite
with its multi-trillion-dollar “quantitative easing” money-printing program.
The effect can be seen in the ever more staggering wealth
of the financial oligarchy, which has consistently enjoyed investment returns
of between 10 and 20 percent every year since the financial crisis, even as the
incomes of workers have stagnated or fallen.
American capitalist
society is hooked on the toxic growth of social inequality created by the stock
market bubble. This, in turn, fosters the political framework not just for the
decadent lifestyles of the financial oligarchs, each of whom owns, on average,
a half-dozen mansions around the world, a private jet and a super-yacht, but
also for the broader periphery of the affluent upper-middle class, which
provides the oligarchs with political legitimacy and support. These elite
social layers determine American political life, from which the broad mass of
working people is effectively excluded.
In this intensifying
crisis, the working class must assert its independent interests with the same
determination and ruthlessness as evinced by the ruling class. It must answer
the bourgeoisie’s social counterrevolution with the program of socialist revolution.
Trump and the GOP created a fake economic boom on
our collective credit card: The equivalent of maxing out your credit
cards and saying look how good I'm doing right now.
*
Trump criticized
Dimon in
2013 for supposedly contributing to the country’s economic
downturn. “I’m not Jamie Dimon, who pays $13 billion to settle a case
and then pays $11 billion to settle a case and who I think is the worst
banker in the United States,” he told reporters.
*
"One
of the premier institutions of big business, JP Morgan Chase, issued
an internal report on the eve of the 10th anniversary of the 2008
crash, which warned that another “great liquidity crisis”
was possible, and that a government bailout on the scale of that
effected by Bush and Obama will produce social unrest, “in light of
the potential impact of central bank actions in driving
inequality between asset owners and labor."
*
"Overall,
the reaction to the decision points to the underlying fragility of financial
markets, which have become a house of cards as a result of the massive
inflows of money from the Fed and other central banks, and are now
extremely susceptible to even a small tightening in financial
conditions."
*
"It
is significant that what the Financial
Times described as a “tsunami of money”—estimated to reach $1
trillion for the year—has failed to prevent what could be the worst year for
stock markets since the global financial crisis."
*
"A decade ago, as the financial
crisis raged, America’s banks were in ruins. Lehman Brothers, the storied
158-year-old investment house, collapsed into bankruptcy in mid-September
2008. Six months earlier, Bear Stearns, its competitor, had required a
government-engineered rescue to avert the same outcome. By October, two of
the nation’s largest commercial banks, Citigroup and Bank of America,
needed their own government-tailored bailouts to escape failure. Smaller
but still-sizable banks, such as Washington Mutual and IndyMac, died."
*
The
GOP said the "Tax Cuts and Jobs Act" would reduce deficits and
supercharge the economy (and stocks and wages). The White House says
things are working as planned, but one year on--the numbers mostly
suggest otherwise.
FROM THE MAGAZINE
Finance’s Lengthening Shadow
The growth of nonbank lending
poses an increasing risk.
Economy, finance, and
budgets
CITY JOURNAL
A decade
ago, as the financial crisis raged, America’s banks were in ruins. Lehman
Brothers, the storied 158-year-old investment house, collapsed into bankruptcy
in mid-September 2008. Six months earlier, Bear Stearns, its competitor, had
required a government-engineered rescue to avert the same outcome. By October,
two of the nation’s largest commercial banks, Citigroup and Bank of America,
needed their own government-tailored bailouts to escape failure. Smaller but
still-sizable banks, such as Washington Mutual and IndyMac, died.
After the
crisis, the goal was to make banks safer. The 2010 Dodd-Frank law, coupled with
independent regulatory initiatives led by the Federal Reserve and other bank
overseers, severely tightened banks’ ability to engage in speculative ventures,
such as investing directly in hedge funds or buying and selling securities for
short-term gain. The new regime made them hold more reserves, too, to backstop
lending.
Yet the
financial system isn’t just banks. Over the last ten years, a plethora of
“nonbank” lenders, or “shadow banks”—ranging from publicly traded investment
funds that purchase debt to private-equity firms loaning to companies for
mergers or expansions—have expanded their presence in the financial system, and
thus in the U.S. and global economies. Banks may have tighter lending standards
today, but many of these other entities loosened them up. One consequence:
despite a supposed crackdown on risky finance, American and global debt has
climbed to an all-time high.
Banks
remain hugely important, of course, but the potential for a sudden, 2008-like
seizure in global credit markets increasingly lies beyond traditional banking.
In 2008, government officials at least knew which institutions to rescue to
avoid global economic paralysis. Next time, they may be chasing shadows.
T he 2008 financial crisis vaporized 8.8 million American jobs,
triggered 8 million house foreclosures, and still roils global politics. Many
commentators blamed a proliferation of complex financial instruments as the
primary reason for the meltdown. Notoriously, financiers had taken subprime
“teaser”-rate mortgages and other low-quality loans and bundled them into
opaque financial securities, such as “collateralized debt obligations,” which
proved exceedingly hard for even sophisticated investors, such as the overseas
banks that purchased many of them, to understand. When it turned out that some
of the securities contained lots of defaulting loans—as Americans who never
were financially secure enough to purchase homes struggled to pay housing
debt—no one could figure out where, exactly, the bad debt was buried (many
places, it turned out). Global panic ensued.
The
“shadow-financing” industry played a role in the crisis, too. Many nonbank
mortgage lenders had sold these bundled loans to banks, so as to make yet more
bundled loans. But the locus of the 2008 crisis was traditional banks. Firms
such as Citibank and Lehman had kept tens of billions of dollars of such debt
and related derivative instruments on their books, and investors feared (correctly,
in Lehman’s case) that future losses from these soured loans would force the
institutions themselves into default, wiping out shareholders and costing
bondholders money.
The
ultimate cause of the crisis, however, wasn’t complex at all: a massive
increase in debt, with too little capital behind it. Recall how a bank works.
Like people, banks have assets and liabilities. For a person, a house or
retirement account is an asset and the money he owes is a liability. A bank’s
assets include the loans that it has made to customers—whether directly, in a
mortgage, or indirectly, in purchasing a mortgage-backed bond. Loans and bonds
are bank assets because, when all goes well, the bank collects money from them:
the interest and principal that borrowers pay monthly on their mortgage, for
example. A bank’s liabilities, by contrast, include the money it has borrowed
from outside investors and depositors. When a customer keeps his money in the
bank for safekeeping, he effectively lends it money; global investors who
purchase a bank’s bonds are also lending to it. The goal, for firms as well as
people, is for the worth of assets to exceed liabilities. A bank charges higher
interest rates on the loans that it makes than the rates it pays to depositors
and investors, so that it can turn a profit—again, when all goes well.
When the
economy tanks, this system runs into two problems. First, a bank’s asset values
start to fall as more people find themselves unable to pay off their mortgage
or credit-card debt. Yet the bank still must repay its own debt. If the value
of a bank’s assets sinks below its liabilities, the bank is effectively
insolvent. To lessen this risk, regulators demand that banks hold some money in
reserve: capital. Theoretically, a bank with capital equal to 10 percent of its
assets could watch those assets decline in value by 10 percent without
insolvency looming.
Yet
investors would frown on such a thin margin, and that highlights the second
problem: illiquidity. A bank might have sufficient capital to cover its losses,
but if depositors and other lenders don’t agree, they may rush to take their
money out—money that the bank can’t immediately provide because it has locked
up the funds in long-term loans, including mortgages. During a liquidity “run,”
solvent banks can turn to the Federal Reserve for emergency funding.
By 2008,
bank capital levels had sunk to an all-time low; bank managers and their
regulators, believing that risk could be perfectly monitored and controlled,
were comfortable with the trend. By 2007, banks’ “leverage ratio”—the
percentage of quality capital relative to their assets—was just 6 percent, well
below the nearly 8 percent of a decade earlier. Since then, thanks to tougher
rules, the leverage ratio has risen above 9 percent. Global capital ratios have
risen, as well. Many analysts believe that capital requirements should be
higher still, but the shift has made banks somewhat safer.
The
government doesn’t mandate capital levels with the goal of keeping any
particular bank safe. After all, private companies go out of business all the
time, and investors in any private venture should be prepared to take that
risk. The capital requirements are about keeping the economy safe. Banks tend to hold similar assets—various types of
loans to people, businesses, or government. So when one bank gets into trouble,
chances are that many others are suffering as well. A higher capital reserve
lessens the chance of several banks veering toward insolvency simultaneously,
which would drain the economy of credit. It was that threat—an abrupt shutdown
of markets for all lending, to good borrowers and bad—that led Washington to
bail out the financial industry (mostly the banks) in 2008.
B ut what if the financial industry, in creating credit, bypasses
the banks? According to the global central banks and regulators who make up the
international Financial Stability Board, this type of lending constitutes
“shadow banking.” That’s an imprecise, overly ominous term, evoking Mafia dons
writing loans to gamblers on betting slips and then kneecapping debtors who
don’t pay the money back on time, but the practice is nothing so Tony
Soprano-ish. The accountancy and consultancy firm Deloitte defines shadow
banking, wonkily, as “a market-funded credit intermediation system involving
maturity and/or liquidity transformation through securitization and
secured-funding mechanisms. It exists at least partly outside of the
traditional banking system and does not have government guarantees in the form
of insurance or access to the central bank.”
“Shadow banking is nothing new, encompassing everything from
corporate bond markets to payday lending.”
In plain
English, “maturity and/or liquidity transformation” is exactly what a bank
does: making a long-term loan, such as a mortgage, but funding it with
short-term deposits or short-term bonds. Outside of a bank, the activity
involves taking a mortgage or other kind of longer-term loan, bundling it with
other loans, and selling it to investors—including pension funds, insurers, or
corporations with large amounts of idle cash, like Apple—as securities that
mature far more quickly than the loans they contain. The risks here are the
same as at the banks, but with a twist: if people and companies can’t pay off
the loans on the schedule that the lenders anticipated, all the investors risk
losing money. Unlike small depositors at banks, shadow banks don’t have
recourse to government deposit insurance. Nor can shadow-financing participants
go to the Federal Reserve for emergency funding during a crisis—though, in many
cases, they wouldn’t have to: pensioners and insurance policyholders generally
don’t have the right to remove their money from pension funds and insurers overnight,
as many bank investors do.
Understood
broadly, shadow banking is nothing new, encompassing everything from corporate
bond markets to payday lending. And much of it isn’t very shadowy; as a recent
U.S. Treasury report noted, the government “prefers to transition to a
different term, ‘market-based finance,’ ” because applying the term “shadow
banking” to entities like insurance companies could “imply insufficient
regulatory oversight,” when some such sectors (though not all) are highly
regulated. It isn’t always easy to separate real banks from shadow banks,
moreover. Just as before the financial crisis, banks continue to offer shadow
investments, such as mortgage-backed securities or bundled corporate loans,
and, conversely, banks also lend money to private-equity funds and other shadow
lenders, so that they, in turn, can lend to companies.
Such
market-based finance has its merits; sound reasons exist for why a pension-fund
administrator doesn’t just deposit tens of billions of dollars at the bank,
withdrawing the money over time to meet retirees’ needs. For people and
institutions willing, and able, to take on more risk, market-based finance can
offer higher interest rates—an especially important consideration when the
government keeps official interest rates close to zero, as it did from 2008 to
2016. Shadow finance also offers competition for companies, people, and
governments unable to borrow from banks cheaply, or whose needs—say, a
multi-hundred-billion-dollar bond to buy another company—would be beyond the
prudent coverage capacity of a single bank or even a group of banks.
Theoretically,
bond markets and other market-based finance instruments make the financial
system safer by diversifying risk. A bank holding a large concentration of
loans to one company faces a major default risk. Dispersing that risk to dozens
or hundreds of buyers in the global marketplace means—again, in theory—that in
a default, lots of people and institutions will suffer a little pain, rather
than one bank suffering a lot of pain.
B ut too much of a good thing is sometimes not so good, and, in this
case, the extension of shadow banking threatens to reintroduce the risks that
innovation was supposed to reduce. Recent growth in shadow banking isn’t
serving to disperse risk or to tailor innovative products to meet borrowers’
needs. Two less promising reasons explain its expansion. One is to enable
borrowers and lenders to skirt the rules—capital cushions—that constrain
lending at banks. The other—after a decade of record-low, near-zero interest
rates as Federal Reserve policy—is to allow borrowers and lenders to find
investments that pay higher returns.
The world
of market-based finance has indeed grown. Between 2002 and 2007, the eve of the
financial crisis, the world’s nonbank financial assets increased from $30
trillion to $60 trillion, or 124 percent of GDP. Now these assets, at $160
trillion, constitute 148 percent of GDP. Back then, such assets made up about a
quarter of the world’s financial assets; today, they account for nearly half
(48 percent), reports the Financial Stability Board (FSB).
Within
this pool of nonbank assets, the FSB has devised a “narrower” measure of shadow
banking that identifies the types of companies likely to pose the most systemic
risk to the economy—those most susceptible, that is, to sudden, bank-like
liquidity or solvency panics. The FSB believes that pension funds and insurance
companies could largely withstand short-term market downturns, so it doesn’t
include them in this riskier category. That leaves $45 trillion in narrow
shadow institutions and investments, a full 72 percent of it held in
instruments “with features that make them susceptible to runs.” That’s up from
$28 trillion in 2010—or from 66 percent to 73 percent of GDP.
Of that
$45 trillion market, the U.S. has the largest portion: $14 trillion. (Though,
as the FSB explains, separation by jurisdiction may be misleading; Chinese
investment vehicles, for example, have sold hundreds of billions of dollars in
credit products to local investors to spend on property abroad, affecting
Western asset prices.) Compared with this $14 trillion figure, American
commercial banks’ assets are worth just shy of $17 trillion, up from about $12
trillion right before the financial crisis. Banks as well as nonbank lenders
have grown, in other words, but the banks have done so under far stricter
oversight.
A n analysis of one particular area of shadow financing shows the
potential for a new type of chaos. A decade ago, an “exchange-traded fund,” or
ETF, was mostly a vehicle to help people and institutions invest in stocks. An
investor wanting to invest in a stock portfolio but without enough resources to
buy, say, 100 shares apiece in several different companies, could purchase
shares in an ETF that made such investments. These stock-backed ETFs carried
risk, of course: if the stock market went down, the value of the ETF tracking
the stocks would go down, too. But an investor likely could sell the fund
quickly; the ETF was liquid because the underlying stocks were liquid.
Over the
past decade, though, a new creature has emerged: bond-based ETFs. A bond ETF
works the same way as a stock ETF: an investor interested in purchasing debt
securities but without the financial resources to buy individual bonds—usually
requiring several thousand dollars of outlay at once—can purchase shares in a
fund that invests in these bonds. Since 2005, bond ETFs have grown from
negligible to a market just shy of $800 billion—nearly 10 percent of the value
of the U.S. corporate bond market.
These
bond ETFs are riskier, in at least one way, than stock ETFs. Some bond ETFs, of
course, invest solely in high-quality federal, municipal, and corporate
debt—bonds highly unlikely to default in droves. Default, though, isn’t the
only risk: suddenly higher global interest rates could cause bond funds to lose
value (as new bonds, with the higher interest rates, would be more attractive).
And with the exception of federal-government debt, even the highest-quality
bonds aren’t as liquid as stocks; they have maturities ranging anywhere from
hours remaining to 100 years.
Investors
in bond-based ETFs, then, face a much bigger “liquidity” and “maturity”
mismatch risk. If the investors want to sell their ETF shares in a hurry, the
fund managers might not be able to sell the underlying bonds quickly to repay
them, particularly in a tense market. That’s especially true, since bond
markets are even less liquid than they were pre–financial crisis. Because of
new regulations on “market making,” banks will be highly unlikely to buy bonds
in a declining market to make a buck later, after the panic subsides.
(ALBERTO
MENA)
A look at a related type of debt-based ETF raises even bigger
mismatch concerns. “In 2017, investors poured $11.5 billion into U.S. mutual
funds and exchange-traded funds that invest in high-yield bank loans,” notes
Douglas J. Peebles, chief investment officer of fixed-income—bonds—at the
AllianceBernstein investment outfit. A high-yield bank loan is one that carries
particular risk, such as a loan to a company with a poor credit rating or to a
company borrowing money to merge with another firm or to expand; the “yield”
refers to the higher interest rate required to compensate for this risk. Rather
than keep this loan on its books, the bank is selling it, in these cases, to
the exchange-traded funds that are a rising component of shadow banking.
This new
demand has induced lending that otherwise wouldn’t exist—in many cases, for
good reason. “The quality of today’s bank loans has declined,” Peebles observes,
because “strong demand has been promoting lax lending and sketchy supply. . . .
Companies know that high demand means they can borrow at favorable rates.”
Further, says Peebles, “first-time, lower-rated issuers”—companies without a
good track record of repaying debt—are responsible for the recent boom in loan
borrowers, from fewer than 300 institutions in 2007 to closer to 900 today. The
number of bank-loan ETFs (and similar “open-ended” funds) expanded from just
two in 1992 to 250 in June 2018.
Peebles
worries as well about the extra risk that this financing mechanism poses to
investors. “In the past, banks viewed the loans as investments that would stay
on their balance sheets,” he explains, but now that banks sell them to ETFs,
“most investors today own high-yield bank loans through mutual funds or ETFs,
highly liquid instruments. . . . But the underlying bank loan market is less
liquid than the high-yield bond market,” with trades “tak[ing] weeks to
settle.” He warns: “When the tide turns, strategies like these are bound to run
into trouble.”
T he peril to the economy isn’t just that current investors could
lose money in a crisis, though big drops in asset markets typically lead people
to curtail consumer spending, deepening a recession. The bigger danger is a
repeat of 2008: fear of losses on existing investments might lead shadow-market
lenders to cut off credit to all potential new borrowers, even worthy ones.
Banks, because they’re dependent on shadow banks to buy their loans, would be
unlikely to fill the vacuum. “Although non-bank credit can act as a substitute
for bank credit when banks curtail the extension of credit, non-bank and bank
credit can also move in lockstep, potentially amplifying credit booms and
busts,” says the FSB. The porous borders between the supposedly riskier parts
of the nonbank financial markets—ETFs—and the less risky ones also could work
against a fast recovery in a crisis. Thanks to recent regulatory changes,
insurance companies, for example, are set to become big purchasers of bond ETF
shares.
Worsening
this hazard, just as with the collateralized debt securities of the financial
meltdown, many bond-based ETFs contain similar securities. Such duplication
could eradicate the diversification benefit that the economy supposedly gets
from dispersing risk. Contagion would be accelerated by the fact that
debt-based ETFs, like stock-based ETFs, must “price” themselves continuously
during the day, according to perceived future losses; this, in effect,
introduces the risk of stock-market-style volatility into long-term bond
markets. (Bond-based mutual funds, of course, have existed for decades, but
they did not trade like stocks and thus did not feature this particular risk.)
Via the plunging price of collateralized debt obligations, we saw, in 2008,
what happened to the availability of long-term credit when exposed to the
pricing signals of an equity-style crash, but those collateralized debt
obligations traded far less frequently than bond ETFs do today. Bond ETFs may
be more efficient, yes, in reflecting any given day’s value; that supposed
benefit could also allow a panic to spread more rapidly.
During
the last global panic, the answer to getting credit flowing again—so that
companies could perform critical tasks, such as meeting payrolls, before
revenue from sales came in—was to provide extraordinary government support to
the large banks. But even if one believes that such bailouts are a sensible
approach to financial crises—a highly tenuous position—how would the government
provide longer-term support to hundreds of individual funds, to ensure that the
broader market keeps functioning for credit-card and longer-term corporate
debt? This would greatly expand the government safety net over supposedly
risk-embracing financial markets—by even more than it was expanded a decade
ago.
“When both regular banks and shadow banks are tapped out, we may
need shadow-shadow finance to take up the slack.”
U nwise lending also harms borrowers. Private-equity firms, too, are
increasingly lending companies money, instead of just buying those firms
outright, their older model. As the Financial Times recently reported,
private-equity funds—or, more accurately, their related private-credit
funds—have more than $150 billion in money available for investment. They make
loans that banks won’t, or can’t, make, though this is leading banks to take
greater risks to compete. “It’s been great for borrowers,” says Richard Farley,
chair of law firm Kramer Levin’s leveraged-finance group, as “there are deals
that would not be financed,” or would not be financed on such favorable terms.
Competition
is usually healthy, and risky finance can spark innovation that otherwise
wouldn’t have happened. But easy lending can also make economic cycles more
violent. Even in boom years, excess debt can plunge firms that otherwise might
muddle through a recession deep into crisis, or even cause them to fail, adding
to layoffs and consumer-spending cutbacks. We can see this happening already,
as the Financial Times reports, with bankrupt
firms like Charming Charlie, an accessories store that expanded too fast; Six
Month Smiles, an orthodontic concern; and Southern Technical Institute, a
for-profit technical college.
The
numbers are troubling. The expansion of shadow banking has unquestionably
brought a pileup of debt. The Securities Industry and Financial Markets
Association, a trade group, estimates that U.S. bond markets, overall, have
swollen from $31 trillion to nearly $42 trillion since 2008. Federal government
borrowing accounts for a lot of that, but not close to all of it. The
corporate-bond market, for example, went from $5.5 trillion to $9.1 trillion
over the same decade. Corporations, in other words, owe almost twice as much
today in bond obligations as they did a decade ago. That’s sure to make it
harder for some, at least, to recover from any future downturn.
T here are policy approaches to resolving these debt issues. An
unpopular idea would be to treat markets that act like banks, as banks—requiring
ETFs, say, to hold the same capital cushions and adhere to the same prudence
standards as banks. In the end, though, the bigger problem is cultural and
political. What we’re seeing, more than a decade after the financial crisis,
results from the government’s mixed signals about financial markets. On the one
hand, the U.S. government, along with its global counterparts, realized in 2008
that debt had reached unsustainable levels; that’s partly why it sharply raised
bank capital requirements. On the other hand, the government recognized that
the economy is critically dependent on debt. Absent large increases in workers’
pay, consumer and corporate debt slowdowns would stall the economy’s until-recently
modest growth. That’s why the U.S. and other Western governments have kept
interest rates so low, for so long.
Thus, we
find ourselves with safer banks but scarier shadows. Global debt levels are now
$247 trillion, or 318 percent, of world GDP, according to the Institute of
International Finance, up from $142 trillion owed in 2007, or 269 percent of
GDP. When both regular banks and shadow banks are tapped out, we may have to
invent shadow-shadow finance to take up the slack.
Decade after financial crisis
JPMorgan predicts next one’s coming soon
Published
time: 13 Sep, 2018 14:00
© Ole Spata
/ Global Look Press
·
With the 10th anniversary
approaching of the catalyst for the last major global stock market crash – the Lehman
Brothers’ collapse – strategists from JPMorgan are predicting the next
financial crisis to strike in 2020.
Wall Street’s largest
investment bank analyzed the causes of the crash and measures taken by
governments and central banks across the world to stop the crisis in 2008, and
found that the economy remains propped up by those extraordinary steps.
According to the bank’s
analysis, the next crisis will probably be less painful, however, diminished
financial market liquidity since the 2008 implosion is a “wildcard” that’s
tough to game out.
“The main attribute of
the next crisis will be severe liquidity disruptions resulting from these
market developments since the last crisis,” the reports says.
Changes to central bank
policy are seen by JPMorgan analysts as a risk to stocks, which by one measure
have been in the longest bull market in history since the bottom of the crisis.
JPMorgan’s Marko
Kolanovic has previously concluded that the big shift away from actively
managed investing has escalated the danger of market disruptions.
“The shift from active to
passive asset management, and specifically the decline of active value investors,
reduces the ability of the market to prevent and recover from large drawdowns,” said JPMorgan’s
Joyce Chang and Jan Loeys.
The bank estimates that
actively managed accounts make up only about one-third of equity assets under
management, with active single-name trading responsible for just 10 percent or
so of trading volume.
JPMorgan referred to its
hypothetical scenario as the “great liquidity crisis,” claiming
that the timing of when it could occur “will largely be determined by
the pace of central bank normalization, business cycle dynamics, and various
idiosyncratic events such as escalation of trade war waged by the current US
administration.”
As US banks report record profits
Regulators, Congress move to
end all restraints on Wall Street speculation
On Tuesday, the US
House of Representatives passed a bill to exempt the vast majority of financial
firms from the Dodd-Frank bank regulations passed after the 2008 Wall Street
crash. This coincided with press reports that the Federal Reserve Board and
other bank regulators will announce as soon as next week proposals to gut the
provision of Dodd-Frank most hated by Wall Street—the so-called “Volcker Rule.”
The accelerating
offensive against even the most minimal restrictions on financial speculation
takes place in the context of surging bank profits and CEO pay. On Tuesday, the
Federal Deposit Insurance Corporation, one of the agencies that is preparing to
eviscerate the Volcker Rule, reported that US banks recorded record profits of
$56 billion in the first quarter of 2018, a 28 percent increase over the same
period last year.
As the tenth
anniversary of the September 2008 Wall Street crash approaches, the token
restrictions on the banks that were passed during the Obama administration are
being dismantled. These minimal measures, including increased capital reserve
requirements, annual “stress tests” and limited restrictions on risky
derivative trading, were mainly enacted to provide political cover for the
administration’s multi-trillion-dollar bailout of the financial institutions
responsible for the wholesale destruction of jobs, millions of home
foreclosures and the wiping out of retirement savings.
After eight years of
the Dodd-Frank bank “reform,” the American financial oligarchy exercises its
dictatorship over society and the government more firmly than ever. This
unaccountable elite will not tolerate even the most minimal limits on its
ability to plunder the economy for its own personal gain.
The Volcker Rule,
named after the former chairman of the Federal Reserve Board Paul Volcker, was
included in the 2010 Dodd-Frank act but not drafted and approved by the regulatory
agencies until 2013. It took effect only in 2015.
The rule ostensibly
bars commercial banks, which benefit from federally guaranteed retail deposits
and other government backstops, from speculating with bank funds, including
customers’ deposits, on their own account—a practice known as proprietary
trading. However, the rule incorporates huge loopholes allowing banks to
speculate with their own funds under cover of hedging their investments and
providing liquidity to the financial markets.
At the time of its adoption, the Wall Street Journal cynically but accurately
wrote: “Rest assured banks will find loopholes. And rest assured some of the
Volcker rule-writers will find private job opportunities to help with that
loophole search once they decide to lay down the burdens of government
service.”
No banks have been
cited for violating the rule since it took effect.
Nevertheless, top
Wall Street CEOs such as JPMorgan’s Jamie Dimon and Goldman Sachs’ Lloyd
Blankfein have campaigned ferociously against the measure, denouncing it as an
arbitrary restriction on the financial markets and an impediment to economic
growth. Wall Street lobbyists have spent many millions of dollars bribing
politicians of both parties to weaken the rule to the point of complete irrelevance.
In a speech to
international bankers in March, Randal Quarles, the Fed’s new vice chairman for
supervision, said, “We want banks to be able to engage in market making and
provide liquidity to financial markets with less fasting and prayer about their
compliance with the Volcker Rule.”
The plan is to make
the rule a dead letter through administrative changes in the language of the
regulation rather than by means of legislation. At the behest of the major
banks, federal regulators are preparing to widen even further the existing
loopholes, allowing the banks to carry out short-term trades with their own
funds and amass more speculative assets in the name of “market-making.” They
will also end requirements that the banks provide documentation to prove that
their activities comply with the rule, relying instead on assurances from the
bankers.
The banking bill
passed by the House on Tuesday increases the Dodd-Frank asset threshold for
financial firms to be considered “systemically important financial institutions,”
and thus subject to tighter regulatory oversight, from $50 billion to $250
billion. This is being presented by Democratic as well as Republican backers as
a matter of fairness to small and midsize banks. In fact, the exemption covers
such giant companies as American Express, SunTrust Banks and Fifth Third Bank.
These companies will
no longer be subject to yearly Federal Reserve “stress tests” or higher capital
reserve requirements. The bill also exempts banks with less than $10 billion in
assets from the Volcker Rule and exempts banks that have granted fewer than 500
mortgages from reporting requirements.
Thirty-five House
Democrats joined all but one of the House Republicans to pass the measure,
which now goes to President Trump, who has pledged to sign it. The Senate
version was passed in March with broad Democratic support, including 11
Democratic co-sponsors. A total of 17 Senate Democrats voted for the bill.
Another aspect of the
attack on Dodd-Frank is the strangulation of the Consumer Financial Protection
Bureau (CFPB). This agency, lacking any serious enforcement powers and fully
subordinate to the Federal Reserve, was set up under Obama-era legislation to
give the impression of government support for consumers victimized by illegal
or fraudulent banking practices. Despite its toothless character, it was
immediately targeted by Wall Street for destruction.
Under Trump, this
process is now well underway. The White House pressured the Obama holdover
Richard Cordray to resign as director of the CFPB and installed Mick Mulvaney,
Trump’s budget director, as acting head of the bureau to oversee its
dismantling. Mulvaney has halted investigations, imposed a hiring freeze,
stopped the agency from collecting certain data from banks and proposed cutting
off public access to a database of consumer complaints.
Despite
for-the-record verbal protests by Democratic politicians over the gutting of
bank regulations, the removal of restrictions on financial institutions is a
bipartisan policy. Trump’s scorched earth approach is an intensification of the
basic line of the Obama administration rather than a departure from it.
In 2011, the Senate
Permanent Subcommittee on Investigations produced a 650-page report on the
financial crisis documenting in detail the fraudulent and illegal activities of
the major Wall Street banks, aided by corrupt and compliant federal regulatory
agencies and credit rating firms that had a vested interest in promoting the
banks’ subprime mortgage fraud and other swindles. At the time, the chairman of
the subcommittee, Michigan Senator Carl Levin, gave a press conference at which
he said the investigation had found “a financial snake pit rife with greed,
conflicts of interest and wrongdoing.”
Nevertheless, Obama
pursued a deliberate policy of shielding the big banks and their top executives
from criminal prosecution. Financial speculation and fraud continued unabated,
subsidized by the government’s policy of supplying the banks with virtually
free credit by means of near-zero interest rates and the Fed’s money-printing
“quantitative easing” program.
Despite a wave of
scandals, including the manipulation of the key Libor interest rate, JPMorgan’s
$6.2 billion “London Whale” derivative loss, money-laundering cases involving
some of the world’s biggest banks, and the forging of documents to facilitate
home foreclosures, not a single leading banker was criminally charged, let
alone jailed during the Obama years.
This was not because
of difficulties in securing indictments or convictions. On the contrary,
Attorney General Eric Holder told a Senate committee in March of 2013 that the
Obama administration chose not to prosecute the big banks or their CEOs because
to do so might “have a negative impact on the national economy.”
Meanwhile, government
policies favored the further consolidation of financial institutions, including
JPMorgan’s subsidized takeover of Bear Stearns and Washington Mutual, Bank of
America’s acquisition of Merrill Lynch, and Wells Fargo’s absorption of
Wachovia. As a result, the stranglehold of a handful of megabanks over economic
and social life in America is tighter than ever.
Who Can We Blame For The Great Recession?
|
This year
marks the tenth anniversary of the “Great Recession” and the media are trying
to determine if we have learned anything from it. The Queen visited the London
School of Economics after the “Great Recession” to ask her chief economists why
they hadn’t seen this disaster coming. They told her they would get back to her
with an answer. Later, they wrote her a letter saying that the best
economic theory asserts that recessions are random events and they had
successfully predicted that no one can predict recessions.
Still,
George Packer, a staff writer at the New Yorker magazine since 2003, thinks he
knows more than the LSE academics. He wrote the following in the August 27 print
issue :
"It was caused by reckless
lending practices, Wall Street greed, outright fraud, lax government oversight
in the George W. Bush years, and deregulation of the financial sector in the
Bill Clinton years. The deepest source, going back decades, was rising inequality.
In good times and bad, no matter which party held power, the squeezed middle
class sank ever further into debt...
"In
February, 2009, with the economy losing seven hundred thousand jobs a month,
Congress passed a stimulus bill—a nearly trillion-dollar package of tax cuts,
aid to states, and infrastructure spending, considered essential by economists
of every persuasion—with the support of just three Republican senators and not
a single Republican member of the House."
Typically,
journalists will defer to an expert on matters in which they aren’t trained,
which is most subjects. But Packer didn’t bother to ask an economist as the
Queen did. Had he done so, he would have received the same answer from
mainstream economists – recessions are random events and can’t be predicted. If
economists knew the causes of recessions they could predict them when they see
the causes present.
So where
did Packer get his “causes” for the latest recession? In the classic movie
Casablanca, the corrupt and lazy policeman Renault is “shocked” to find
gambling going on at Rick’s place and orders the others to round up the “usual
suspects.” That’s what Packer does. People have blamed greedy businessmen and
bankers for crises for centuries. Since the rise of socialism they added capitalism
and the politicians who support it. The only new suspect in the socialist line
up is inequality, even though inequality has varied little since 1900 and is
near its record low since then.
Had
Packer consulted the University of Chicago Booth School of Business, he
wouldn’t have received much help. Keep in mind that mainstream economists think
recessions are random events. After the storm subsides, they can identify
likely contributors for the latest disaster, but those differ with each
recession. Recently Chicago Booth queried experts for the top contributing
factors of the latest recession. The top answer was
flawed regulations ,
followed by underestimating risk and mortgage fraud.
The
“flawed regulations” excuse assumes that bitter bureaucrats who write the regulations
are wiser than the actual bankers and ignores the fact that banking is one of
the most regulated industries. One analyst described the recent recession as
the perfect storm of regulations so massive no one group could understand them
all and many of them working against other regulations.
Blaming
“underestimated risk” is good Monday morning quarterbacking. Everyone has 20/20
hindsight, or 50/50 as quarterback Cam Newton said. The same economists don’t
explain why banks that took similar risks didn’t fail or why what seems risky
now didn’t seem so risky in 2007. As for fraud, the amount was negligible and
is always there; why did it contribute to a recession this time? Sadly, the
correct answer to what caused the Great Recession– “Loose monetary policy” –
came in next to last among Chicago Booth’s experts.
Perspective
is vital. A magnifying glass can make a lady bug look terrifying. Let’s pull
back and put the latest recession in a broader context. There have been 47
recessions/depressions since the birth of the nation. Before the Great
Depression economists called crises “depressions” and since then they are
“recessions.” They’re the same thing; economists thought “recession” was less
scary.
Recessions
before the Great Depression were mild compared to it. It took the Federal
Reserve and the US government working together trying to “rescue” us to plunge
the country into history’s worst economic disaster. Journalists like Packer
have convinced people that the Great Recession of 2008 was second only to the
Great Depression, but if we combine the recessions of 1981 and 1982, separated
only by a technicality and six months, that recession would have been worse.
The Fed did not reduce interest rates after that recession because it was still
battling the inflation it has caused in the 1970s, yet the economy bounced back
and recovery lasted almost a decade.
I want to
drive home the fact that the three worst recessions in our history assaulted us
after the creation of the Federal Reserve in 1913.
The best
explanation of the causes of recessions, because it enjoys the greatest
empirical support, is the Austrian business-cycle theory, or ABCT. Ludwig von
Mises and Friedrich Hayek are most famous for refining and expounding it, but
the English economists of the Manchester school were the first to write about
it. They discovered that expansions of the money supply through low interest
rates motivated businesses to borrow and invest at a rapid rate. That launches
an unsustainable boom because businesses are trying to deploy more capital
goods than exist. Banks raise rates to rein in galloping inflation and the boom
turns to dust.
Banks
don’t control interest rates today as they did in the past. That’s the Federal
Reserve’s job. The Fed generally reduces interest rates or expands the money
supply through “quantitative easing,” or buying bonds from banks, in order to
force an economy in the ditch to climb out. The recovery from the Great Recession remained on its feet for so long
because the Fed’s policy of paying interest on reserves at banks soaked up much
of the new money it created out of thin air. Also, much of the money went
overseas to buy imports or as investments.
The
lesson – don’t ask medical advice from your plumber or economics from a
journalist. And if you ask an economist, make sure he follows the Austrian
school.
NO PRESIDENT IN HISTORY SUCKED IN MORE BRIBES FROM CRIMINAL BANKSTERS
THAN BARACK OBAMA!
“Records show that four out of Obama's top
five contributors are employees of
financial
industry giants - Goldman Sachs
($571,330),
UBS AG ($364,806), JPMorgan Chase
($362,207) and Citigroup ($358,054).”
OBAMA and HIS
BANKS: THEIR PROFITS, CRIMES and LOOTING SOAR
This
was not because of difficulties in securing indictments or convictions. On the
contrary, Attorney General Eric Holder told a Senate committee in March of 2013
that the Obama administration chose not to prosecute the big banks or their
CEOs because to do so might “have a negative impact on the national economy.”
“Attorney
General Eric Holder's tenure was a low point even within the disgraceful
scandal-ridden Obama years.” DANIEL GREENFIELD / FRONTPAGE MAG
Why the swamp has little to fear
The midterm elections will either
halt or hasten the current soft coup whose aim is to overthrow a legally
elected President now being conducted by the swamp. And if the
history of Washington, D.C. corruption is any indication of what will happen
after the midterms, the swamp will survive regardless of its coup's success or
failure. But the efforts to expose the treasonous plot will fade
away into the dustbin of political history after being seen as just another
waste of time and taxpayer money. The seemingly endless parade of
corruption scandals and mind-numbing criminal activity will go on unabated and
continue to escalate to unimaginable heights because of an inescapable fact of
human nature.
In a Forbes 2015
article entitled "The Big Bank Bailout," author Mike Collins mentions
several ways to prevent another housing bubble crisis from destroying the world
economy when he writes, "But perhaps the best solution is to make the CEOs
and top managers of the banks criminally liable for breaking these rules so
that they fear going to jail. These people are not afraid to do it
again so if you can’t put some real fear in their heads, they will do it
again."
What Collins has honed
in on is accountability and punishment, the very things lacking in today's
dealings with the swamp. Just as the major banking institutions will
soon, if not already, re-enter into risky, corrupt, and illegal lending
practices because there was not a "smidgen" of accountability for the
trillions of dollars they lost in the housing bubble catastrophe, so too will
the past and presently unknown criminals within the IRS, FBI, and DOJ continue
to thumb their noses at the law.
What the American people have been
subjected to over the past 18 months since President Trump took office is a
series of crimes that have been painstakingly unearthed but little
else. "Earth-shattering," "bombshell," and "constitutional
crisis" are just some of the words and phrases used by media outlets to
describe the newest update regarding the many ongoing
investigations. These words are meant to shock the audience but no
longer have the impact they once did because of their overuse and because of
the likely lack of any substantive outcome. What Americans have seen
are trials without consequences, clear proof of guilt with no
punishment. Draining the swamp without
any repercussions to the swamp creatures inside is like going on a diet but
eating the same foods.
Americans witnessed no accountability
regarding exhaustive investigations into the deadly circumstances surrounding
the swamp's gun-walking campaign named Fast and Furious, a program where U.S.
Border Patrol agent Brian Terry and hundreds of innocent Mexican citizens were
killed with guns the government sold to criminals. The swamp
continued on its power mission and attempted the deceitful confiscation of
America's health care with Obamacare, whose real aim was a redistribution of
the nation's wealth. After little pushback and the passage of
Obamacare, Americans witnessed Benghazi in 2012, and when nothing
was accomplished over the investigations of that tragedy, the swamp trampled on
the rights of conservatives in what became known as the IRS scandal of
2013. Nothing was done about that. And on and on, with
the swamp committing one bigger and bolder crime after the next with
impunity.
So we have arrived at the doorstep of
the Russian collusion investigation farce by first traveling through the swamp
of unsolved crimes perpetrated inside the Obama administration. With
the passage of time, swamp-dwellers like Eric Holder and Lois Lerner,
knee-deep in the mud with congressional contempt charges, continue to be
financially enriched and will slowly be forgotten, while more recognizable
swamp royalty like Hillary Clinton get to run for president.
Until Americans see
guilty members within the United States government wearing orange jumpsuits and
serving time, the investigations and congressional hearings are mere sideshow
spectacles to appease the masses.
No comments:
Post a Comment