I recently interviewed Chuck Butler about JP Morgan’s recent admission to five felony counts and $1 billion fine. I asked, “When Is It Going To End?”
Right after finishing the interview, ZeroHedge reported:
“Goldman Sachs is reportedly on the cusp of settling one of the biggest criminal cases involving a Wall Street bank since the financial crisis: According to a Bloomberg News report…the Vampire Squid has reached a tentative agreement with the DoJ to pay more than $2 billion in penalties…- and – here’s the key bit – allows the bank to avoid all criminal penalties.
…. Tim Leissner, formerly the bank’s top man in Southeast Asia…reportedly told authorities about the endemic “culture of corruption” at play within the bank.”
Wall Street on Parade (WSOP) confirmed, adding:
“The U.S. Department of Justice is being played like a fiddle at a tractor meet. …. Twice, in a period of just three weeks…the Justice Department (announced) settlements of landmark criminal cases against two of the largest banks on Wall Street….
To prevent the possibility that a reporter…might ask the Justice Department why it was giving JPMorgan Chase a Deferred Prosecution Agreement when these were the fourth and fifth criminal counts it has brought against JPMorgan Chase in the past six years, (it has admitted guilt to all of the charges) the Justice Department simply skipped its usual procedure and did not hold a press conference announcing the charges.”
Stealing the wealth of the nation
The system is designed to allow the fox, (also known as the Federal Reserve) to enable the banks to make risky bets. When they win, they make billions, (on top of what they made through criminal activity). When they lose, the taxpayers are stuck with the losses.
The Federal Reserve is theoretically our central bank, designed to look after the best interest of US citizens. There are 12 Federal Reserve Banks, and the New York Fed is given the responsibility to create money. Federal Reserve Banks are owned by member banks.
“The largest shareowners of the New York Fed are the following five Wall Street banks: JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, and Bank of New York Mellon. Those five banks represent two-thirds of the eight Global Systemically Important Banks (G-SIBs) in the United States. The other three G-SIBs are Bank of America, a shareowner in the Richmond Fed; Wells Fargo, a shareowner of the San Francisco Fed; and State Street, a shareowner in the Boston Fed.
G-SIBs…must be monitored closely for financial stability. JPMorgan Chase, Citigroup, Goldman Sachs, and Morgan Stanley are also four of the five largest holders of high-risk derivatives. (Bank of America is the fifth.)
The five mega banks that are the major shareowners of the New York Fed are also supervised by the New York Fed, despite participating in the election of two-thirds of its Board of Directors. James Gorman, Chairman and CEO of Morgan Stanley, currently sits on the New York Fed Board. Jamie Dimon, Chairman and CEO of JPMorgan Chase, previously served two three-year terms on the Board.
…. (They) also participate in various advisory groups with the New York Fed where they hash out “best practices” for their industry. Those “best practices” were not sufficient to prevent JPMorgan Chase from becoming a three-count felon, Citigroup a one-count felon, and four of the banks (all but Bank of New York Mellon) from actively engaging in creating and selling subprime investments that blew up the U.S. financial system, the nation’s economy and a good swath of Wall Street in 2008.”
The crime and fines keep piling up. In early 2018 MarketWatch published a report card of the fines (now obsolete):
Four of the top five banks owning the New York Fed have paid billions in fines for criminal activity, no one goes to jail, while the member banks control the board of directors. As long as Congress allows the fox to guard the hen house, the banks will continue to steal the wealth of the nation.
Prior to the repeal of the Glass-Steagall act, FDIC insured banks were to be kept separate from brokerage and investment houses. Since the Great Depression, the system worked well and Americans were well protected. We had free-market interest rates, and those who worked hard, lived within their means, saved and invested wisely could expect to build some wealth and eventually retire.
The FDIC insured banks protected the citizens if a bank failed.
|The bank was saved and the people were ruined. — William Gouge|
In 1999 congress repealed the Glass-Steagall Act allowing banks and investment houses to merge. Banks began making risky bets in new, high-risk products like derivatives, amounting to trillions of dollars.
“TARP was a congressionally-approved taxpayer bailout of the Wall Street banks, including those that had brought on the crisis by turning their federally-insured banking unit into a derivatives casino.
…. the New York Fed, with nary a vote in Congress or even the awareness of Congress, was running a secret $29 trillion Wall Street bailout.
…. So desperate was the Fed to keep that $29 trillion a secret from the American people that it battled in court for more than two years, arguing that the American people had no right to this information.”
WSOP reports things are worse today:
“The problem is that the largest interconnected risk between the banks is …. their mutual holdings of each other’s derivatives, which are in the trillions of dollars, in terms of face amount. The tangle of incestuous derivative relationships is as bad, if not worse, than it was in 2008. And these trillions of dollars in derivatives …. are still sitting at the federally-insured part of the Wall Street bank, where the taxpayer is still on the hook for any blowup.”
The Fed is the fox, protecting the criminals, not the citizens.
How does this hurt the average American?
Low interest rates favor the banks and government and make it impossible for citizens to invest and grow their money safely.
Prior to the bank bailout, the prevailing interest rates allowed investors to double their money in around 12 years. At today’s rates, it now takes around 130 years.
In 2012 it was estimated that $4 trillion in interest, that would have been paid to savers, was diverted into interest cost savings for the government and big banks. This affects pensions and your individual savings.
The National Association of State Retirement Administrators published the following graph. In 2001, State pension funds were 100% funded. In 2018, primarily due to low interest rates, they are now 72.6% funded. Who is going to make up the difference?
|I fear the middle class will be history in 20 years.|
Since the 2008 bank bailouts, US national debt rose from just under $11 trillion to over $27 trillion. The biggest contributor to the debt increase is the money spent to bail out the banks – 3 times since the Glass-Steagall act was repealed in 1999.
The Balance reports the 2021 federal budget includes $378 billion for interest cost.
The Fed’s new “average” inflation calculation will allow inflation to rise above the 2% target. How do they keep it from skyrocketing? Paul Volker did by raising interest rates.
Each 1% interest rate increase will cost the government an additional $270 billion in interest cost. If the rates jump to 5%, like they were before the 2008 bailout, it would add over a trillion dollars to the federal budget – just for the additional interest on the national debt!
In 2008 they told us interest rates would quickly return to normal. Not a chance!
Caught in a debt trap
Hoisington Management reports:
“The U.S. is caught in a debt trap (Emphasis mine), a term originated by the Bank for International Settlements. A condition where too much debt weakens growth, which elicits a policy response that creates more debt that results in even more disappointing business conditions.”
The spendaholic government continues to borrow money to pay the minimum balance on their credit cards.
To keep interest rates low, the Fed is creating record amounts of money out of thin air and buying up government and corporate debt.
I saw the Carter years inflation clobber my parent’s life savings. It was awful. I expect the government to raise taxes, and use every means possible to steal wealth to try to stay afloat.
How do we protect ourselves?
Gold is the BEST way to protect your nest egg against inflation. Hope things never get so bad you have to sell it!
President Trump nomination of Herman Cain and now Judith Shelton, both advocates of returning to the gold standard, to the board of the Federal Reserve was met with great resistance. God forbid we have a consumer advocate seeing what is really going on behind the Fed’s secret curtain.
In 2016 Rand Paul proposed a bill to do a true audit of the Federal Reserve. It was blocked and did not pass. I wonder why…. Sadly, the career politicians on both sides of the aisle protect the banks. There was a reason Wall Street donated $75 million to the Biden campaign.
We MUST also demand that congress STOP bailing out the banks and reinstate Glass-Steagall. It worked for 66 years and we need it NOW!