sabato 18 aprile 2015

The trick and the fix for mega banks balances

A graph exposing the bank accounting problem

martedì 16 settembre 2014

The 2014 Midterms: The Dark Money Election

It's Time To Name The 2014 Midterms The Dark Money Election


Posted: Updated: 
2014 DARK MONEY

WASHINGTON -- If 2012 was the super PAC election, the 2014 midterms look to be the dark money election. Spending on ads that named federal candidates by nonprofit organizations, which are not required to disclose their donors, has soared in the months leading up to November.
Dark money groups have spent at least $142 million on advertising campaigns naming specific senators, representatives and congressional candidates over the past 20 months, according to a Huffington Post analysis of news reports, press releases and political advertising reports collected by the Sunlight Foundation. This total now surpasses the $122 million spent by independent groups that do disclose their donors and only stands to grow.
The major source of this undisclosed money is no surprise -- the political network run by billionaire oligarchs Charles and David Koch. Their network raised and distributed$400 million in the 2012 elections. This time around, the six groups at the center of the Koch operation have already combined to spend at least $53.5 million just on candidate-specific ads.
Nearly all of the spending by Koch groups has come in the form of so-called issue advocacy. Buying issue ads, which level attacks on candidates while stopping short of calling for their electoral victory or defeat, is a useful loophole for nonprofit groups that must abide by tax laws restricting the time and money they can spend on elections. Further, none of this spending is required to be disclosed publicly to the Federal Election Commission.
Despite this legal maneuvering, it's clear that the groups spending big on issue advocacy are directing their efforts toward electoral outcomes. In a recording of a June 16 conference hosted by the Koch-funded Freedom Partners Chamber of Commerce, which was obtained by The Undercurrent and provided to HuffPost, a top Koch network official explained to donors how issue ads help decrease the popularity of its targets.
Freedom Partners President Marc Short told the crowd of wealthy donors how issue advocacy directed at Sen. Kay Hagan (D-N.C.), on which the Koch network has so far spent $13 million, had worked out as of mid-summer.
"After several months of ads that you helped to fund to remind citizens about her record in support of big spending and support of Obamacare, her disapproval rating climbed from 34 percent to where it stands today at 54 percent," said Short in June. "Now, that’s not a good place for her to be running for re-election as an incumbent."
Short also pointed to issue advocacy targeting Sen. Mary Landrieu (D-La.). "[O]ver the course of a couple of months, her approval rating went from 54 percent to 39 percent," he said
"So we want you to know that this network has helped to shift the landscape," Short said. (Both Hagan and Landrieu are engaged in tough Senate races that are currently too close to call.)
The principal arm of the Koch political operation, Americans for Prosperity, leads all dark money groups in spending this electoral cycle with $33.1 million, according to the HuffPost analysis. The other Koch groups spending big money include Freedom Partners with $7.9 million, Concerned Veterans for America with $5.8 million, American Energy Alliance and Generation Opportunity each with $2.3 million, and Libre Initiative with $2.1 million. All of these totals are just minimum estimates as the groups do not disclose this spending in a uniform fashion.
Overall, nonprofits in this election have spent $89.2 million on undisclosed issue advocacy and $52.8 million on electoral efforts disclosed to the FEC.
The top dark money spender outside the Koch universe is the U.S. Chamber of Commerce, the nation's top business lobby, with $15.5 million. In a departure from previous cycles, the chamber entered the 2014 election early and aggressively to support pro-business Republicans and beat back tea party primary challenges. All of its spending has been electoral in focus and disclosed to the FEC, although its donors remain anonymous.
In Kentucky, Senate Minority Leader Mitch McConnell (R), hoping to fend off a tough opponent in Secretary of State Alison Lundergan Grimes (D), has been boosted by the nonprofit Kentucky Opportunity Coalition. The organization, closely linked to the Karl Rove-founded Crossroads groups, has spent more than $5 million on issue advocacy and $4.7 million on electoral ads to boost the six-term Republican.
Crossroads GPS, the nonprofit arm of the Rove empire, has dropped $9.1 million on issue ads in 2014 after a quiet 2013. The group and its affiliated super PAC, American Crossroads, spent $300 million in the 2012 election, but they have reportedly had difficulty with fundraising since then due to the failures of Republicans in that election.
The dark money world is not the sole province of conservatives. Nonprofit groups aligned with the Democratic Party have combined to spend $27 million so far in the 2014 elections.
Leading the pack of Democratic dark money groups is the League of Conservation Voters with $9.7 million spent on issue and electoral advertising combined. The environmental group has targeted Reps. Mike Coffman (R-Colo.), Rodney Davis (R-Ill.) and Dan Benishek (R-Mich.) in an issue ad campaign, as well as New Hampshire Senate candidate Scott Brown (R). It has also boosted Reps. Pete Gallego (D-Texas) and Scott Peters (D-Calif.) and Sens. Hagan and Susan Collins (R-Maine).
Another big Democratic dark money player is Patriot Majority USA, a group linked to Senate Majority Leader Harry Reid (D-Nev.) and the Senate Majority PAC. The group has spent at least $8.5 million on issue and electoral ads boosting a handful of Democratic representatives and attacking Republican Senate candidates. Its main targets have been Rep. Tom Cotton (R-Ark.), who is running against Sen. Mark Pryor (D-Ark.), and McConnell.
Spending by nonprofits like these jumped after the Supreme Court loosened restrictions on issue ads in its 2007 Wisconsin Right to Life decision and then surged following the court's 2010 Citizens United ruling.
The latter decision, along with a subsequent lower court ruling, is known for its connection to the creation of the super PAC, which can raise unlimited funds from corporations, unions or individuals. Super PACs, however, are required to disclose their donors to the FEC. The Supreme Court's 5-4 ruling in favor of the conservative nonprofit Citizens United also freed nonprofits to use corporate funds to run ads and campaigns targeting specific candidates. Since then, the nonprofit vehicle has proved to be a very attractive tool for wealthy individuals and corporations that want to mask their contributions to the political process.
At the end of the 2012 campaigns, HuffPost reported that dark money groups hadspent at least $400 million on issue and electoral advertising at the federal level. The total amount disclosed to the FEC topped $300 million, which was a large jump from the $130 million disclosed in the 2010 election.
This year, the amount of dark money is only expected to rise exponentially as the campaigns move into the last two crucial months. The Center for Responsive Politics, a nonprofit tracking campaign finance, estimates that the total amount disclosed to the FEC will surpass the last election's $300 million. How much will finally be spent on issue ads praising or excoriating candidates is anybody's guess.

Superior debt management: solving the Eurozone crisis

Superior debt management: solving the Eurozone crisis
A sovereign funding instrument outside banking oligarchs reach
by Marco Saba, September 15, 2014

To solve once and for all the Eurozone crisis it is possible to design a national funding instrument with all desirable features, namely that it is

(a) non-tradable and would not need to be marked to market by investors, but instead could be kept on their books at face value;

(b) cheaper, requiring a lower interest rate, than the crisis-period bond market yields; 

(c) available without rating from the credit rating agencies and hence also not be affected by potential ratings downgrades; 

(d) available domestically, hence not requiring borrowing from abroad, thus resulting in lower total debt and greater fiscal and financial stability domestically and in the eurozone; 

(e) generating returns for the domestic banking sector, allowing organic growth of reserves and capital buffers; 

(f) boosting domestic demand, delivering overall economic growth, and hence lower deficit/GDP and debt/GDP ratios by increasing the denominator; such reliance on domestic demand would be superior to the reliance on external demand of IMF-style packages, as foreign demand is an exogenous factor;

(g) available without the conditionality of required deep fiscal tightening, asset sell-offs and deflationary structural reform:

(h) be available on demand by being created ex nihilo domestically, without the  need for any capital by the lenders. 

It is one of the oldest and simplest funding instrument in existence: a State Bill. In Italian: Biglietto di Stato. In French: Billet de l'État. Technically: 'zero-coupon perpetual puttable security' (Wiseman, 2000). 

  In our modern monetary system, which is dominated by digital money transactions, the total amount of digital money is actually controlled by banks and their bank credit creation (Werner, 2005; Ryan-Collins et al, 2012, Bank of England, 2014a, b). For nominal  GDP to grow, more (GDP-based) transactions must take place. This requires a larger amount of money to change hands to pay for this larger amount of transactions. The main way in our monetary system for more money to be used for transactions is for banks to create more bank credit. In other words, banks need to find borrowers willing and able to borrow from them (Werner, 2014). The State's Bill alternative is easier: the digital bills are issued upon necessity as soon as a law establishing an expenditure is promulgated by the democratic government of the country.
  Past approaches to debt management have focused on a narrow set of funding tools and debt restructuring, including complex derivative instruments. But the simplest,  most plain-vanilla of funding instruments, the BILL OF STATE, a digital Sovereign Legal Tender with his full seigniorage, has been neglected, rendering its use ‘unconventional’. 

Bibliography:

Bank of England (2014a), Money in the modern economy: an introduction, by Michael McLeay, Amar 
Radia and Ryland Thomas (Monetary Analysis Directorate), Bank of England Quarterly Bulletin, Q1 2014, 4-13 

Bank of England (2014b), Money creation in the modern economy, by Michael McLeay, Amar Radia and Ryland Thomas (Monetary Analysis Directorate), Bank of England Quarterly Bulletin, Q1 2014, 14-27 

Ryan-Collins, Josh, Tony Greenham, Richard A. Werner and Andrew Jackson (2012), Where Does Money Come From? London: new economics foundation, 2nd edition 

Werner Richard A. (2005). New Paradigm in Macroeconomics: Solving the Riddle of Japanese Macroeconomic Performance, Basingstoke: Palgrave Macmillan, 2005 

Werner Richard A. (2014). Enhanced debt management: solving the Eurozone crisis by linking debt management with fiscal and monetary policy, Journal of International Money and Finance (in press)

Wiseman Julian D. A. (2000)The end of EMU: How Germany might leave, www.jdwiseman.org, October 2000

Scotland Should Declare Its Independence From Alex Salmond

Scotland Should Declare
Its Independence From Alex Salmond

By Greg Palast for Reader Supported News
I mean, what's the bloody point? Why pretend to declare your independence only to chain yourself to a coin with a British snout on it and simultaneously beg to become a colony of Angela Merkel's Fifth Reich, aka the European Union?
I realize that, as an American and an economist, I carry into this debate a double dollop of disrespect from Scottish readers. But, with thousands of miles of salt water separating me equally from London and Edinburgh, I think I can see clearly what you miss from having your head inside the fish bowl.
There are two overwhelming and undeniable advantages for Scotland to declare its sovereign independence: to end both Scotland's damaging enchainment to the British pound and the debilitating tyranny of European Union membership.
Yet, weirdly, inexplicably and inexcusably, Alex Salmond promises to throw away the two most valuable benefits of national self-determination.
First, the pound. In all the hoo-hah over whether Scotland can keep the coin with the Queen's schnozzola on it, no one seems to have asked, Why in the world would Scotland want this foreign coinage?
The Bank of England's singular task at this moment is to figure out how to counteract the disastrous macroeconomic consequences of George Osborne's austerity fixations and the bleating demands of City bankers. The only time when the Bank of England gives any consideration to Scotland's economy is when a BOE governor checks the little gauge which tells them how much of Scotland's oil they have left to spend.
Why should the interest rates, exchange rates and monetary supply of a resource nation like Scotland be subject to the needs and whimsies of the rusting realm to your south? According to the well-accepted theory of Optimum Currency Areas, Scotland would be best off adopting the Canadian dollar, also a damp, salmon-choked oil exporter or, better yet, the Vietnamese dong.
No nation controls its economic destiny until it controls its currency--a concept easier to understand if you read it in Greek.
And Scotland's own coin, backed by taxing power over its oil extractors, would undoubtedly be stronger than sterling and more flexible alone. Control over its own currency will enable Scotland to cut interest rates when local manufacturing falters while the Bank of England is raising rates to fight a speculative bubble in The City.
To give you a head start, my daughter has designed your new currency (above).
Second, why this pathological need to remain subjugated by the European Union? Is there some extraordinarily wise legislation crafted by the solons of the European Parliament? Does Scotland need the guiding hand of Angela Merkel, Marie LePen and the Italian premier du jour? Does Scotland fear a sudden shortage of Bulgarian plumbers?
The USA trades with Europe without giving Lithuania veto power over trade terms. And as Swiss nationals will tell you, a lack of an EU passport will not cause you to be strip-searched on your way to the Costa del Sol. Disadvantages of EU membership: loss of control over terms of trade, and policies of industrial regulation, immigration and environmental control. And sorry, Mr. Salmond, you will indeed have to join the euro, at which point, Germany's finance minister will draft your budgets.
So that is my question to my friends north of Hadrian's wall. Why demand your independence from Britain only to insist on keeping your shackles? If you too find attachment to your chains nonsensical, then shouldn't your first referendum be a vote to declare Scottish independence from Alex Salmond?
* * * * * *
Greg Palast is the author of the New York Times bestsellers Billionaires & Ballot Bandits, The Best Democracy Money Can BuyArmed Madhouse and Vultures’ Picnic , a BBC Television Book of the Year.
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domenica 14 settembre 2014

21st Anniversary of the Maastricht Treason

21st Anniversary of the Maastricht Treason Charges

PRESS RELEASE
http://freenations.net/21st-anniversary-of-the-maastricht-treason-charges/

1993 TREASON CHARGES PREDICTED TODAY’S CRISES IN MASS IMMIGRATION, THE SCOTTISH REFERENDUM, THE EURO, PARLIAMENT’S POWERS, EU TAXES AND REGULATION, CITIZENSHIP AND VOTING RIGHTS
On 9th September 1993 Rodney Atkinson and the late Norris McWhirter laid before the magistrates court in Hexham, Northumberland under the process known as “Misprision of Treason” 7 counts of treason against the British Constitution and people by two Ministers who had signed the Treaty of Maastricht in 1992. Some weeks later in Scotland Norris McWhirter laid a further case. The Crown Prosecution Service took 4 months to consider the charges but, headed by the political post of Attorney General (who acted in contravention of the legal principle of non judex in re sua) the CPS refused to address the specific charges and declared that the treason at the signing in 1992 was made legal by the passing of the European Communities (Amendments) Act 1993. The treason of 1992 had been legalised!
But treason was committed in 1992 and that act remains a crime since British law recognises it was the law at the time.

The Scottish Referendum

The de facto overturning of the 1706 Union with Scotland Act by the 1992 Treason and the surrender of UK self Government by Ministers on a daily basis since 1972 mean the contract with the Scots was broken. The occupiers of Scotland including those who are not Scots at all now vote to destroy the United Kingdom.
The 1993 Treason cases showed that 500m people could move to and vote in any EU country’s national elections. The Government denied this. But it is happening in the Scottish National referendum.
So the aim of the treason committed at Maastricht by British politicians was the destruction of the United Kingdom – now within 10 days of realisation.
The Crown Prerogative is the power of Her Majesty’s Government to act on the authority of the Queen and without the authority of Parliament. It is impossible for the Government of the day to undermine the constitution when signing treaties with other countries under Crown Prerogative powers.
So no Treaty which contradicted the Act of Settlement, the Coronations Oath Act, the Union with Scotland Act, the Treason Acts, Constitutional Case Law (R v Thistlewood 1820) and Magna Carta and confirmed the permanent superior power of European Union Law could justify the use of undemocratic Crown Prerogative Powers.
The end results of our treason cases were statements from the Crown Prosecution Service in England and the Lord Advocate in Scotland. They refused to address the specific charges at all and both countries declared that the treason at the signing in 1992 was made legal by the passing of the European Communities (Amendments) Act 1993.
The treason of 1992 had been legalised! But treason was committed in 1992 and that act remains a crime since British law recognises it was the law at the time. And since the 1993 Act could not overturn the British Constitution that Act was nul and void.
The Cases therefore remain unanswered – because they were unanswerable. But they remain a marker even today since they can be picked up and used by a British people slowly awakening to the deceitful and covert destruction of their democratic sovereignty on the altar of the European State.

Case 1

It is an offence under Section 1 of the Treason Act 1795 “within the realm or without…to devise…constraint of the person of our sovereign…his heirs or successors.”
Article 8 of the Treaty of Maastricht which Her Majesty the Queen becomes a citizen of the European Union and therefore “subject to the duties imposed thereby”, subject to being arraigned in her own courts and being taxed and thereby effectively deposed as the sovereign and placed in a position of suzerainty under the power of the “European Union”.

Case 2

Whereas it is an offence under section 1 of the Treason Act 1795 to engage in actions “tending to the overthrow of the laws, government and happy constitution” Article 8 of the Maastricht Treaty says “every person holding the nationality of a member state shall be a citizen of the Union” with the right to move and reside freely and vote within the territory” and “the question whether an individual possesses the nationality of a member state shall be settled solely by each member state.”
So the British people and Parliament have no right to determine the numbers or identity of non British nationals to whom other European states can give residence rights and voting rights in the United Kingdom.

Case 3

Whereas it is an offence under the Act of Settlement (1700) for any “person born out of the Kingdoms of England, Scotland or Ireland or the Dominions thereunto…shall be capable to be…a Member of either House of Parliament”
And whereas according to R v Thistlewood 1820 “to destroy the constitution of the country” is an act of treason.
according to Article 8b of which “Every citizen of the Union residing in a member state of which he is not a national shall have the right to vote and stand as a candidate in the Member State in which he resides.”

Case 4

And whereas, according to the Act of Settlement 1700 S4 “The laws of England are the birthright of the people”
And whereas according to R v Thistlewood 1820 to “destroy the Constitution” is an act of treason.
according to Article 8 the British people, without their consent have been made the citizens of the European Union with duties towards the same and the british people can be taxed directly by that European Union without further process in the Westminster Parliament and according to Article 171 of which the British State can be forced to pay a monetary penalty to the European Union.

Case 5

Whereas, in accordance with the Coronation Oath Act, Her Majesty Queen Elizabeth II swore at Her Coronation in 1953 that she would govern Her subjects “according to their laws”.
And whereas it is an offence under Section 1 of the Treason Act 1795 “within the realm or without…to devise…constraint of the person of our sovereign…his heirs or successors”
The Treaty extended the powers of the European Commission, the European Court of Justice and the European Parliament in the new “European Union” to make and enforce in the United Kingdom laws which do not originate in the Westminster Parliament. And that this loss of democratic rights was without the express consent of the British people.

Case 6

Whereas it was established in 1932 that “No Parliament may bind its successors” (Vauxhall Estates v Liverpool Corporation IKB 733)
And whereas according to R v Thistlewood 1820 to destroy the constitution is an act of treason.
According to Article Q the Maastricht Treaty “is concluded for an unlimited period” and from which there was no right of nor mechanism for secession.

Case 7

Whereas it is established by a statute in force, the Magna Carta (Chapter 29) that:
“No freeman may be…disseised…of his liberties
or free customs…nor will we not pass upon him
but by the law of the land.”
The “Treaty of European Union”…etc..which disseises all free men of their liberties and free customs under the law of this land by subjugating their Government to the extension of the powers of the European Commission, Court and parliament (in which latter the United Kingdom members form a minority of 87 of 567 voting members).
Under Article 192 of the integrated treaty our free men are open to be taxed without further process of the United Kingdom Parliament
Under Article 8 of the Treaty free men are required to become citizens of the European Union “subject to the duties imposed thereby.”

Case 8 (IN SCOTLAND)

Whereas it is an offence per S1 of the Treason Act 1795:
“to enter into measures tending to the overthrow of the laws, government and happy constitution of the United Kingdom”
and whereas to destroy the constitution per R v Thistlewood 1820 is an act of treason.
This treaty is contrary to and inconsistent with the Union of Scotland Act 1706 whereby the people of the United Kingdom be represented by the one and the same Parliament and none other and per Article XVIII that no alteration be made in laws which diminish the rights of Scots
Under the treaty, the rule of a Parliament other than that of the Parliament of the United Kingdom is established whereunder, subjects within Scotland become subject to laws made in an assembly in which their representatives form a minority seven fold more slender than in the parliament of the United Kingdom established by the Act of Union.
Therefore the said Rt Hon Douglas Hurd and the said Rt Hon. the Hon Francis Maude are guilty of treason.
The book Treason at Maastricht was published in 1994 and remains in print, published in physical form by Compuprint Publishing and as an ebook by Amazon.
Rodney Atkinson can be contacted on 01668 214636
His website www.freenations.net contains his internationally praised work and testimonials from Heads of State, Cabinet Ministers, politicians, academics and journalists.
A video by Rodney Atkinson filmed partly at Runnymede, will appear on the freenations website in the next 48 hours.

sabato 13 settembre 2014

Federal Reserve racket: the intent is to Detroit-ize municipal governments

Preparing to Asset-Strip Local Government? The Fed's Bizarre New Rules

Monday, 08 September 2014 14:56By Ellen BrownThe Web of Debt Blog | News Analysis
(Image: <a href="http://www.shutterstock.com/pic-167233115/stock-photo-headquarter-of-the-federal-reserve-in-washington-dc-usa-fed-cyanotype.html?src=LdJXZ29MGF205me_UiLo5w-1-15" target="_blank">Federal Reserve headquarters in Washington, DC</a> via Shutterstock)(Image: Federal Reserve headquarters in Washington, DC via Shutterstock)In an inscrutable move that has alarmed state treasurers, the Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, just changed the liquidity requirements for the nation’s largest banks. Municipal bonds, long considered safe liquid investments, have been eliminated from the list of high-quality liquid collateral. assets (HQLA). That means banks that are the largest holders of munis are liable to start dumping them in favor of the Treasuries and corporate bonds that do satisfy the requirement.
Muni bonds fund the nation’s critical infrastructure, and they are subject to the whims of the market: as demand goes down, interest rates must be raised to attract buyers. State and local governments could find themselves in the position of cash-strapped Eurozone states, subject to crippling interest rates. The starkest example is Greece, where rates went as high as 30% when investors feared the government’s insolvency. Sky-high interest rates, in turn, are the fast track to insolvency. Greece wound up stripped of its assets, which were privatized at fire sale prices in a futile attempt to keep up with the bills.
The first major hit to US municipal bonds occurred with the downgrade of two major monoline insurers in January 2008. The fault was with the insurers, but the taxpayers footed the bill.  The downgrade signaled a simultaneous downgrade of bonds from over 100,000 municipalities and institutions, totaling more than $500 billion. The Fed’s latest rule change could be the final nail in the municipal bond coffin, another misguided move by regulators that not only does not hit its mark but results in serious collateral damage to local governments – maybe serious enough to finally propel them into bankruptcy.
Why this unprecedented move by US regulators? It is not because municipal bonds are too risky, since corporate bonds with lower credit ratings are accepted under the new rules. Nor is it that the stricter standard is required by the Basel Committee on Banking Supervision (BCBS), the BIS-based global regulator agreed to by the G20 leaders in 2009. The Basel III Accords set by the BCBS are actually more lenient than the US rules and do not include these HQLA requirements. So what’s going on?
From the Inscrutable, Unaccountable Fed
The rule change was detailed by Pam Martens and Russ Martens in a September 4th article titled “The Fed Just Imposed Financial Austerity on the States.” They write that on September 3rd:
The Federal regulators adopted a new rule that requires the country’s largest banks – those with $250 billion or more in total assets – to hold an increased level of newly defined “high quality liquid assets” (HQLA) in order to meet a potential run on the bank during a credit crisis. In addition to U.S. Treasury securities and other instruments backed by the full faith and credit of the U.S. government (agency debt), the regulators have included some dubious instruments while shunning others with a higher safety profile.
Bizarrely, the Fed and its regulatory siblings included investment grade corporate bonds, the majority of which do not trade on an exchange, and more stunningly, stocks in the Russell 1000, as meeting the definition of high quality liquid assets, while excluding all municipal bonds – even general obligation municipal bonds from states with a far higher credit standing and safety profile than BBB-rated corporate bonds.
This, rightfully, has state treasurers in an uproar. The five largest Wall Street banks control the majority of deposits in the country. By disqualifying municipal bonds from the category of liquid assets, the biggest banks are likely to trim back their holdings in munis which could raise the cost or limit the ability for states, counties, cities and school districts to issue muni bonds to build schools, roads, bridges and other infrastructure needs. This is a particularly strange position for a Fed that is worried about subpar economic growth.
Not Sufficiently Liquid?
In a September 3rd press release, Federal Reserve Governor Daniel K. Tarullo stated that while “most state and municipal bonds are not sufficiently liquid to serve the purposes of HQLA in stressed periods . . . the liquidity of some state and municipal bonds is comparable to that of the very liquid corporate bonds that can qualify as HQLA.” [Cite] Criteria were being developed, he said, for considering these assets. But “it is important to get this final rule adopted now, so that the largest banks can begin to prepare for its implementation on January 1.” In the meantime, muni bonds are in limbo, and it appears that most will still not be accepted as HQLA.
The regulators consider stocks to be more liquid than muni bonds because they are readily traded on the stock market. But as the Martens’ note, stock markets can be quite inaccessible in a crisis. Quoting from the Fed’s own archives on the crash of 1987:
Market makers in the over-the-counter market were not obligated to maintain an orderly market and many withdrew from trading. Delays in processing trades resulted in investors receiving prices very different from what they expected. Many brokers did not answer their phones, leaving investors unable to reach them. Erratic price movements and quotes resulted in frequent lock-ups in the electronic trading system used in the over-the-counter market.
In any case, switching the banks’ holdings from muni bonds to corporate bonds or Treasuries is liable to have little effect in a crash. The stricter rules are supposed to be a defense against bank runs; but in a major derivatives bust and bail-in, the available collateral will go first to the derivatives claimants, through a massive concession to financial institutions in the Bankruptcy Reform Act of 2005. (See my earlier articlehere.) The FDIC and the depositors are both liable to be out of luck, no matter what form the collateral takes.
The Martens’ conclude:
That the Fed and its regulatory cohorts have to resort to this implausible plan – which crimps the ability of states and localities to raise essential funds to operate – in a strained effort to pretend that they’ve found a means of avoiding another massive bailout of Wall Street in a crisis, is just further proof that the only way to seriously deal with too-big-to-fail banks is to restore the Glass-Steagall Act and break up these complex creatures before they strike again.
Gordon Gekko Goes Muni?
The rule change may not have much effect in a crash, but where it will have a major effect is on the cost of credit, which will increase for municipal governments and decrease for corporate and financial institutions. The result will be to further shift power and financial resources from the public sector to the private sector.
Why would regulators dangerously jeopardize state and local government budgets in this way? Skeptical observers speculate that the intent is to Detroit-ize municipal governments, so that assets can be stripped as is being done in that imperiled city. The international bankers got away with asset-stripping Greece. Why not make the US itself a wholly-owned subsidiary of private banking interests?
If that seems far-fetched, consider what is happening with Argentina, which has been forced into bankruptcy by a US court to satisfy the exaggerated claims of certain hold-out vulture funds. IMF regulators have discussed establishing an international bankruptcy court that could strip a country such as Argentina of its assets, including prime sections of real estate, to pay off the nation’s creditors.
In the US, there is already a trend to force state and municipal governments into austerity measures, if not outright bankruptcy, in order to eliminate labor unions, pension obligations and social services. Bankruptcies can be involuntary, forced by the creditors who caused them. Detroit is the US model. Michigan’s Constitution protects pensions, so the emergency manager appointed by the governor could not unilaterally cut those funds. But in a municipal bankruptcy, a judge would decide the fate of city workers’ pensions, making it an attractive option for banking interests. The oligarchs have long had their eyes on the massive sums represented by the pension funds.
Public Banks to the Rescue?
Whatever the explanation for the Fed’s game-changing move, the vulnerability of state and local governments to unpredictable and unaccountable federal regulators is another strong argument in favor of forming publicly-owned banks. Why be under the thumb of an erratic privately-owned central bank manipulated by Wall Street megabanks now caught in multiple frauds?
Like Eurozone countries, US states cannot print their own currencies. But unlike Eurozone countries, they can borrow from their own public banks, which can create money as credit on their books just as private banks do.
At least, they could if they had their own banks. Only one state – North Dakota – has currently taken advantage of that option. North Dakota is also the only state to have escaped the 2008 credit crisis, sporting a budget surplus every year since then. It has the lowest unemployment rate in the country, the lowest default rate on credit card debt, and one of the lowest foreclosure rates.
True, North Dakota also has oil. But the 2008 crisis happened before oil and gas had made a significant impact on state revenues; and the state was posting a budget surplus all during that period. Other oil and gas states are not doing so well.
Globally, 40% of banks are publicly owned; and they are largely in the BRIC countries – Brazil, Russia, India and China. These countries also escaped the credit crisis largely unscathed.
If state and municipal governments want to protect themselves from the fate of Greece and Detroit, they would do well to follow North Dakota’s lead and form their own publicly-owned banks. And time is of the essence, if they hope to beat the rush before the first US Cyprus-style bail-in consumes the collateral that local governments are counting on to protect their multi-billions in deposits.
This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

ELLEN BROWN

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are Web of DebtPublic Bank Solution, and Public Banking Institute.

Greece: An Economic Hit Man Speaks Out

An Economic Hit Man Speaks Out: John Perkins on How Greece Has Fallen Victim to "Economic Hit Men"

Thursday, 11 September 2014 00:00By Michael Nevradakis, Truthout | Interview
2014 911 perkins st"My sin was ripping off people around the world," said John Perkins, author of "Confessions of an Economic Hit Man," at Transitions Bookplace in Chicago, on February 3, 2006. (Photo: Peter Thompson / The New York Times)John Perkins, author of Confessions of an Economic Hit Man, discusses how Greece and other eurozone countries have become the new victims of "economic hit men."
John Perkins is no stranger to making confessions. His well-known book,Confessions of an Economic Hit Man, revealed how international organizations such as the International Monetary Fund (IMF) and the World Bank, while publicly professing to "save" suffering countries and economies, instead pull a bait-and-switch on their governments: promising startling growth, gleaming new infrastructure projects and a future of economic prosperity - all of which would occur if those countries borrow huge loans from those organizations. Far from achieving runaway economic growth and success, however, these countries instead fall victim to a crippling and unsustainable debt burden.
That's where the "economic hit men" come in: seemingly ordinary men, with ordinary backgrounds, who travel to these countries and impose the harsh austerity policies prescribed by the IMF and World Bank as "solutions" to the economic hardship they are now experiencing. Men like Perkins were trained to squeeze every last drop of wealth and resources from these sputtering economies, and continue to do so to this day. In this interview, which aired on Dialogos Radio, Perkins talks about how Greece and the eurozone have become the new victims of such "economic hit men."