Secret FDIC Plan to Loot Bank Accounts

Secret FDIC Plan to Loot Bank Accounts

The Super-Priority Status Derivatives

Cyprus-style confiscation of depositor funds has now been called the “new normal.” Bail-in policies are appearing in multiple countries directing failing TBTF (too big to fail) to convert the funds of “unsecured creditors” into capitol; and those creditors, it turns out, include ordinary depositors. Even “secured” creditors, including state an local governments, may be at risk. Derivatives have “super-priority” status in bankruptcy, and Dodd frank precludes further taxpayer bailouts. In a big derivative bust, there may be no collateral left for the creditors who are next in line.

Shock waves went around the world when the IMF, the EU, and the ECB not only approved but mandated the confiscation of depositor funds to “bail-in” two bankrupt banks in Cyprus. A “bail-in” is a quantum leap beyond a “bail-out.” When governments are no longer willing to use taxpayer money to bail out banks that have gambled away their capital, the banks are now being instructed to “ recapitalize” themselves by confiscating the funds of their creditors, turning debt into equity, or stock; and the “creditors” include the depositors include the depositors who thought they put their money in a safe bank.

The Cyprus bail-in was not a one-time emergency measure but was consistent with similar policies already in the works for the US, UK, EU, Canada, New Zealand, and Australia, as detailed in my earlier articles. “too big to fail” now trumps all. Rather than banks being put into bankruptcy to salvage the deposits of their customers, the customers will now be put into bankruptcy to save the banks.

The big risk behind all this is the massive $230 trillion datives boondoggle  managed by US banks. Derivatives are sold as kind odd insurance for managing profits and risks; but as Satyajit Das points out in Extreme Money, they actually increase the risk to the system as a whole. In the US after the Glass- Steagall Act was implemented in 1933, a bank could not gamble with depositor funds for its own account.  But in 1999, that barrier was removed under Bill Clinton. Recent congressional investigations have revealed that in the biggest derivative banks, JP Morgan and Bank of America, massive mixes have occurred between their depository arm and their unregulated and highly vulnerable derivative arm. Under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured. In a major derivatives fiasco, derivative claimants could well grab all collateral, leaving other claimants, public and private, holding the bag. The tab for the 2008 bailout was $700 billion in taxpayer funds, and that was just the start. There will be no more $700 billion bail-outs. So where will the banks get the money in the next crisis? It seems the plan has just been revealed in the new bail-in policies. Main Street will again be plundered by Wall Street. Besides eliminating the super-priority of derivatives, here are some other ways to block the Wall Street asset grab: Restore the Glass-Steagall Act. – support Marcy Kaptur’s HR-129. Break up the gaint derivatives banks. Make derivatives illegal, as they were from 1936 to 1982. Establish publicity-owned banks to be depositories of public money, following the lead of North Dakota, the only state to completely escape the 2008 banking crisis. North Dakota does not keep its revenues in Wall Street banks but deposits them in the state-owned Bank of North Dakota by law. The bank has a mandate to serve the public, and does not gamble in derivatives. A motivated state legislature could set up a publicly-owned bank quickly. Having its own bank would allow states to protect their own revenues and those of its citizens while generating the credit needed to support local business and restore prosperity to Main Street.

Editors advice: If you have money in a major bank transfer it to a small local bank or credit union. They will not gamble with your money.

Ellen Brown is an attorney, chairman of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth about our Money System and How We Can Break Free. Her Websites are webofdebt.com and ellenbrown.com.

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