Too Big To Fail

‘Too Big to Fail’ Is Too Big Period

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'Too Big to Fail' Is Too Big PeriodJohn Green – A recent Gallup poll found that public confidence in our institutions is collapsing.  The only institutions that still garner majority confidence are the military and small businesses.  Nearly three quarters of Americans have lost confidence in government, big business, academia, and the media (among others).

The vast majority of our institutions are failing.  They aren’t failing to survive.  They’re failing to meet our expectations — which means they’re failing to satisfy their reason for being.

But there’s something peculiar about their failure.  As they collapse, they are all falling leftward — never rightward.  They universally move in a direction that reduces rather than increases our liberty.  Why is that? Continue reading →

New G20 Rules: Cyprus-Style Bail-Ins To Take Deposits AND Pensions

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“Rather than having their assets sold off and closing their doors, as happens to lesser bankrupt businesses in a capitalist economy, “zombie” banks are to be kept alive and open for business at all costs – and the costs are again to be to borne by us.” – E Brown

EllenBrown2On the weekend of November 16th, the G20 leaders whisked into Brisbane, posed for their photo ops, approved some proposals, made a show of roundly disapproving of Russian President Vladimir Putin, and whisked out again. It was all so fast, they may not have known what they were endorsing when they rubber-stamped the Financial Stability Board’s “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” which completely changes the rules of banking.

Russell Napier, writing in ZeroHedge, called it “the day money died.” In any case, it may have been the day deposits died as money. Unlike coins and paper bills, which cannot be written down or given a “haircut,” says Napier, deposits are now “just part of commercial banks’ capital structure.” That means they can be “bailed in” or confiscated to save the megabanks from derivative bets gone wrong.

Rather than reining in the massive and risky derivatives casino, the new rules prioritize the payment of banks’ derivatives obligations to each other, ahead of everyone else. That includes not only depositors, public and private, but the pension funds that are the target market for the latest bail-in play, called “bail-inable” bonds.

“Bail in” has been sold as avoiding future government bailouts and eliminating too big to fail (TBTF). But it actually institutionalizes TBTF, since the big banks are kept in business by expropriating the funds of their creditors.

It is a neat solution for bankers and politicians, who don’t want to have to deal with another messy banking crisis and are happy to see it disposed of by statute. But a bail-in could have worse consequences than a bailout for the public. If your taxes go up, you will probably still be able to pay the bills. If your bank account or pension gets wiped out, you could wind up in the street or sharing food with your pets. Continue reading →

Andrea Germanos ~ Federal Judge Slams DoJ For Not Prosecuting Wall Street Execs

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CommonDreams  November 14 2013

The “‘too big to jail excuse’ is mindboggling in what it says about the department’s disregard of fundamental legal principles,” said Rakoff

Photo: Satish Indofunk/cc/flickr

A federal judge with a history of slamming the regulatory system issued scathing remarks against the Department of Justice on Tuesday for allowing Wall Street executives to escape criminal prosecutions.

Speaking at an event hosted by the New York City Bar Association on Tuesday, U.S. District Judge Jed Rakoff of Manhattan said the DoJ’s “unconvincing” excuses for not prosecuting individuals were “technically and morally suspect.”

“[Not] a single high level executive has been successfully prosecuted in connection with the recent financial crisis, and given the fact that most of the relevant criminal provisions are governed by a five-year statute of limitations, it appears very likely that none will be,” Rakoff said.

While the DoJ has not said that all the top executives are innocent in the lead-up to the financial crisis, it “has offered one or another excuse for not criminally prosecuting them—excuses that, on inspection, appear unconvincing,” the Financial Times reports Judge Rakoff as saying.

“Just going after the company,” which could lead to deferred prosecutions and nominal fines, is “both technically and morally suspect. It is technically suspect because, under the law, you should not indict or threaten to indict a company unless you can prove beyond a reasonable doubt that some managerial agent of the company committed the alleged crime; and if you can prove that, why not indict the manager?”

“And from a moral standpoint, punishing a company and its many innocent employees and shareholders for the crimes committed by some unprosecuted individuals seems contrary to elementary notions of moral responsibility,” Rakoff said.

Ultimately, “the failure of the government to bring to justice those responsible for such a massive fraud speaks greatly to weaknesses in our prosecutorial system that need to be addressed,” he said.

Continue reading →