Banks: Is a New Glass-Steagall Good News? My comment to Ben Levisohn of Barrons

Hello Ben,

I helped work on Gramm Leach Bliley (beginning when it would have been D’Amato Leach Bliley).

I met Rep Jim Leach at the 2000 Republican National Convention while a NY delegate for Senator John McCain. When I met Rep Leach (and I considered that a privilege), after I introduced myself, I asked why didn’t we allow the mix of commerce and banking in repealing Glass Steagall when we ‘passed’ GLB (I missed meeting Senator Phil Gramm and Senator Jessie Helms by the delay in USPS mailing the invitation to me for that function at that event venue in Philadelphia prior to the Convention’s major reason for convening).

Rep Leach said in effect, that if we’d allowed mixing commerce and banking, that large foreign industrial companies like Daimler would have wanted to buy our largest banks, LIKE THAT, A SNAP OF THE FINGERS. My eyes went wide as … and I felt some sort of shock through my system while I looked at him after what he’d said.

He said he didn’t want it, and I agreed I didn’t want that even though I’d researched and analyzed that matter while reviewing what would have breached the founders’ attempts to stop the abuse of power by limiting concentrations of power…

I thought I had it all figured out about what made Ford’s ownership of First Nationwide a marginal operating strategy, and like that, but as if that was OK. Regardless however, what he said had the appropriate shock effect on me.

It was a while before I’d come into a key understanding about what was a root problem of,  and reason for the matter that he’d mentioned ie,  domestic or large foreign commercial and/or industrial enterprises able to buy our banks.  It isn’t only about concentrations of power by size, including  Too Big to Fail. ALL DISCUSSION, CONTEMPLATION AND PLAN TO EMBRACE THE  PROBLEM OF GOING BACK TO GLASS STEAGALL AND WORTH PUTTING THE TOOTHE PASTE BACK INTO THE TUBE  MUST INCLUDE OUR DETERMINATION TO ADDRESS AND AVOID THE ***ABUSE OF POWER***.

But there’s more to it; it’s not that simple to repeal Gramm Leach Bliley and Commodity Futures Modernization Act both which were de-legislating while legitimizing combining banking with investment banking, and writing and trading credit swaps, and derivatives contracts (these obtaining the ‘financial innovation’ nick name, even though that originally meant developing and selling Mortgage and Asset Backed Securities) without any regulatory framework or oversight.  Legitimization of writing and trading (making these instruments affected by the levels and direction of the financial markets, and thus enfragilating) credit default swaps (CDS) and derivatives gave balance sheet access to these instruments, as if they were legitimate assets belonging on a bank’s balance sheet, when they are not legitimate assets except that legitimization to trade them gave them access to sleaze into asset class. These as assets on banks’ balance sheets increase fragility on a bank’s balance sheet, while performing loans and other legitimate balance sheet worthy assets (those producing monthly cash flows regardless of the directions of the financial markets) tend to stabilize a bank’s balance sheet.

While I was researching my Public Due Process Comment Letter to the regulators about opposing  Basel III, I began to understand another ROOT CAUSE, not only of our long time problems we’ve had in abuse of power and corporate personhood.  My research brought me to know WHY THIS MAY HAVE BEEN THE CASE of large foreign commercial ‘national champions’ acquiring our largest banks, had Rep Leach and the others in Congress not taken some aggressive steps against mixing commerce and banking in GLB.

***We have to repeal US signatory status to the GHWB G8 Agreement to which that president committed the US to the germans, although other European countries are also signatories, but they sort of don’t matter. ***

This particular multilateralism by and since him over these 25 years, has been most of the root problem (s) we’ve been experiencing. In effect GHWB agreed to throw  the US under the bus to suit german interests to ‘align’ US regulation, and in effect the US corporate pecking orders to suit the germans and the ‘national champions’ in Europe. This is their name for their largest companies that have their cozy interests and power with the countries in which they are domiciled. Like Daimler, or DB. In the case of the Grossbanken, these enjoy huge power over there. Think about DB is doing in Europe, now most of which is under the EU ‘free’ trade/euro currency zone umbrella to advantage Germany over all other sovereigns which have become EU members. This is the design of this multilateral framework.

The way that we could and if we should do a restoration of Glass Steagall is to repeal US signatory status to that which is a root foul of our society, economy and somewhat, our sovereignty. Repealing US signatory status to that G8Agreement gives us some traction against larger foreign companies wanting to buy our banks if we reduce their size, as well as some traction against Germany’s interests to obtain hegemon powers.

This interest and that Agreement are sort of what is a root of the ‘global competition’ concerns by senior management of our largest banks, although I am not certain if they understand what is the reason for why their banks would be vulnerable and also in part why they’ve blown up as well as inflated their balance sheets with these pathetic, gmo of the financial product world, swaps and derivatives.

Rather than go down the rabbit hole on ghwb (scherf) we need to understand what he did in that G8, and which no subsequent president seems to be willing to take on and repeal. That G8Agreement also is why rather than administering our own effective regulation that we had with Prompt Corrective Action from the 1991 FDICIA legislation, we’ve adopted the Basels….I liken basel agreements as in effect what comes out of the research department of the Federal Reserve Bank of NY or the Research division of the Board of Governors of the FRS in DC. BSCS was the research arm of the BIS. see?

On a related matter, another thing to which he agreed in that G8Agreement was to deindustrialize the US so as to not be a ‘trade competitor’ to the germans so that Germany could sort of ‘trade’ itself out of some of the cost of reunification, which he and helmut kohl schemed, and to which Thatcher and Mitterand vigorously opposed. In order to spur management to take production out of the US, it would go into ‘trade liberalization’ ie, with cheap labor, and usually Catholic countries, the US would knock down the Constitution’s Article 1 Section 8 tariff framework against the imports from those countries. This is what is commonly known as ‘free’ trade, but in reality, that is a double speak expression for US self immolation and economic treason.

The swaps and derivatives hide the deleterious impact of the increasingly souring loans/ credits in the weakened developed economies to do loans into scratch dirt/ underdeveloped foreign economies which often were former colonies of our allies. These financial items however and glowingly called ‘financial innovation’ which first was an expression used by people like McKinsey’s Lowell Bryon, to characterized asset backed securities, such as MBS and CLOs, but now is an expression used to pretend these contingent agreements deserve balance sheet access like loans, but not at all with the same properties as loans, which are the banks’ main investment business and are a well worn groove that can be regulated. Meanwhile the derivs and swaps were what were not what should have been legitimized and to TRADE, which Commodity Futures Modernization Act (derivatives) and Gramm Leach Bliley (CDS) both allowed.

These enfragilating items do not belong on the balance sheet and a smoking gun as to a real purpose is found here Ms Fixler said, that in the early 90s, US banks were ‘enlisted’ into finding ways to help Germany deal with the cost of reunification. In knowing that Germany would not be able to obtain direct transfer payments from the US in order to reunify, bush – who had some roots on Wall Street with relatives at Brown Brothers Harriman, and anyway, president that was a part of reuniting a Germany that deserved to have been separated, and should have been left separated, but that the US banks which also operate in Europe as counterparties to large European banks that also would be affected by 1. german reunification and 2, the EU strategy that would be Germany taking over Europe using a ‘free’ trade zone, a same currency and a legal framework that eventually always would advantage Germany, except for the power of the ECB against Germany’s sovereign self interests. Draghi knows this and Germany too, and has to play along with the power of the ECB. Notwithstanding, our banks as counterparties and because from that time, the power of the bushs got the FDIC pushed back while the Fed and ‘financial innovation’ got glorious traction. Those instruments could not trade thank God, except when Ruben, Phil Gramm, Larry Sommers, greenspan and Clinton got the Commodity Futures Modernization Act CFMA2000, against Brooksley Born’s insights and experience – no regulatory framework nor institutional structure existed for these instruments, which were lying off balance sheet, but not in the hundreds of trillions notional they do today.

When that legislation got passed, by 2004, derivs and swaps plumed to more than $400 Trillion notional and without virtually any of the paperwork straightened out. It was while Tim Guithner was NY Fed president that he told banks in that district to get their paper work on those contracts in order. It was because my research on barter, and revenue recognition was somewhat of a spur to bring some attention to this huge looming problem of these contracts, how even when hedged, they’re what’s fragile, because they’re financial market connected, (whereas very little about banks’ balance sheets were financial market connected – before glb there weren’t the ‘margin accounts’ concept that had existed on banks’ balance sheets’ from after FDI Act 1933 to 1998. in 1929, when there were margin accounts on banks’ balance sheets, this was some of the reasons banks failed with the 1929 stock market correction.

This is why CFMA 2000 should be repealed and the part of GLB that legitimized the writing and trading of Credit Default Swaps, that part of GLB should be repealed. Don’t even need a Volcker ‘Act’, rule. Delegitimize instruments which make the balance sheets fragile which until CFMA and GLB weren’t on banks’ balance sheets and didn’t belong there anyway, and this will somewhat help diminish the financial crisis.

The financial crisis isn’t really over. Only because of nearly zero interest rates which has tended to spur action into the institutional financial markets, is there ‘stability’ and an illusion that the pus economy is Ok. Unemployment actually is quite high from deindustrialization and the contraction to which that has contributed. Banks don’t have a healthy economy here or in other developed countries into which to lend. This current admin has been aggressive to heist the ‘numbers’ and manipulate them for disingenuous public dissemination, but it’s in effect to keep eroded the US economy to ‘comply’ with that to which GHWB also agreed – to ‘align’ the US economy with that of in effect Germany, to have no net new job growth probably from when he was in the W/H, and facilitate the ability for foreign ‘national champions’ to have more traction here. that’s why foreign banks could operate in the US without being adequately capitalized, and through the 90s enjoyed a fair amount of Teflon from our regulators.

Repealing Glass Steagall isn’t a bad idea and it is possible to put the tooth paste back into the tube. It is better to repeal CFMA 2000 and unwind the huge books of swaps and derivs when these fragile instruments are delegitimized.

Please feel free to quote me, but do give me attribution.

Andrea Psoras

Posted in asymmetric war, EU, FDIC, financial sector, Germany, Resolutions of 'SIFIs' | Leave a comment

Psoras – Curriculum Vitae/Resume CR 2Q16

Andrea M. Psoras

201 W117th Str #2B NY, NY 10026 ; (212) 666-2569;


  • Financial Analyst/Financial Sector with strong strategic thought leadership skills – experience consulting to, analyzing predominantly depository and financial institutions. Strong skills in: Financial analysis, research, quantitative analysis with strong commercial intuition and reasoning/problem solving, abilities ; team player in transactions-projects with multiple stakeholder collaboration for M&A-investment banking (combinations/divestitures), credit/counter-party risk, stock or Private equity portfolio investments (industry/macro, credit analysis) using 10Q, 10K, Y9-C, “Call”, TFR, Focus, some Basel II, Pillar 3/Market Risk – FFIEC 102; FFIEC 101; FR Y-14/“Stress Tests: DFAST, CCAR – Capital Plans, capital planning and Capital Adequacy research and analysis ; Dodd Frank (Resolution Plan) related, consulting business development. Some Financial Reporting work.
  • International Bank Credit Trained – formal credit training;. 24 credits specific to Accounting.
  • Strong software skills including complex interactive (spreadsheet) forecasts, strong modeling, building models: MS Office: Excel, Word, Access, Powerpoint, MS Project; Lotus 123, Amipro; FoxPro; dBase and programming; WordPerfect; Bloomberg API spreadsheet building; FactSet product use; QuickBooks; STATA; Sybase; WordPress-website development; some SAS JMP/data mining, data analysis; BigDough; Sales Force; MedTracks
  • Member: NYSSA; Jul’14 NYC Exam for Staff Analyst Trainee: 78%; Jun15 NYC exams for Analyst, Assoc Staff Analyst

EMPLOYMENT/CONSULTING (see also Transactions/Projects/Activities List in WordPress)

  • Independent Consulting/PLLC Family office Analyst/Consultant           (8/08-Pres)
  • QED International Associates, Inc. (“QEDI”) Senior Vice President    (10/05–8/08)
  • Strategic Advisory (“SA”) Principal/Analyst                                        
  • KPMG Peat Marwick, LLP (“KPMG”)                         Senior Banking Analyst                                                                        
  • Lyons, Zomback & Ostrowski (Advest Group) (“LZO”) Associate/M&A consulting

EXPERIENCE-Financial Sector, Related (Also see Transactions-List

Financial Analyst – Counter-party Credit Risk (and project-contract-temporary, etc); Financial Reporting:

  • For Financial reporting work by/for Treasury, Control, gap analysis (in Hyperion, Sybase), G/L: I reported to Controller, Treasurer, CFO at large European bank sub in US, for whom I also determined profits and losses from trading: derivatives – options, swaps, hedges; forward rate agreements, FX
  • Used/analyzed GAAP; RAP data: “Call”, Y9-C reports, Focus Reports for broker/dealers, North American based financial institutions, credit card banks, financial service cos, broker/dealers, ETNs, also analyzing US subsidiaries (“subs”) and foreign subs in Europe, Asia of US based financial institutions (some translating from French, Spanish)
  • Reviewed Y2K, operations/IT compliance, some editing of Counterparty ISDA docs used for adjusting global exposures to credit counterparties
  • Provided credit analysis using internal credit utility software on Global 1000 cos. at a global bank for Sr. Mngt
  • For clients (while at LZO), for internal use I worked on the development of the LZO Bank & Thrift Directory a bank rating guide subscription product, and from regulator data in dBase form I built, I co-developed a credit scoring model that quality-rated banks and thrifts as a proxy for rating their CDs

M&A and Related Consulting (mostly “Execution” side):

  • LZO, KPMG, SA I co-authored M&A, recap, strategy, business-capital plans (these were predecessors to ‘Resolutions’ Plans) for regulator, client purposes.
  • LZO, KPMG, SA I created, constructed, developed complex, scenario driven interactive Excel, Lotus spreadsheet models with stress testing/scenarios, pro-forma forecasts for business combinations, divestitures, recapitalizations, private placements, financial and/or credit analysis; modeled mostly retail, (some) commercial, industrial, SNC/‘participations’ loan portfolios – to accompany co-authored materials.
  • LZO, KPMG, SA For execution side of transactions/projects: I engaged in strategic consulting, strategic economic and financial analysis collaborating between external, internal stakeholders: senior partners/investment bankers, analysts, clients and/or external parties such as the regulators; “turn-around” work. I also was involved in some business development.
  • LZO, KPMG, QEDI, IC While laws, regulations have been designed to diminish the number of ‘mouths’ feeding at the table of the US economy, for stakeholders – clients, regulators (external) and MDs (internal) I researched/surveyed/co-authored: industry trends, economic/demographic trends, sub-sectors; fairness opinions, regulatory assisted transactions/FDIC resolutions-Resolution plans, Open Bank Assistance Requests/Applications; D’Oenche Doctrine. I also analyzed deposit franchise/branch networks, market/trade areas, calculated Herfindahl (deposit concentration, anti-competition/anti-competitive) analysis; associated scenario driven spread complex interactive sheet models.
  • LZO, KPMG, SA, IC Used/analyzed, dealt with definitions, data changes in “TRF”, “Call” reports, UBPRs, BHCPRs (“RAP”) including Examiners/Exam Reports, and GAAP data on North American based financial institutions, other public and private enterprises – understanding, comfortable with data and those definitions that role up into these reports
  • LZO, KPMG Worked on structured pricing/bids, strategies for acquiring, selling branches; also for failing/failed financial institutions.

Other Related Experience (Full CV, Transactions/Project List /

  • Financial Services consulting: Dodd Frank Resolution Plan/PMO business development, related consulting
  • Financial Reporting using Financial analysis, transactions, and product development on other sectors: CFTC public due process comment on Event driven commodity contracts; “Stress” Tests public due process comment
  • Analysis of Accounting/Financial Reporting; Risk Management, Regulation and Legislation
  • Basel III Public due process comment; Basel II macro/micro (some policy) Analysis
  • Analysis of mortgage products, mortgage equity products and associated companies
  • Medium Term Notes: Transactions and Collateral Due Diligence, coordination with Traders/Trading Banks

EDUCATION and OTHER: Franklin & Marshall College, B. A. Major/minors: Business Mngt/Economics, Accounting (24 credit hours). Columbia University, NY, NY. Public Economics, research: ‘Shadow Pricing of Foreign Exchange”; Spanish. Baruch College – CUNY : Accounting Certificate. 15 Credit hours (Fall 2003), Budgeting, QuickBooks, Audit. Full CV:

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“BHC Report Modernization Initiative” DOCID fr13no08-39 Nov 13, 2008 Vol 73 No 220 pps 67159-67173

Via email:
Ms. Jennifer Johnson
Board of Governors of the Federal Reserve System Division of Banking Supervision and Regulation
Constitution Ave, NW
Washington, DC 20551
Fax: 202 452-3819
Fax 202 452 3102

Cc: OMB Desk Officer
Office of Information and Regulatory Affairs
US Office of Management and Budget
New Executive Office Building Rm 10235
725 17th street, NW
Washington, DC 20503
Fax 202 395 6974

Ms. Monica Posen
Team Leader Regulatory Reporting Division
Federal Reserve Bank of New York
New York, NY 10045-0001
(212) 720-8239

DOCID fr13no08-39 Nov 13, 2008 Vol 73 No 220 pps 67159-67173
“BHC Report Modernization Initiative” proposal to separate and included data currently not specifically tracked in the following reports: FR Y-9C, FR Y-9SP, FR Y-9ES, the FDIC’s Report of Condition and Income FFIEC 031 and 041, and the Office of Thrift Supervision’s TFR form 1313

Dear Ms. Johnson and To Whom It May Concern In Regulatory Comments:

Thank you for availing the analyst community and public to participate in the due process effort of the regulatory framework. I appreciate the opportunity to comment on matters of concern related to data collection for the Bank Holding Company Report with associated reporting numbers referenced above.

Although the FR Y-9 family of reports historically has been the primary source of financial information on BHCs between on-site inspections, and with that decision makers of all sorts use the financial information from these reports to detect emerging financial problems, to review performance and conduct pre-inspection analysis, to monitor and evaluate capital adequacy, to evaluate BHC mergers and acquisitions, and to analyze a BHC’s overall financial condition to ensure safe and sound operations, I appreciate that the Fed and our other regulators have made the effort to collect all necessary and pertinent data for themselves and the users of these financial reports and data to understand the health as well as performance of the individual financial institutions as well as the health performance of peers and other members of the financial depository sector.

Recently while interested to review the current release of Bank Holding Company Performance Report (“BHCPR”) as well as understand a particular bank holding company’s condition, I downloaded a Y-9C from the website, as well as BHCPR along with definitions for these reports and analytical tools.

I found distressing the aggregation of interest revenue with fee revenue that apparently could be include in fee income, however for US GAAP reasons, is included in these line items summing to data field 4107 on the for form FR Y-9C. I suggest a separate memo field for fees and another field – a separate field – for Fair Value changes to interest revenue at the present time captured in BHC for FR Y-9C data field 4107.

I am interested to understand the banks/bank holding companies’ pure interest revenues (see Note a) (and in the Interest Expense Line datafields) for lending rather than an amalgamated Interest revenue number fuddled with fee income amortized into the Interest revenue numbers one finds on the BHC FR Y-9C and related reports as well as the other reports I mentioned above.

For illustrative purposes, here I have copied material from the – Report of Income for Bank Holding Companies, Schedule HI—Consolidated Income Statement

Interest income

  1. Interest and fee income on loans:

(1) In domestic offi ces:
(a) Loans secured by 1–4 family residential properties ………………………………… 4435 1.a.(1)(a)
(b) All other loans secured by real estate …………………………………………………….. 4436 1.a.(1)(b)
(c) All other loans ……………………………………………………………………………………….. F821 1.a.(1)(c)
(2) In foreign offi ces, Edge and Agreement subsidiaries, and IBFs ………………………4059 1.a.(2)

  1. Income from lease fi nancing receivables ………………………………………………………4065. 1.b.
  2. Total interest income (sum of items 1.a through 1.g) ……………………………………….4107 1.h.

With the BHC Report data gathered on FR Y-9C tracking US GAAP, the banking regulators have adopted and incorporated into the reports Financial Accounting Standard (“FAS”) 91 (see Note b) which permits including in the measurement of interest revenue, a mixed reporting in this line item by including various fees as well as when taking the “Fair Value Option” on loan and lease assets’ interest and probably associated fee income that are also then amortized in data field 4107, or where ever it is amortized over the life of the associated loans and leases.

In general now we see reported in this series of :4435, 4436,F821, and the Total Interest Income in 4107 a misrepresentation of the pure price to lend, while confusing the number with other management decisions that determine associated fees that the banking associations while FAS 91 was being promulgated and during the due process period, probably heckled the FASB to include in the Interest income so as to make the number appear larger when the actual price summing to the revenues from loans extended to customers, clients and counterparties, perhaps would be much less.

Not to mention, as well as when management for one reason or another decides that it is going to revalue a tangible asset, which then dumps the associated interest and fee revenue number into this series of data fields, giving us a ‘polluted’ number in datafield 4107.

If we wanted to understand pure interest revenues for a pure yield measure of all loans and leases portfolio’d, we’re not going to find it while it is obfuscated with fees and Fair value option revaluations. For these later items such as fees associated close enough to be amortized in this line (see Note c)

Loan pricing strategies not to mention pricing based on the cost management incurs for the loans it makes, again are based on different economic decisions and differently enough on the other related product provided here. Although there are services rendered in the lending process that FAS 91 permits attached to the loan as measured here aggregating in data field 4107.

Also given of late, the Federal Reserve proposes to implement a number of changes to the FR Y-9C and FR Y-9SP reporting requirements to better support the surveillance and supervision of individual BHCs and enhance the monitoring of the industry’s condition and performance, my suggestions for better transparency and improved disclosure on interest revenue quality rather than mix of items all of which have been based on different economic decisions and for internal reporting purposes I conjecture are used for management performance measurement. Thus, my suggestions should gain traction.

Meanwhile, as the Fed believes its current proposed revisions reflect a thorough and careful review of data needs in a variety of areas as BHCs encounter the most turbulent environment in more than a decade, and that the revisions now will include new data items focusing on areas in which the banking industry is facing heightened risk due to market turmoil and illiquidity and weakening economic and credit conditions. Also, the Federal Reserve proposes certain revisions due to changes in accounting standards and amendments to regulatory capital requirements. To minimize reporting burden, where possible, the Federal Reserve has sought to establish reporting thresholds for proposed new data items” (from the Instructions for the FR Y-9C).

For all the reasons the Fed is asking for new data, I am urging if not separate fields on Schedule HI (and as well as on other Federal Reserve parallel reports and also associated reports of the FDIC and the OTS) to give a pure interest revenue number in data fields 4435, 4436,F821, and the Total Interest Income in 4107. And because fee income at the present time camped into and I consider is fouling the datafield 4107 should be reported separately or in a memo, at the very least where the use of the memo field method for fees that management claims are associated closely enough to amortize in this line and in turn goose the interest revenue number, as well as another memo field for the increase that management is claiming from tangible assets it chose to revalue under the fair value option need themselves to be reported in an environment urging better disclosure and transparency.

Although not completely arbitrarily, as I’d noted management produces these 2 aforementioned components economically independent enough that analysts and decision makers who are users of this data as well as parallel data on parallel regulatory reports would want the transparency and improved disclosure to distinguish what – fee – revenues are attributable to management decisions rather than the competitive environment and interest rate environment behind the pricing for its lending. The Fair Value Option and FAS 157 revaluations impact on the income statement absolutely warrant separate or memo reporting.

Elsewhere on the Y-9C we find fee income which includes the investment banking reported revenue; what made this fee revenue different enough to report here, while with most bank holding companies and financial holding companies that chose to file the Y-9C, this includes its lending services often a part of ‘facilities’ of lending and service products provided to customer/clients.
Thank you again for this due process and accepting my contribution to the Bank Holding Company Data collection project and suggestions to improving what data we are provided on the FR Y-9C and all parallel reports that ask for interest revenue.

Andrea Psoras
Consultant and Analyst
New York, NY 10026
(212) 666 2569

  1. I also suggest for and on the FDIC reports for small and large banks, as well as OTS chartered thrifts which data is captured and reported on the Thrift Financial Report “TFR”, that this memo field separation (2 memo fields) for associated fees that FAS 91 and the financial regulators permit amortized against the life of the associated loan or lease in this line and that reported independently of the Fair Value affects on associated tangible assets at the very present time amortizable into these interest revenue lines as permitted by FAS 91.
  2. Board of Governors of the Federal Reserve System Instructions for Preparation of Consolidated Financial Statements for Bank Holding Companies, Reporting Form FR Y–9C, Reissued March 2007. Page HI-2, (2) Loan origination fees, direct loan origination costs, and purchase premiums and discounts on loans held for investment, all of which should be deferred and recognized over the life of the related loan as an adjustment of yield under FASB Statement No. 91 as described in the Glossary entry for ²loan fees.² See exclusion (3) below. (3) Loan commitment fees (net of direct loan origination costs) that must be deferred over the commitment period and recognized over the life of the related loan as an adjustment of yield under FASB Statement No. 91 as described in the Glossary entry for ²loan fees.² (4) Investigation and service charges, fees representing a reimbursement of loan processing costs, renewal and past-due charges, prepayment penalties, and fees charged for the execution of mortgages or agreements securing the bank holding company’s loans. (5) Charges levied against overdrawn accounts based on the length of time the account has been overdrawn, the magnitude of the overdrawn balance, or which are otherwise equivalent to interest. See exclusion (6) below. (6) The contractual amount of interest income earned on loans that are reported at fair value under a fair value option.


  1. Instructions for Y-9C “Assets and liabilities accounted under the fair value option — Under U.S. generally accepted accounting principles (GAAP) (i.e., FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (FAS 159); FASB Statement No. 155, “Accounting for Certain Hybrid Financial Instruments” (FAS 155); and FASB Statement No. 156, “Accounting for Servicing of Financial Assets” (FAS 156)), the bank holding company may elect to report certain assets and liabilities at fair value with changes in fair value recognized in earnings. This election is generally referred to as the fair value option. If the bank holding company has elected to apply the fair value option to interest-bearing financial assets and liabilities, it should report the interest income on these financial assets (except any that are in nonaccrual status) and the interest expense on these financial liabilities for the year-to-date in the appropriate interest income and interest expense items on Schedule HI, not as part of the reported change in fair value of these assets and liabilities for the year-to-date. The bank holding company should measure the interest income or interest expense on a financial asset or liability to which the fair value option has been applied using either the contractual interest rate on the asset or liability or the effective yield method based on the amount at which the asset or liability was first recognized on the balance sheet. Although the use of the contractual interest rate is an acceptable method under GAAP, when a financial asset or liability has a significant premium or discount upon initial recognition, the measurement of interest income or interest expense under the effective yield method more accurately portrays the economic substance of the transaction. In addition, in some cases, GAAP requires a particular method of interest income recognition when the fair value option is elected. For example, when the fair value option has been applied to a beneficial interest in securitized financial assets within the scope of Emerging Issues Task Force Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets,” interest income should be measured in accordance with the consensus in this Issue”
  2. c)

Noninterest income:

  1. Income from fi duciary activities …………………………………………………………………….  4070 5.a.
  2. Service charges on deposit accounts in domestic offi ces …………………………………..4483. 5.b.
  3. Trading revenue2 …………………………………………………………………………………………    A220 5.c.
  4. (1) Fees and commissions from securities brokerage ………………………………………. C886.. 5.d.(1)

(2) Investment banking, advisory, and underwriting fees and commissions ……………..C888.. 5.d.(2)
(3) Fees and commissions from annuity sales ………………………………………………………C887. 5.d.(3)
(4) Underwriting income from insurance and reinsurance activities ………………………… .C386 5.d.(4)

Posted in FDIC, financial sector, Professional: banking, Resolutions of 'SIFIs' | Leave a comment

“War is a Racket” by Major General (Ret) Smedley Butler – connect the dots to Wall Street with blood on its hands…

Smart people listen to what the media reports and sort of smell a rat, but are either too busy, or too reluctant to believe the worst. Some may let their minds actually wonder or discern ie that there is conspiracy lurking behind the news and perhaps in much of what’s reported to us, but ? Who, what, where, when and why are often a little too seemingly unconnected and oblique. Since before the Civil War, but more so now because our Constitution and our Republic are broken, and fair government for all Americans is quite broken, meetings behind closed doors (among the, I hate the expression, but the wealthy among the ‘power elite’), sadly have an effect on the health of our domestic commerce, our society, and our quality of life. That’s why secret societies such as Skull/Bones, enjoy some degree of ‘reverence’, or Knights of Columbus or Malta aka SMOM or Templars, Society of Jesus (Jesuits), etc even high levels of ‘freemason’ in our neo-feudal society have, and have had short and long term deleterious effects on our domestic commerce and our quality of life and society.

People of these inner circles of means and power that then hurt our future and had contempt for their fellow Americans behind their self-interests included Smedley Butler, a man among them but not OF them (1) and (a). We understand this by “War is a Racket”. Published in 1935, “War Is a Racket” is the title of two works, a speech and a booklet, by retired United States Marine Corps Major General and two time Medal of Honor recipient Smedley D. Butler, according to Wikipedia. In them, Butler frankly discusses from his experience as a career military officer how business interests commercially benefit (war profiteering) from warfare.

After his retirement from the Marine Corps, Butler made a nationwide tour in the early 1930s giving his speech “War is a Racket”. The speech was so well received that he wrote a longer version as a small book with the same title that was published in 1935 by Round Table Press, Inc., of New York. The booklet was also condensed in Reader’s Digest as a book supplement which helped popularize his message. In an introduction to the Reader’s Digest version, Lowell Thomas, the “as told to” author of Butler’s oral autobiographical adventures, praised Butler’s “moral as well as physical courage”.[1 wiki note] and
Published 2010 by World Classics Books

(1) (a –  see below: John 8:23, I John 4:4, 17)

Born in West Chester, PA, Smedley Darlington Butler[1] (July 30, 1881 – June 21, 1940) was a United States Marine Corps major general, the highest rank authorized at that time, and at the time of his death the most decorated Marine in U.S. history. During his 34-year career as a Marine, he participated in military actions in the Philippines, China, in Central America and the Caribbean during the Banana Wars, and France in World War I. Butler is well known for having later become an outspoken critic of U.S. wars and their consequences, as well as exposing the Business Plot, a purported plan to overthrow the U.S. government.

By the end of his career, Butler had received 16 medals, five for heroism. He is one of 19 men to receive the Medal of Honor twice, one of three to be awarded both the Marine Corps Brevet Medal and the Medal of Honor, and the only Marine to be awarded the Brevet Medal and two Medals of Honor, all for separate actions.

In 1933, he became involved in a controversy known as the Business Plot, when he told a congressional committee that a group of wealthy industrialists were planning a military coup to overthrow Franklin D. Roosevelt, with Butler selected to lead a march of veterans to become dictator, similar to other Fascist regimes at that time. The individuals involved all denied the existence of a plot and the media ridiculed the allegations. A final report by a special House of Representatives Committee confirmed some of Butler’s testimony.

In 1935, Butler wrote a book entitled War Is a Racket, where he described and criticized the workings of the United States in its foreign actions and wars, such as those he was a part of, including the American corporations and other imperialist motivations behind them. After retiring from service, he became a popular activist, speaking at meetings organized by veterans, pacifists, and church groups in the 1930s.

Rather than dying in battle, sadly in 1940, he was off’d in a friendly, chummy hospital in his home town at that point, Philadelphia. I figured that those who hated his disinclination to head the junta against Roosevelt, also knew he would smell a crafted war strategy which Stinnett describes in “Day of Deceit: The Truth About FDR and Pearl Harbor ” (2)

(a) (John 8:23, I John 4:4, 17) and also v17


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Christ Life Ministries links to and wordpress

Christ Life Ministries
Pastor Michael Terrone
109-28 221 Street
Queens Village, New York

Phone to call anytime for prayer, questions about the Messages and Itinerary
718-465-1248 home evening however more has to be built on this wordpress page

Other ministries I ‘support’ and/or respect:

Son Life ministries – Jimmie Swaggart and his Wife, Frances, and son Donny and grandson Gabriel, although they still believe in the ‘Rapture’ and give a pass to the nation state of Israel. God in Hosea divorced  Israel and Judah, so the contrivance of man in the middle east that is called Israel shouldn’t be put on any pedestal.

I also somewhat support Light of the City Ministries, although out in the Boeing/Microsoft mind controlled Seattle, the jesuits and the nsa perps have done a goon job on that ministry and it’s been having some tough battles while the pastor has been involved with new ‘family’ and the cares and worries of this life. I can’t condemn him completely, knowing that battle.

And my friends and brothers/sisters in our Lord Yeshua and the Heavenly Father:  Kehilath Haderekh The Way 

Kehilath HaDerekh (Congregation of the way) is a Messianic Jewish Synagogue of Jews as well as non Jews of calling, committed to Torah, Jewish Life, and ..

I also read The Trumpet, by the Philadelphia Church in God,  This organization and magazine have been fairly good on 4th Reich Germany and its contemporary role as the secular state partner with the Vatican for ‘holy roman empire’.


~~~~~~~~~~~~  and

and also now and also both high quality sources for skulduggery.

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Can’t Pretend You Can Catch a Falling Knife: Selling BigFinancials

Today I emailed a comment to a colleague who wanted to understand my connecting ‘barter’ with what ISDA Cartel are doing. I will use it  as a Preface: 26Jul14

Again, I get the impression, you are unacquainted with analyzing banks and understanding their businesses, especially those of the ISDA banks (NOTE 1) which in a way have the power to take the law into their own hands and/or operate above the law.

In answer to your question about barter: with OTC contracts and derivatives banks are inflating their Balance Sheets. Thus by way of how the ‘revenues’ and other forms of Income are derived from their business practices which end up on their Balance Sheets, banks are using all of this to game their Income Statements in part as a result of the ‘fair value’ also known as AKA ‘mark-to-market’reporting model which the SEC had the FASB and FASB have been adopting and harmonizing which facilitates more agency/management discretion that can impact financial reporting quality (NOTE 2).

Ordinary analysis of a non financial company includes analysis of the Cash flow Statement (NOTE 3).

Unlike industrial companies, however, banks engage in activities using financial assets and debt instruments. These Balance Sheet items (NOTE 4) have to be fair valued – aka ‘marked -to -market’ regardless of the direction of the financial markets. These often have not intrinsic ‘periodic’ cash flows if these are not loans (which produce interest and principal from the borrower paid monthly to the lender which recognizes these as accruals in the Revenue ie, Interest Income Line – in Revenues in the Income Statement) or classic fee generating activity such as underwriting. Both loans and underwriting fees produce real cash flows, which are part of Net Income and which surfaces in the Cash Flow Statement as Cash Flows form Operations (NOTE 5 ) or if interest from Loans, then sometimes in Cash Flows from Investing. When the Balance Sheet items have to be marked to market or ‘fair valued’ and those unrealized non cash gains (or losses, but we’re talking about inflating not collapsing) are ‘recognized’ in the Income Statement or in the Other Comprehensive Income, if by management discretion or frothy and inflated financial markets and those trading books which are a part of those financial markets, those ‘marks to market’ will produce inflated values. These Instruments such as the Derivatives and contracts permitted to trade OTC all of which the Fed characterizes as ‘financial innovation’ should never have been permitted to trade. It obtained that however with Sommers, Greenspan and Ruben and Phil Gramm… and we get Commodity Futures Modernization Act in 2000 in spite of what Brooksley Born opposed. and this also gets you ‘fragility’, barter or otherwise.

Consider this and again to answer your question about the barter of instruments in which banks are engaging. It’s not your barter in form as you understand it. It is barter in substance. Banks do engage in CP and Repo, Re-repo borrowings. There are fees and interest income and expense for these sorts of borrowing and lending activities. These are not barter other than if instruments were posted and the borrower failed in some way in the transaction and the counter-party keeps the collateral.

For other sorts of business, Banks have to post collateral in order to engage in different types of trades and/or derivatives activities. When a counter-party fails in the transaction or the trade has the poster a ‘loss’, those securities are kept in place of the fail in the transaction. The fees from these may be recognized as fee income in the income statement. The instrument however is a financial asset that is on the Balance sheet of the keeping company, and no longer on the balance sheet of the company that posted the collateral and gave it over when he failed in his trade follow though. There is very little to impede this activity. The Fed and/or the FDIC and or OCC may not go after it unless a company if a bank often fails in its transactions and this sort of activity has gone into unsafe and unsound levels and considered abusive.

Original post “Can’t Think You Can Catch a Falling Knife: Selling Big Financials.”

This post is similar to Historical Cost/ Accrual Basis accounting post, but realize that the Big Financial names all have risks in their Balance Sheets, when with higher amounts of Financial innovation on their Balance Sheets, without QE and with MTM aka Fair Value accounting, risk facing 2008 futures if they don’t diminish their exposures to the derivatives and OTC contracts. Can’t Pretend You Can Catch a Falling Knife: Selling BigFinancials / Originally posted in

Nov 29, 2010 7:29 PM | about stocks: KRE, IAT Can’t Pretend You Can Catch a Falling Knife: Selling BigFinancials It’s Not Your Dad’s Accrual Accounting – How They’re Using the Eroded Financial Reporting Model to Pirate the Time Value of Money Posted originally on Bankinnovation by Andrea Psoras on September 26, 2010 at 3:09am in Credit; Nov 29, 2010 7:29 PM | about stocks: KRE, IAT ( Now this website and associated link are broken) This past week while reading through Woelfel’s 1993, “Handbook of Bank Accounting” to improve my understanding of Statement of Cash flows for financial institutions, I stumbled on his comments about accrual accounting’s need for “Cash flows”…which “are important indicators of a bank’s profitability and viability. To be profitable and viable, a bank must have sufficient cash flows to make loans and investments, meet withdrawals, satisfy loan commitments, and meet other cash requirements.” Meanwhile, “Cash basis information provides critical support to accrual basis accounting (but does not replace the need for accrual basis accounting)”.

What would he say in a new edition about current erosion of Financial Reporting that has bigFinancials’ funding using 1980’s brain-dead thrifts’ 2.0 version such as Asset backed securities, and repo-ing these and other assets, commercial paper and liquidity mechanisms the Fed, et al have surfaced from its bowels which Woelfel also listed on pg 32 and 33 as “Specific and detailed supervisory powers of the Fed through its Board include prescribing rules and regulations governing:”. Just as an aside, this list includes a number of mechanisms that Chairman Bernanke this past week at Princeton attempted to characterize as new, attempting to play on our ignorance about what the Fed (our model of European central banking)has done or what it has among its supervisory powers.

Although this doesn’t directly relate to my concerns about any continued erosion of accrual accounting, with the abuse of fair value accounting corrupting the income statement, Fed actions, inactions, and its credibility is key. Perhaps the frequency of these Fed ‘irregularities’ is extremely limited, that the Fed has engaged in buying anything other than Treasuries. Although now with more “fair value” in the reporting model, what was rare will now be more frequent.

Treasury having provided Open Bank Assistance to bail-out the bankrupt in form BigFinancials and flush the financial system with printed, fiat money to give moving markets to the BigFinancials, likewise was rare rather than have the Fed or the FDIC engage in discretionary efforts. The FDIC administering Open Bank Assistance, also typically fires senior management of the assisted depository, however since it was Treasury that administered the bailout, this huge scam enjoyed even more discretion AND impunity for moral hazard.

With the Fed, the bigfinancials crafted their own enronesque collapse, and anyway whatever representations the Fed makes always should be subject to second-guessing and the historical tests for cause and effect.

Back to the reporting abuses, US GAAP’s (old) Conceptual Framework seemingly is esoteric in this fantastic financial ‘crisis’. The Concept 6 definition for Revenue Recognition violates accrual accounting’s need to recognize the financial effects of transactions, events and circumstances having or ultimately affecting cash consequences in the period in which they occur (Woelfel p,20).  Accountants may recall these Concept Statements, and this one particularly existed before attempts at harmonization of US GAAP and IFRS (European accounting/reporting model, misrepresented as being a better financial reporting model for US commerce) or even before the push for the US to adopt IFRS, although it seems it was a more European way to claim a gain, or ‘revenue’.

In effect Fair Value is Concept 6 Definition of revenue recognition. Thus management can revalue and in turn at the end of a period claim that asset or liability revaluation, running the revaluations – the unrealized non cash gains or losses through the income statement as if these were a real revenues or expenses that realize to cash (or have cash consequences) when in reality they do not. Many of the items (OTC contracts and derivatives) and those associated operating activities in which the BigFinancial is engaging anyway aren’t producing sufficient positive operating cashflows against their cash demands.

Thus I’ve deemed them as cashflow parasitic, and thus a form of agency self-dealing and bilking the enterprise. And because it’s management at bigFinancials, this method of enjoying revenues via period- over-period fair valuing (marking to market and thus the financial markets) of Balance Sheet items I likened to white-shoe welfare, especially since over time Fed annually inflating the money supply 3% and of late with QE2, because this market support is subsidized by everyone else except bank management.

In effect, it’s enabling bank management to claim gains from Balance Sheet items or contingent non CME (Chicago Mercantile Exchange) issued and cleared ‘contracts’ such as a derivatives as if these are generating revenue, like an interest, rent, or dividend, although these instruments aren’t often doing that.  As long as a bank has engaged in commercial banking and related activitie, and investment banking underwriting, those Balance Sheet items will produce true revenues that realize to cash in the earnings cycle, while those Balance Sheet items via Fair Value those revaluations also being run through the income statement as if those too were real revenues that realize to cash, when in fact these revaluations do NOT realize to cash, but WILL affect the bottom line WITHOUT improving operating cash flow. In that we saved those cheesy, inferior quality earnings in 2008 that gave bigFinancial to bankruptcy, Dodd Frank will not improve the smoke ‘n mirrors situation of the Balance Sheet packed with these unsafe and unsound banking instruments and their pathology.

Via fair value of all its derivatives contracting, agency pretends these and thus its activities at the bank are highly profitable. Running these bogus, faux, non cash producing ‘profits’ through the income statement give appearances the bigFinancial fiefs are enjoying positive earnings, when in reality their OTC derivatives contracting and ‘trading’ which if these are NOT cleared to cash, and are swapped for other securities and thus are ‘barter’, then bigFinancials are engaging in dotcom schemes.

By their bogus OTC derivatives activities they’re claiming to be ‘profitable’ and in that deceit are obscuring the losses from their regular commercial banking activities, that they’re barely engaging in providing banking products and services. In that recessed way they’re contributing to our collapsing economy (the economy is bad anyway from the deindustrialization to which GHWBush agreed with Helmut Kohl in 1988? now obscured in some G7/G8/G20 Agreement and effectuated through ‘free’ trade/’trade-liberalization’ multilateral policy) by not engaging in approprite levels of appropriate banking activity into our economy.

Back to the accounting, in the Statement of Cashflows, where Net Income is key to the enterprise’s operating cash flows, non cash activity passed- through Income Statement and thus in earnings becomes a problem when earnings failing to realize to cash fouls the operating cash flow. Reported in the Income Statement, banks’ Interest Income now is being fouled with the Balance Sheet hedging which perhaps may have associated cash-flows but perhaps not, with non cash items combined into the interest revenues as well as the loan accounts on the Balance Sheet.

Again, fair value accounting has the unrealized non cash gains recognized in the Income Statement as if these were real revenues that would realize to cash. Moreover, insufficient quality lending now gamed with hedging on the loans and asset items has diminished cash in the operating section of the Statement of Cash-flows. This all seriously erodes the quality of accrual basis accounting which is established as the framework of our US GAAP, and is a somewhat less discretionary reporting model to give us financial reporting that produces a stable economic picture of the status of the enterprise and whether its operations and activities are giving us earnings that realize to cash. An enterprise that produces earnings that realize to cash is an enterprise that gives us superior quality earnings and has more than adequate means to pay its obligations.

Shareholders could argue that this in effect is wealth development. Consider also the impact of backing out interest revenues when management has mark down loans to non-accrual, while having to make provision for deteriorating asset quality – although provisions goose operating cashflows rather than penalizing management for poor asset quality. AND all of this contracting -so called hedging, risk management of writing and trading OTC contracts and derivatives – through which agency can fair value and enjoy bogus revenues for those, has hidden poor management decisions and in general poor managing at our bigFinancials.

Aside from some contemporary version of feudalism, this Concept Statement and FV accounting allows management to pirate the time value of money without the need for either a transaction or a contract such as one that generates true performance income: a rent on real property, an interest on a loan or bond, or dividend on an equity. In their contractual forms these have their incomes and/or in the case of a transaction of these balance sheet items, have true cash flows and also have associated consequences such as a capital gain or loss, or the true sale with the transfer of rights and/or responsibilities, privileges of ownership.

But with the ‘financial innovation’ which is what the Fed calls the financial engineering, the most craven self dealing has been all of this as a mechanism to enable Agency’s pirating the time value of money.

We’ve been shouldering the burden of that cost for, thus *subsidzing*  agency self dealing. As I’ve called it, and thus is white shoe welfare, while management hasn’t actually been engaging in banking activities that are producing quality earnings or meeting our economy’s commercial banking needs.

Other than if we have deposits on which banks pay us interest to rent our money, we can only have access to the unlocked time value of money and associated impact on a balance sheet item when we transact in some honest way such as buy or sell.  Agency at the bigfinancials however have now found how to cripple the system and abuse the well crafted flaws to the degree where they can print money through their Income Statements merely by even inflating their Balance Sheets with this smoke ‘n mirrors, meanwhile with the appearance of having done their jobs.  And remember, management can claim their contracts are worth more from one quarter to the next because in the ‘fair value’ of those contracts.

Through the Income Statement they’ll run that non cash unrealized gain and because of our crippled financial reporting model which IFRS will not solve – it similarly is crippled (remember, Europe spawned feudalism and the agency discretion of IFRS would be its reporting model) society is funding bank management’s enterprises not producing real or sufficient operating cash flows, but via the Income Statement can report to society it’s ‘profitable’.

Worse, their ability to abusively derivatives and OTC contracts, and their traders’ books fungible through their Income Statements enables them to ‘print’ money via their contracting and serving as management currency.

That is a piracy when and because it is subsidized by Society which has to meet accountability tests that the bigfinancials and Global corporates have been permitted to avoid. Traded derivatives contracts/contractual obligations by ISDA banks’ plumed (cartel of bigFinancials which engage in derivatives contracting-writing and swapping/trading) against their enterprises’ resources after Phil Gramm added the loophole for these in the Commodity Futures Modernization Act 2000.

This plume related and contributed to the collapsing of the US economy for it to comply with the G20 agreements’ constraints. This contracting also contributed to smoke ‘n mirrors inflation of their balance sheets. To shadow G20-Basel regs and EU banks in 2004 the SEC also had a program with the “Net Capital Rule” for the largest US investment banks which allowed them to suspend their leverage ratio constraints in conjunction with allowing their balance sheets to inflate a few times over.

Enron similarly inflated/collapsed under the same game plan. Enron wasn’t a bank that was TooBigtoFail; Enron’s self dealing by its management garnered public decrying and associated punishment with its senior management getting jail time. In the parallel with the bigFinancials however, with all the open bank assistance that saved them from their own Enron, NONE of their managements were fired nor successfully litigated.

What happened? What’s wrong with this picture when what the bigFinancials pulled off their own enron, with impunity although it was as a part of this disgraceful treacherous multilateral policy (G7/G8/G20) to which we need to repeal our signatory statuts so that our economy turns around and the banks have better into which to lend.

Back to Enron – some also say Enron was a risk issue, that Enron didn’t do anything illegal which if one at that point understood the energy derivative contracts Enron was trading were legitimized under the CFMA2000. Regardless, the inside job nature of its collapse is not justified by those arguments. Even speaking to the risk ‘issue’ – whether Enron’s or those of the BigFinancials, management also apologizes that it has problems measuring their risk exposures. There is software and hardware IT, and associated measurement matter, the IT sectors and agency over the last 20 years have wasted Wallstreet’s gift in the computer by failing to properly develop optimal uses for DOS and/or ascii related to enterprise (text) data and analysis. Their IT systems CAN capture the impact of their contracting, and with proper programming their software can capture the costs and pricing for their contracting.

Where Microsoft has dominated software to focus on personal and desktop applications, however, the software industry had not developed DOS and ASCII to more sophisticated levels to capture, process and analyze text activity of the trading/bartering which is happening among the counter-parties which are ‘raging over the penny’. The Cartel’s counter-parties now are not only worried about what’s on their own Balance Sheets because Concept 6 and Fair Value accounting allowing agency to pirate the time value of money from the Balance Sheet into the Income Sheet, but what’s on the books of their counter-parties exported to them by way of the trading/ swapping/ bartering – all which gives society this huge cost because of agency’s abuse and regulators’ capture, and the failure of our software IT companies more effectively give us programs and programming to track all of agency’s activity, and what those true revenues and expenses are of those enterprises.

And toxic financial RISK alert! The netted’ positions of the $680 Trillion notional OTC derivatives contracts gives us a $25Trillion moving target hole. It’s a moving target – RISK – because each derivative is a unique obligation management has contracted with a single counter-party that obligates the bank’s resources of one sort or another. These contracts have been traded around, however, these contracts do not ‘off-set’ cleanly because by their nature as contracts by banks’ managements, the self interests of the writer give the contracts unique characteristics and thus are not a ‘clean’ off-set. This is the reason the net gives us a moving target hole and that cartel’s hole is ah, nearly 2 years of US GDP – $25T. But that $25T hole is a subject treated cautiously by the analysts at the largest financial players. One fixed income analyst at one of the world’s largest banks said in effect, we have to look at a little tiny window of that and address this in small increments, rather than deal with a hole that could swallow 2 years of US GDP.

This contractual over-proliferation is quite serious. Without that clean-wash- trade quality, such as a wash sale in a stock or a call or put option on a stock or commodities contract that is exchange cleared and closely monitored, rather than a unique contract written by bank management obligating bank resources notional in the many Trillions of dollars, each of the large ISDA banks’ open exposures are netting ball-park to $20B to $40B depending on the players size. Remember it’s not a clean net, where the offset is clean like a common stock wash sale, nor without bank management obliged resources of the enterprises they manage. “ Wallstreet taking-out Mainstreet- these open, netted positions rely on stable, upward trending markets so that their companies’ capital and liquidity doesn’t circle down the drain like Lehman.

The summer of Lehman’s failure didn’t have the other bigFinancials in better condition than their felled chum. Regardless, given the $25T otc derivatives hole, agency at the ISDA cartel enjoying government back-stops  – have vastly over obligated the resources of their enterprises, with the balance of society enduring the costs and consequences of that via voter subsidized and backed liquidity mechanisms, voter backing of all ISDA agreements among the bigFinancials and the voter ultimately the beast of burden when an ISDA cartel member fails as in the Lehman case.

If they’re saying all the derivatives contracting has been honored, it’s only because of all the voter subsidized liquidity mechanisms available and voters of sovereigns backing all ISDA agreements when management blows itself up, manages poorly and engages in abusive practices bilking their enterprises.

Altogether this serious agency self dealing and abuse with their OTC derivatives contracting and ‘hedging’ has enabled bank management to run the Fair Value unrealized non cash gains through their income statements, while producing insufficient cash flow other than from repo and other short term funding that except for the Fed would shut down and become unavailable if the markets got nervous.

Management also is now saying they’re inclined and have had written into Dodd Frank Act that they’ll settle for exchange ‘trading’ and/or ‘clearing’. But these exchanges are virtually controlled by the bigFinancials which are members; these clearing organs are self-interested to have power and turf in management’s multi-trillion dollar heist of the voters’ wallets.

Nor have the bigFinancials the means or collateral to fund the clearing.

So who picks up the tab for this? Understand what I’ve explained. These banks not only ARE NOT profitable, but that their activities are costing society while their managements are bilking their companies, the voters and non-management shareholders’ wallets while the reporting model and legitimizing legislation is permitting the pillaging.

The Huns, the Vandels, the Vikings, you name the clan that sacked civilizations and we’re not looking at the numbers of those petit beasts compared to the pirates today in suits and with pens and facilitated by and as a result of flawed multilateralism G7/G8/G20.  Short of some physical bloody slaughter, we’re looking at a form of financial nuclear war perpetrated against the everyday American, and perhaps the everyday man even elsewhere around the world where his bank was legitimized to rape his economy.

What a huge gravy train to bigFinancials’ managements on which is added this ruse that there’s regulatory oversight and transparency except to themselves. It may be Fed wheat receipts, but those feudal players get to enjoy the relative wealth affect while the assets have been purloined into the hands of those few from the hands of the many serfs – the voters and what was our individual, self-rule, shoulder to shoulder society that is supposed to exist for us under life, liberty and the pursuit of happiness.

Consider again the real burden of management’s piracy of the time value of money has serious externalities: the abuse and piracy has fallen on the backs and wallets of other stakeholders in our financial system and society with the cost of all of this in a system to and in which WE must have accountability and we are expected to be accountable.

As it were however, we are picking up the tab for the bigFinancials’ agency abuse. Meanwhile it’s not honestly providing us the goods and services of a banking system that should operate responsibly; the bigFinancials want our (depositor, 401(k), etc) wallets while the financial cartel are facilitating off-shoring jobs and production, and contributing to constraining the economy to meet the constraints for the US under the G20 agreements. While agency at the BigFinancials has parasited between $10T to $16T of voter money *now via “QE2” * to flush the markets so that the bigFinancials can have stable and upward moving markets to revalue their balance sheets, these vast sums are now available for whom except the financial players and their ‘capital markets’ now crippled to serve their self interests with society feeding on the leavings?

It is agency shamelessly and insidiously engaging in their inside and self dealing with virtually no push-back or punishment by the regulators which now will ‘supervise’ via some committee of oversight that is stacked all with regulators and insiders that wallstreet and bigFinancials will be able to choose those at the table and via campaign contributions pay for legislation about how that oversight body will be structured, with little to no sunshine for push back against the cartel. (SPoE is some contrived attempt to discipline management, however SPoE as proposed is marxist vandalism to suit some off-the-radar screen player wanting the Fed and FDIC to ‘tee-up’ a target SIFI for ‘resolution’. Two sides of the same coin – regulators allowing the condition i’ve described above, and now is if they’re serving the public good with thei got-new-religion).

Dirty secret -not only are the bigFinancials also paying more in cash taxes to the IRS than they actually owe – I suspect as ‘hush’ or go-away money, but Social-economic blowback has expanded along with managements’ pay packages and financial schemes: many others in our society have lost their jobs, homes, etc while the bigFinancials have contributed to trampling the US economy.

The BigFinancials had their hand in having our Congress agree to the G20 treaties, in which the US is to constrain its economy to meet G20 constraints for it.

And it has veiled a key reason for all of this: so that our economy either doesn’t outgrow the German economy or out produce the German economy which relies on exports to keep and/or support its economy.

No disrespect to my German colleagues, but why have our bigFinancials favored those interests over the voters’ stake here in the US? For this reason- we went into aggressive non-tariff’d ie, ‘free’ trade agreements. Before 1993, very little non-tariff’d ie, ‘free’ trade existed throughout most of our history after the colonies became a republic. In doing so from 1979-2008, however, more than 15% of our GDP tied up in production we off-shored into Mexico, China and the former colonies of our European allies, all serving to contribute to seriously eroding our economy.

Also used to collapse the economy for G20’s interests: dot com inflate/collapse and the current dotcom-esque problems with bigFinancials’ barter with their trading.

We thought with shedding slavery that we’d shed that inferior economic model characterized by barter. Or in having left Europe behind, also had enjoyed liberty from the Old World’s feudalism that included barter and made very little available to the serfs of what was considered the universally acceptable unit of exchange known as money, be it gold or something else that was considered MONEY.

But again we’re sort of there in part with this current kleptocracy and their hijacking of the reporting model devolving from accrual accounting while in their self-dealing ways management is lining its pockets with the regulators and congress looking to likewise feed from that trough via FV accounting and the bogus ‘gains’ through the Income Statement used to goose earnings and pretend profitability while the truth in the externalities hits the wallets of many others impacted by the externalities.

Between our Congress’s problems and our domestic economic problems, as well as the self interest of the Europeans financials and their governments, our regulators haven’t punished nor cease and desisted this sort of agency plunder now seriously into the public weal.

That bigFinancial cartel fief and its Teuton-ized European chums will attempt to devour all of our society, except we who understand the problem and in turn condemn it, all of it, every conflicted participant in all of this and require their accountability to the voters-stakeholders here in our society.

Agency, Congress and our regulators are to draw back in horror at the systematic looting by agency of the bigfinancials, aided and abetted by the Fed and Treasury’s regulators (OCC and OTS), with the FDIC also at that table as a the good cop in the good cop/bad cop routine that attempts to play everyone else for ignorant and/or fools.

This all quickly will cease; God’s hand is not too short for there to be a swing in the pendulum against corruption, a crippled system and those who shave value outside the rules or hijack the rules for self-dealing and self-interest while the balance of society again has to foot the bills and survive accountability tests.


1.Sell BigFinancials

2.Shed Fair Value attempting to hi-jack the reporting model. Restore a reporting model that allows banks’ balance sheets to reflect stable, safety and soundness characteristics, with analysts and would-be investors reading through the RAP and GAAP materials for asset quality and drawing their own conclusions. The balance sheets of banks which are to serve as safe places for depositor money aren’t sunk or inflated in a correcting or expanding ‘market’. Thus reporting at amortized cost rather than FV better serves the financial sector but definitely shedding those enterprises which have balance sheets full of contracting that screams management discretion which is code for agency self dealing fair-valuing their balance sheets rivening like maggots with smoke ‘n mirrors from contracting, swapping, bartering.

3.Cease and Desist agency OTC derivatives contracting and ‘hedging’, swapping, the like. All of that anyway covers for bad management decisions and is facile for management greed and expedience.

4.Stepping back from G20 and any further US contraction for German, European and British managed competition.

5.Requiring the US government to relinquish backing including any financial support for all ISDA contracts written by US based bank written. This will require bank management to write fewer and of those if they write, vastly more cautiously. This backing anyway was part of why Congress, the Administration via the Treasury and the Fed bailed out the banks while obscuring the truth such as this.

Andrea Psoras

Disclosure: Selling bigFinancials, it’s your call but I dislike pirates and piracy at the cost of the wallets of others.

Disclosure: No Positions held, although urging finding good community banks, buying those stocks

Disclosure: no positions

(NOTE 1 International Swaps and Derivatives Association “ISDA”. I also get the impression you haven’t correlated or have knowledge of or don’t understand what’s happened to the US economy as a result of multilateralism by way of G7/G8/G20 agreements. Those have forced Basel and IFRS on us. Congress and the Fed and our regulators idiotically have slowly adopted Basel Accords. These they should UTTERLY rejected, however our ON PURPOSE regulators weren’t even administering effective regulation on our books because they were to march to the new order come down by multilateralism of G7/G8/G20. Very few people pay ANY attention to what that means or what GHWBush did and the traction that his agreements and subsequently those of the US in G7/G8/G20 have done to our commerce, our economy and as a result our quality of life and future which also is a result of what those agreements, and the ISDA banks have done and are doing in the market place and in Washington, lobbying that produces and is a part of ‘fragility’. Subsequent to G7/G8 Agreements between bush and kohl, US ISDA banks obtained true nationwide banking (1995 Reagle Neal legislation) repeal of Glass Steagall (Gramm Leach Bliley 1999) with ability to write and trade Credit Default Swaps, which put corporate borrowers at risk, and the ability (but without ANY regulatory framework) to OTC trade their Swaps and derivatives (Commodity Futures Modernization Act 2000) after they’d written all these off Balance Sheet contingent agreements aka ‘contracts’ in order to help finance the cost of germany’s reunification, and cover for souring credits and be able to write new ones that would be weaker resulting from the increasingly weak US and world economies. Upon obtaining CFMA, these contingent off Balance Sheet contracts (swaps and derivatives) obtained Balance Sheet Recognition, but where not ordinary bank loans and other instruments of a safe and sound nature. There also are the fails among these that have be recognized ie, ‘fair valued’ also known as ‘marked-to-market’ regardless of the direction of the fnancial markets)
(NOTE 2 IFRS is a fair value reporting model, and although we didnt adopt IFRS, thank GOD!, sadly we have been harmonizing to it).
(NOTE 3 This is why the SEC requires it and even if FASB had wanted to get rid of it, I had protested. Even when Banks dont have to provide a cash flow statement in their ‘Call Reports’, the regulators know the importance of the Cash Flow statement and how it reports the health of the enterprise’s sales and operating activities which provide its products and/or services. If you’re not knowledgable of banks and this sector, know that when for Safety and Soundness, banks are/were examined especially by the Fed, examiners completed a Cash Flow Statement which is confidential information).
(NOTE4 and if they are the instruments kept when the poster failed to deliver or complete the transaction and so his collateral was kept but has to be fair valued)
(NOTE 5 if these cash flows were recognized in the income statement and end up in Net Income which starts the Cash Flow )Statement and is included in Operating Cash Flows or Investment Cash Flows)
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Anat Admati on Bill Moyers: Thoughts on “Too Big To Fail”, an inflate/collapse strategy

“Anat Admati on Bill Moyers: Thoughts on “Too Big To Fail”, an inflate/collapse strategy – Big Financials at risk for starring roles in a contemporary drama of Shakespeare ‘s Julius Caesar”

A few weeks ago, I caught part of Bill Moyers’s program on which Anat Admati was his guest. Although on a few matters she and I agree (and on where we agree and disagree is perhaps for another post), on a number of others such as what to do about Systemically Important Financial Institutions, aka “SIFIs”, I am not supportive of taking apart these institutions capriciously, or even if any of them are ‘sick’ ie in some danger of such that they’d be perceived to need to be ‘resolved’. This is FDIC lingo for the FDIC seizing the bank and/or the bank getting taken over or shut down and put into conservatorship or receivership and as a whole or in parts bid out to ‘investors’.

In the past the FDIC didn’t take over large financial institutions, except in 1991 when it seized the Bank of New England. At that point, I owned a block of its shares.  I hadn’t even received the certificate when later that week on Friday at 5pm , the FDIC shut down the Bank and had to operate it through the transition to the winning bidder to assume most of the bank’s assets and some liabilities. During that time, the FDIC was requiring New England banks and thrifts to take aggressive charges on their souring real estate and mortgage portfolios. Bank of New England was going to have to take a charge that left it with 1% equity or perhaps would have wiped out its equity. This occurred a while ago and I forget the exact details except I lost about what a pair of shoes would cost.

Until WAMU, that was the largest depository institution that the FDIC shut down. In the case of WAMU, JPMC (NOTE 1)  was waiting to assume the franchise with a loss/share arrangement set up with the FDIC. In the case of a $300B thrift, with a Balance Sheet of 1-family loans and derivatives, and probably structured product of loans it had written, but rising rates were not going to benefit WAMU and any marking to market shadowing the deteriorating financial markets.

Considering the ‘regulators’ as well as Congress, SEC, FASB all have aided and abetted SIFIs into their ‘Too Big to Fail’ ability to abuse power and associated size, I’m not quick to give a pass either to Prof Admati to target “TooBigtoFail’ for some sort of ‘resolution’. Resolution means to shut down a SIFI and/or sell parts; along with Sheila Bair and a few others like Paul Volcker, until perhaps around 2007 or so it wasn’t vogue to be public in  wanting to break up Too Big to Fails. Now however, it IS blood-sport or blood lust, arguably open season for publicly calling for break-up of the franchises of some these largest Insured Depository Institutions (“IDIs”), that have sort of gone off the reservation and are of the size that is actually reflective of their ability to abuse power.

Prof Admati and former FDIC chairman Sheila Bair are sort of relative new comers to concerns about the ISDA cartel, aka the TooBigToFail group of financial institutions that in their ability to abuse power, are writing and trading virtually ALL of the over the counter contracts and derivatives now with an estimated notional value of between $600Trillion to $700Trillion. I suggest it is this, THESE instruments and the power to proliferate them and TRADE them that IS the problem and make the system fragile. That the system is ‘fragile’ are on what Prof Admati and I agree ( NOTE 2)  Ten years ago, I testified at the Boston Fed, when it had public due process hearings regarding the merger application of Bank of America for Fleet Bank Boston. No mystery – I opposed that merger on the abuse of power grounds which ah, well I used the expression “TooBig to Fail”. I also opposed the combination stating problems of an out- of- region bank determined to acquire the region’s largest bank and in a shrinking economy (NOTE 3) would be bad for New England.

Consolidation in the financial sector has been aggressive with some slow down, but arguably since the end of the ‘Cold War’ or even with the first thrift crisis which plumed with the Reagan/Bush1 Admin while Volcker was Fed Chair, but consolidation coincident with inflate/collapse has been happening since Volcker’s money supply constraints.  Thrift regulation contributed to trashing those Balance Sheets while 1982’s Garn St. Germaine legislation fanned the fire with flawed legislation and domestic financial sector policy.

I’ll not take the time in this post to go into the problems of disintermediation that occurred when interest rates spiked while Volcker was constraining the money supply, however, *inflate/collapse* hadn’t been seen in the US since the post WW1 and the Hoover era, when the US had made 2 series of loans to post Kaiser Germany -after WW1  (NOTE 4). While our economy was encountering money supply problems perhaps in part because of  those loans, but the strong domestic economy that the US enjoyed after WW1, our large population of banks and thrifts that were NOT Fed members were going to be at risk for inside dealings and schemes that were going to target our economy and thus them, that was going to alter the future for not only those many non Fed member depository institutions during a time when deposit insurance had yet to exist, but also to the means of many middle class and bank connected voters whose means, like those of my grandparents were in savings in depository institutions who lost ALL of their savings in a bank/thrift failure in 1930 0r 1931 in Philadelphia.

Abuse of power is the real problem and the root of “Too Big to Fail”  rather than focusing on Too Big To Fail. With regard to the condition of our largest financial institutions which are among the largest ISDA cartel members, problems of stability and health of some of those financial institutions have existed off and on for a while.  Where the label ‘Too Big To Fail’ (“2B2F”) or Systemically Important Financial Institutions (SIFIs”) many use to identify these US ISDA cartel members, that many believe their condition is bad enough that they should fail, but are so large that they enjoy protection, or ‘teflon’, that they’re able to thwart ‘market’ discipline and thus able to abuse power which people mix or see their ability to remain distractingly extremely large … gets us to a complex problem with many types of bad fruit.

Again, we’re really seeing the abuse of power rather than that these enterprises are deserving to be dis-assembled because as they’re said to be in bad condition, whether that’s really true or otherwise, but the regulators have the power to deem something is bad when it may not be. Moral hazard issues run throughout this entire matter, but there seems to be amnesia of the history of regulator and government moral hazard that again has contributed to this symbiotic Too Big To Fail and the government and associated workers which populate our regulators’ staffs. NO disrespect to them. They work hard and often are earnest although we’re more than 2 decades into Germany’s reunification and US -Bush 1 era ‘agreements’ with Helmut Kohl, which slowly have changed virtually everything. No Conspiracy Theory here, as this was by design by interests which covered for (protected or enfranchised) Bush and Kohl.

And perhaps it is, that these huge ‘shops’ are thugs in our economy. To rid ourselves however, of these ‘oppressive’ financial companies, that they should be ‘resolved’ and allowed to ‘fail’, I reject this because of the attendant destruction of capital. Again, “Resolve” is an FDIC expression that means more than I want to fully define here, but the associated slice-and-dice actions the FDIC does in a resolution that would serve to reduce a SIFI to a size of accountability, ie, ‘market’ discipline is very disruptive and in the short and long run I suggest destroys capital. Resolving fails to solve the destruction of Capital I’m seeing in what the FDIC has proposed and the luminaries including Prof Admati who are among those calling for slicing up (again “resolving”) or I suggest would be plundering SIFIs.

Ah, well I do agree about making the private sector accountable, as well as making government and administration including the regulators accountable.  None of them have been truly held accountable, however, and all ie, administration (regulators) and the ‘SIFIs” again, I suggest are in their respective conditions because of co-dependence.  

It’s been expedient for the 2B2F and our administration and regulators which are in this co-dependent condition to produce something dysfunctional and broken that think it is and has power to enjoys a sort of feudal, fief-like tribal-esque power over the people.


This condition exists because of, and I’ve blamed flawed federal level policy (multi-lateral policies that link us with the ‘Old world’) that one could argue is ‘mission creep’ at great cost to our society done at and above the federal level, sourced in part in multilateralism as far back as GHW Bush’s administration and a G7? meeting with Helmut Kohl and the other G7 senior administrators at that point. These included Margaret Thatcher and Francois Mitterand ( see FootNOTE 6   although an earlier version of ‘money center banks’ lending to governments of Catholic countries did happen with the ‘3rd World Debt Crisis in the early/mid 80s).

Around that time, “Glastnos” had begun in the former Soviet Union. Notwithstanding, against the strong concerns and opposition from Thatcher and Mitterand, Bush fully supported and/or incentivized Helmut Kohl’s plan for German reunification. Without direct transfer payments from the US to Germany, but with nearly every other give-over the President Bush could promise, the US’s largest banks of which all were in International Swaps and Derivatives Association (aka “ISDA”)  cartel as well as our Wall Street investment banks, these were enlisted to support this to which Bush committed the US and the resources of our public weal and those of our voters.

Again, I call this MISSION CREEP. Again, see here the Moral Hazard of where the guy behind the curtain, aka OZ  manipulates the levers of the Oz Face regulators, which can’t really do anything else but what the OZ has them do.

As it were, understand roots of this complex problem which remind us that it was not our job (the American People) nor that of our financial institutions to serve or solve German problems. Nor was George HW Bush some royal and the United States a fief of his, that he could obligate the future of the US to suit Germany’s interests and advantage. And even against 2 key allies of ours suffering great losses at Germany’s hands during the military part of WW2, Mr Bush over-rode their strong objections to allowing and incentivizing Germany to reunify.

Forgetting the past when we should not have, and thus its snaring of us in this false burden *Mission Creep* to help Germany – to which one of our presidents and  his self interests ‘committed’ US voters, their wealth, property and quality of life and future, the economy and its health and our financial system, the trillions in ad hoc contracts (Derivatives and OTC contracts) aka the “financial innovation” all are a part of supporting this mission creep now to be an accepted policy of the US government and which the American people, commerce and its financial system were going to  have to accept and exist in, for better or worse.

Worse – it was going to be  including the financial regulators accepting these flawed policies, and having to dance with the elephants. Now the people and our private enterprise including our financial sector were going to have to underwrite the Bush agreements to Helmut Kohl and Germany in G7/G8/G20 Agreements, rather than engaging in ho-hum commercial banking such as making performing loans, and investment banking activities like corporate finance. That to which Bush agreed, to deindustrialize the US, do ‘free’ trade to spur the deindustrialization, and erode – contract our domestic economy that would harm the environment into which our banks lend, the true problem has been the disintegrating economy resulting from the multilateral agreements struck long ago.

It’s foul and treacherous to our own that we engaged in agreements with foreign sovereigns that were able to encompass virtually all of American society and the economy, while our largest financial companies, corporate America and the institutional investors were going to see their ‘future’ in the flimsy economies of the former colonies of our allies. Where is there more ailment in a way than that? And the derivatives, OTC contracts were going to hide and have been hiding this dissipation of what had been the wealth and relative health of US domestic commerce into the  flimsy economies of the former colonies of our allies, many of which have Catholicism as their national religion.

This is where Mission Creep and failing to discern it, failing to discern ah, haul out the “T” word, Treason has sentenced us. And here in effect, we’ve been rotting and I suggest it’s been by design which I’d mentioned earlier in this comment.

We don’t have to stay here. We can repeal flawed legislation, regulation and policy. We repealed Prohibition; we repealed GLASS STEAGALL! And Glass Steagall wasn’t even a bad thing, nor was Prohibition, except for making organized and white collar criminals wealthy and making splashy headlines for gangsters and their gun molls.

We can repeal our signatory status to the policies to which GHWB and other foolish presidents in G7/G8/G20 Agreements (NOTE 5).  Prior to legitimization to trade these instruments (which hid bad or weak business and credits), this limited the writing and use of these instruments, generally to ‘hedging’. Most of this was off Balance Sheet, ie considered contingent and not able to be defined as an Asset and enjoy Balance Sheet access. This is key because there also is less accountability for these contracts and less capital needed also because it’s not really including in what hits Balance Sheet footings.

The FDIC initially rejected this ‘financial innovation’ activity, and the increasing amount of off-Balance Sheet exposure as unsafe and unsound  banking practices because it’s unstable even when off-set or ‘hedged’. Many of these instruments didn’t have the cash flow generating, credit risk monitored profiles of performing loans. And there was a lack of accountability and regulatory oversight of these contracts, as well as their use and this as a banking activity. This new mix of products and services would expose and has exposed the banks and thus the Deposit Insurance fund to potentially great liability. Even after Commodity Futures Modernization Act’s passing in  2000, institutional framework was non-existent then, and only now with Dodd Frank (2010) legislation and pursuant regulation, or at that point within the banks. The financial system had virtually no tracking and constraint against the increasing and self-dealing and abuse of what bank management and companies like Enron were doing with these contracts.

The Fed however, itself also a  multilateral organ characterized derivatives and OTC contracts writing as “Financial Innovation”. The Fed was enlisted to virtually crusade for the financial engineering aka,  ‘financial innovation’, contrary to what and how the FDIC viewed this financial engineering for the purpose of and now covering for the sobering cost of Germany’s reunification and with its EU strategy (takeover Europe without using panzers) the other European countries ‘accepted’ in 1991/1992 at Maastricht.  So our using ‘financial innovation’ for appeasing of Germany’s reunification, which Thatcher and Mitterand vigorously opposed, which also has been including financialization of Germany’s Maastricht – EU take over of Europe, packing the banks’ balance sheets with ad hoc, non loan like contracts and what would help keep the paper moving – the FDIC is now supportive of all of this.

Again, consider that these instruments often do not produce healthy cash flows like performing loans, nor are they like underwriting business or like institutional same from one to the next common stock shares or bonds. Additionally there was no regulatory framework but now with Commodity Futures Modernization Act (NOTE 6)  which legitimized financial innovation contracts to trade, also gave them Balance Sheet access to inflate the Balance Sheet but also needing capital while fattening up the Balance Sheet although now using these crippled, crippling OTC contracts and derivatives items rather than performing loans.

Discern here the inflate/collapse scenario – an ISDA strategy which enjoys multilateral power with a cartel of the world’s most powerful enterprises which are the arteries of the world’s economies. But none of this financial ‘innovation’ was quality banking and in the long run what wasn’t anything to write home about for the health of the sector, rather than the increasing amount of ‘fragility’ and cripple points financial innovation would add.

Dr. Admati and I agree on the fragility, but where it’s at is that FASB, Congress (and the regulators), and the academic community, the monetary economists too aided and abetting the fragility with the erosion of US GAAP into fair value basis accounting and at all that financial innovation could be traded and be plumed as well as have Balance Sheet access because these contracts could be traded and now ah, with ‘trading’ having to be marked to market. So any financial markets inflating or correcting accordingly would have that same affect on ISDA banks’ Balance Sheets. Some characterize this as ‘pro-cyclicality’ but in any event, it ie, mark to market and the ‘financial engineering’ isn’t good for banks’ Balance Sheets.

Like a spider while weaving its web, there is a designer here with this design. Again, as opposed to what George HW Bush committed the US Balance Sheet and people to Germany’s war footings, again it’s not our problem but now brings the risk of “night-of-the- long-knives” to all the US ISDA cartel members, which are going the way of financial innovation and drinking quantitative easing rather than operate using that well worn but ho-hum groove of safe and sound banking.

There’s no Resolution plan that can be triggered if without QE and if there is a market correction, because a bank which returns to ho-hum banking, that bank’s Balance Sheet probably will not get trashed in a mark-to-market. SIFIs don’t have to be here even though they have to file Resolution Plans, and don’t have to be like even more tame versions in the past before Dodd Frank and Resolution Plans and Orderly Liquidation Authority and many high profile people out for Blood…Volcker, Bair, and others like Prof. Admati.  Perhaps even DB wants our banks to trash themselves, and our experts to want to take down a SIFI using ‘SPoE’, and competitors are vanquished.

Not like the 80’s “3rd World Debt Crisis” encountered by our “Money Center”Banks wasn’t a bad enough experience – although that was in a way contrived to take control over – a form of re-colonialization – of the former colonies of our European allies, but then the largest US banks had to write down or write off their portfolios of loans to ‘3rd World’ countries.  It’s from that, that friend of mine who’d been in Commerce in Reagan’s first administration  and had worked for Willard Butcher (who’d headed Chase after Dr. David Rockefeller retired), said that “countries should lend to countries”.


Well, it wasn’t his own wallet that former President Bush committed to Helmut Kohl. It wasn’t Yankee Bonds, or Bund Bonds that Bush and Kohl brewed up, not even Dawes or Young plans or IMF loans or like that. It was the US to deindustrialize, violate our Constitution’s Article 1 Section 8’s indirect fiscal revenue clause to spur off-shoring production into low wage countries which are former colonies of our allies and have their National religions that of the Vatican. It also had our banks engaging in unsafe and unsound banking, with laws, regulation, and accounting all along the way to throw us under the bus to benefit the Germans.  So we’re a long way away from countries should lend to countries.

What George HW Bush did for the 4rth Reich and exploited/expropriated the future of America and the quality of life of its 99% is unlike anything seen in recent times.

God rest his soul,  my friend Bob Chapman used the expression, “slow train wreck” about ‘free’ trade and what was happening in the US economy. Whereas it’s not then nor now our problem to help and support Germany’s reunification then and its EU take-over Europe strategy now, slow train wreck and by design is what the Bush 1 agreements to Helmut Kohl have been to the US and the vast majority of Americans (NOTE 7)  Virtually all Americans anyway didn’t know that there is a German core still engaging in commercial and cultural war against the US, Britain and Russia. This isn’t well discerned again by virtually all Americans and our press and policy makers likewise either fail to discern it or at the the heart of the problem are the Bushes and their camp (NOTE 8).

WRAPPED NOW IN FEDERAL POLICY.  Thus that to which the US agreed wrapped up in G7/8/, after March of 1992, the new president  would have to carry out the ‘free’ trade part of deindustrialization, while attendant with Maastrict, the ‘financial innovation’ sky-rocketed until 2000, when US ISDA cartel members’ obtained legitimization to write Credit Default Swaps (“CDS”)  as well as to trade these instruments but long before there was any effective oversight or a regulatory framework to keep this stuff in check, this enabled the ISDA cartel to enjoy their financial ‘innovation’.  The 2000 Commodity Futures Modernization Act legitimized the OTC contracts and derivatives to keep in line with GHWBush agreements to the Germans.

No question the turn of the paper (and the associated fees NOTE __)( In this I mention the way that fair value accounting enables bank management to enjoy a huge gravy train when the Balance Sheet exposures of these instruments when FV’d is run through the Income Statement and with the $700 or so Trillion in notional value, that if 1 basis point is recognized in the Income Statements of the ISDA banks, that is a huge gravy train that bank management and others feeding from the pie, don’t want touched.) mounted astronomically, while the derivatives and swaps etc, were also to cover for the souring and weak credits that were being written and would be written in the future.  Although ‘fee’ income would be generated and while these contingent contracts were off – Balance Sheet, and thus no capital was needed to help ‘foot’ what wasn’t on the Balance Sheet, when able to trade these and Balance Sheet them, this was believed to solve what was believed to be a problem of multilateralism, that our banks were not as big as Deutsche Bank and those in Japan.

I’ve attended meetings of the regulators, read through their Resolution Plan regulation, read through its Single Point of Entry Proposed Regulation. Recall that our regulators and supervisors of insured depository institutions are the Fed -which is a mask in search of a face, and the FDIC, a tag team member with the passive, but dominant Fed. The Fed has a difficult time being a ‘regulator,’ while the FDIC is having a difficult time also being a regulator, when it only had ever been that.

Some may give a pass to this if one has read the Notice for Proposed Regulation (“NPR”) in which the FDIC discusses its new ‘role’* or presumed new role rather than as regulators and examiners for safety and soundness of Insured Depository Institutions, and protectors of the Bank Insurance Fund, and where in my Comment letter (pg32 – here below and edited) for the public due process of the FDIC NPR for Single Point of Entry (“SPoE”).

I suggest and mentioned earlier, returning to ho-hum commercial banking and investment banking. I suggest and have mentioned here and elsewhere in some of my comment letters, to repeal US signatory status to the flawed multilateral policies in the G7/G8/G20 Agreements, in order to restore the domestic US economy into which our banks can lend and do investment banking. Rather than ‘financial innovation’, which will bring one to the slice-and-dice crowd, looking to serve up the SIFIs, I suggest that the US ISDA cartel have the means and resources to lobby on behalf of what will make the US economy better and it’s not ‘free’ trade, the form of what ‘trade liberalization’ was established to produce deindustrialization.

I suggest abstaining from ‘financial innovation’ which although it may be exciting like a speed rush, or a opiate, it is a financial form of a pipe dream even if by design to get the people and the administration and  perhaps even the regulators under the thumb of the US ISDA cartel. Like terrorists of a financial sort, holding their form of guns to our heads.

Ah, they lived by that sword and they’re at risk for dying by that sort by the hands of the slice-and-dice crowd, calling for blood of SIFIs by way of ‘resolving’ them, by way of ‘piercing’ their top holding company and using their capital to cover for the losses the FDIC would encounter when shutting down an ongoing concern.  Where is there some sanity? Again I suggest a lobbying congress and the Executive Branch for better policy and in turn that will spur the economy into one better into which to lend. It would be different if others too haven’t observed the same condition about the economy, but the ISDA cartel have the means to reverse the slow train wreck that’s been happening to our society, quality of life and commerce.

“(At levels above the FDIC, purposed destabilization is deemed to happen in the US, although Congress has had a hand in passing ‘free’ trade agreements, which have been to facilitate de-industrialization to which George Bush agreed in 1988 or so with Helmut Kohl at a G”X” meeting. Effects of breeching compliance of the Constitution’s Article 1 Section 8 were known and understood even at that time, especially eliminating tariffs on goods from asymmetric economies.

The FDIC had no power to thwart these flawed policies, but its research again as I’ve said has failed to expose or condemn these flawed policies and their deleterious effects on the US economy and areas/footprint of US IDIs into which these lend, take deposits, engage in their products and services.

I also suppose I shouldn’t be shocked that the FDIC assumes it has right or power to promote market discipline and maintain financial stability, when it really has neither of these nor right to claim them. Market discipline or using it as punishment is easily manipulated in part by forces the FDIC failed in the past to discipline, i.e. such as the NEWS although the FDIC has no control over this. It does HOWEVER and did have power to issue MOUs and C&Ds against abusive behavior occurring inside IDIs and enterprises that are close financial affiliates under BHCs having large IDIs.

Moreover it has little power over the abuses of traders or the FDIC fails to take effective regulator interaction with annual comprehensive safety and soundness examinations.

Beyond the true, on the books role of FDIC however are long-time problems with thick roots. Whereas utilities tend to not be broken up, like power dam or power plant that has to be large to provide power to many residential as well as industrial users, we now have very large banks. Although I’m not advocating ‘TooBigToFail’ because it was Rockefeller, Morgan and Rothschild agent Warburg by 1913 who were key in establishing a central bank to suit their key interests: to provide banking for their large corporations and to control the economy of the United States with their own Too Big To Fails of that era. There are other interests they had, those two I mention are not conspiracy theory related to establishing the Fed. Now up to this point (1913) large financial institutions were partnerships and made loans which they syndicated, i.e., took parts of large loans so that they all enjoyed the profits to large borrowers while not having exposure on any single balance sheet.

Then there were partnership structures used for the banks.
Partnerships tended to engage in only that which its partners felt comfortable, with limits to their exposure to risks of sorts, usually credit or commercial risk.

Partnerships and the ability to abuse power over federal government however are two different things. When our banks began lending and backing different warring factions as far back as the Franco-Prussian War and our government bailing out the US lender which had backed the looser, that’s what also contributed to the problems of abuse of power and also corporate-personhood which a few years after that the Supreme Court provided for the wealthy and their corporate interests.

Given these are deeply entrenched problems in the US and have multilateral connections, and given it’s not really in the FDIC’s job description to ‘promote’ market discipline, it IS the regulator’s job to protect the Bank Insurance Fund and regulate for Safety and Soundness. There is FDICIA. Prompt Corrective Action “PCA” and disciplining against management engaging in abusive conduct practices and at any level of capital, administering discipline and using MOUs and C&Ds at any capital level.

So do that JOB -this is the on-the-books job. Please do that job,
rather than this surreal, mission creep which it is assuming and mentions in this NPR, which sounds worse and with more problems because it isn’t really able to do that, nor fence with slick foreigns and their regulators. Sadly the ‘policy-makers’ have the FDIC thinking it is able, and legitimized to ’embrace’ this new mission creep role and also coordinate with foreign regulators which are upon it because of multilateralism and large foreign banks operating with significant assets and power, along with largest US banks operating globally.)

Again, I’m not supportive of globalism and giving that a pass.
Actually Citi operated in 100 or many foreign countries long prior to G7 and related agreements calling for the US to deindustrialize. THIS is globalism, i.e. US deindustrialization into many former colonies of our allies, of which many have Catholicism as their national religion. Operating in many foreign countries as an operating strategy isn’t globalism.

*Including Skull/Bones – established in Bavarian jesuit occult and today still manipulated to serve those interests which are quite contrary to those livelihoods and quality of life of virtually all Americans.

** 76622 (page) in Federal Register / Vol. 78, No. 243 / Wednesday, December 18, 2013 / Notices
FEDERAL DEPOSIT INSURANCE CORPORATION – Resolution of Systemically Important Financial Institutions: The Single Point of Entry Strategy AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Notice; request for comments.
Request for Comment To implement its authority under Title II, the FDIC is developing the SPOE strategy. In developing and refining this strategy to this point, the FDIC has engaged with numerous stakeholders and other interested parties to describe its plans for the use of the SPOE strategy and to seek reaction. During the course of this process, a number of issues have been identified that speak to the question of how a Title II resolution strategy can be most effective in achieving the dual objectives of promoting market discipline and maintaining financial stability. The FDIC seeks public comments on these and other issues.

(+)–EU.html. See also below – NOTE 7 of this comment.

(NOTE 1 which was the typical way a large financial institution was dealt with if in sick condition, or deemed by the regulators to be in sick condition such as what the OCC and/or FDIC or Fed did with Southeast Bancorp with 7% primary capital and tee’d it up for First Union by seizing Southeast and bidding it to First Union, while keeping some of the sour real estate assets. Depository Institutions were seized and held for bid or there was a new owner lined up and when the FDIC on Friday would shut down a ‘shop’, on Monday the new owner pre-arranged by the FDIC would re-open the branches the following Monday. also see note 26 in that pdf)

(NOTE 2 I have been saying this since around the time of the correcting financial markets beginning in March 2007. In late 2006, Nuriel Roubini’s research became public on the trillions of dollars of financial sector assets, non-performing mortgages going to or that had achieved that condition. AEI in March of 2007 hosted him and others on a panel that Chris Whalen and Alex Pollock moderated, where Roubini made his presentation. That summer, Moody’s and S&P began aggressive reviews of many of the structured vehicles of mortgage paper and referenced mortgage paper, ie ‘synthetic’ structured product, that all were affected by interest rates and the condition of the financial markets. Things got quite ugly from there. )

(NOTE 3) Reviewed, opposed merger proposal between Bank of America and Fleet Boston on Concentrations of Power issues. Testified before the Committee at the Federal Reserve Bank of Boston with written statement introduced as support, however not read in entirety at the hearing: Public Hearing Regarding Bank of America Corporation, and FleetBoston Financial Corporation – Held on Wednesday, Jan 14, 2004, at the Federal Reserve Bank of Boston: Unedited Transcript. Vol I, Pgs 1 – 423, line . 0263 beginning 23

 (NOTE  4 Street And The Rise Of Hitler By Anthony C. Sutton approx. 12, 13 paragraph of the post )

(NOTE 5)  We also can repeal our concordat with the Vatican, to which the Reagan administration committed the US, but never before had any President or administration or Congress EVER had signed and ratified in the form of a treaty. This concordat with the Vatican, this treaty is with the largest, oldest dictatorship and feudal society on the face of the earth. Not anything to which the founders had bound us, not anything that they ever would have promoted or suggested. NOT EVER, until Reagan. Perhaps he felt that the enemy of my enemy is my friend, considering the Vatican as an enemy of the former Soviet Union. In that Russia had been Orthodox, one could say historically the Vatican had its sovereign interests contrary to those of the Orthodox Church and thus, Russia. That Reagan would sign treaty with the Vatican which defacto bound us to it and recognized a ‘national religion’ contrary to the Constitution, greased a bad path against the US.

It was after that, that our economy and society began experiencing ‘planned obsolescence’ worse than ever throughout all of America society and commerce.

And George HW Bush was Reagan’s Vice President. That GHWB was Vice President and that the Vatican and the US went into a concordat are related problems, but what has this to do with our banks, financial system and society?

G7/G8/G20 Agreements and those member countries (many of which have Catholicism as their National Religions and probably often where the Vatican’s representatives are present or in attendance as the ‘Christian Democrat’ party members from those “G” countries parliaments), and multilateralism anyway in reference to the ISDA cartel, for the ISDA cartel members which include the largest European banks like Deutsche Bank, this not only meant more ad hoc contracts although swaps on loans and FX were well-worn grooves, and non listed, non exchange traded/cleared derivatives, this meant generally engaging in what would facilitate Germany’s reunification.  German reunification was going to have significant costs to the US and many other societies, especially since Germany’s 4th Reich was/is still at war (asymmetric) against the US, Britain and Russia.

(NOTE 6 at the hands of Texas Senator Phil Gramm, Treasury Secretary former Goldman Chair Bob Ruben, former CEA Economist Larry Sommers and then Fed BOG chair Alan Greenspan – and against then CFTC chair Brooksly Born’s expert and strong reservations)

(NOTE 7 on 4th Reich and what I’d found about asymmetric war–EU.html  and Albert Speer, “Inside the Third Reich, p 497, 498 which discusses what Speer had stumbled into in his circle at the top of the Reich.  The Reich’s government in fact was never required to surrender in the same way the Wehrmacht was required to unconditionally surrender. We see Speer’s observations about this. War protagonists wage their non-military battles, using asymmetric means. This includes strategies and tactics that lurk in financial, commercial and social ‘theaters’, to use a war time expression.

(NOTE 8)  Opposing Basel III, see NOTE 6 in that Comment letter for the FDIC public due process on Basel III posted in this wordpress site, Note 6 of that document)

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