Inside the Bankster Settlements: Where All the Money Is Going

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Everyone wants to know where the billions of dollars big banks have forked over to bank regulators, the SEC, the CFTC, the FERC, and the Department of Justice ends up.

But, before I can tell you who's paid out what, the infractions they committed, and where that money ends up, I want to give you information that's critical in assessing your bank and your investments…

Just who is it that's looking out for your money?

These Agencies "Restrict" the Big Banks

Banks are watched over all the time. And with good reason. The entire financial system, in the U.S. and globally, is predicated on trusting banks.

First and foremost, banks are for-profit entities.

To assume giant banks won't put their own massive profitability ahead of depositors, borrowers, customers, and clients flies in the face of what America's (and European) "too-big-to-fail" and "too-big-to-jail" behemoths have done.

The Federal Reserve System, which houses the Federal Reserve Bank, isn't just America's central bank; the Federal Reserve is also the top bank regulator in the United States. The Federal Reserve is responsible for supervising and regulating:

  • Bank holding companies, including, under the Gramm-Leach-Blilely Act of 1999, diversified financial holding companies
  • State chartered banks that are members of the Federal Reserve System
  • Foreign branches of member banks
  • Edge and agreement corporations, through which U.S. banks conduct foreign operations
  • U.S. banks conducting foreign operations
  • U.S. state-licensed branches, agencies, and representative offices of foreign banks
  • Non-banking activities of foreign banks
  • State banking authorities also regulate state-chartered banks.

The Office of Comptroller of the Currency (OCC), which absorbed the Office of Thrift Supervision (OTS) in July 2011, regulates national banks, who are not members of the Federal Reserve System, and federal savings and loan associations.

The National Credit Union Administration (NCUA) supervises, regulates, and insures federal credit unions and state-chartered credit unions.

The Federal Deposit Insurance Corporation (FDIC) insures state-chartered banks that are not members of the Federal Reserve System and insures deposits in banks and savings associations in the event of bank failure.

The Securities and Exchange Commission (SEC) administers and enforces federal securities laws. Because big banks are corporations or subsidiaries of bank holding companies and because they engage in trading securities regulated by the SEC, they are subject to regulation by the SEC.

The SEC is also charged with administering and enforcing the Public Company Accounting Reform and Investor Protection Act of 2002, otherwise known as Sarbanes-Oxley. Sarbox, as it is often called, mandates that CEOs and CFOs of public companies "certify" their quarterly and annual financial statements for "accuracy and completeness."

The Commodity Futures Trading Commission (CFTC) doesn't directly regulate banks, but regulates futures trading, options on commodity futures, foreign exchange trading, and now swaps and some derivatives.

In its regulatory capacity to administer and enforce trading rules and commodity exchanges, as the SEC regulates listed corporations, equity securities, and the exchanges they are traded on, the CFTC is another regulator banks are beholden to.

Banks are also regulated by the Federal Energy Regulatory Commission (FERC) if they own or transact in any way in the physical natural gas market, the electric or other power generation markets, or are involved in storage, transmission, operation, or related transactions in anything the FERC regulates.

Last, but by no means least, the Dodd-Frank Wall Street Reform and Consumer Protection Act spawned five new regulatory bodies, three of which are bank oversight agencies (click on each to read what they cover):

Join the conversation. Click here to jump to comments…

About the Author

Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Short-Side Fortunes, Shah shows the "little guy" how to make massive size gains – sometimes in a single day – by flipping large asset classes like stocks, bonds, commodities, ETFs and more. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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  1. Steve Zimmerman | February 3, 2014

    Nice tease, but you really never get around to saying where the "fines" end up. Just exactly which pocket receives the money, if ever.

    • Ken | February 3, 2014

      Agree wholeheartedly with Steve on this one, Shah !

    • Mark | February 3, 2014

      I would guess that the fines are divided up in to unmarked paper bags and donated to polititions. But you are right the question was not ansered.

  2. fallingman | February 3, 2014

    The CFTC doesn't "regulate" anything. It co-conspires.

    It's a pretend regulator … otherwise known as JPM's lapdog.

  3. Barbara | February 3, 2014

    I read your article, Hawaii along with other states won a law suit and got awarded a large amount of money, but who benefits.

  4. Pierre Turin | February 3, 2014

    It's not only the total collapse of world economy, it's the end of a wrong going way for whole of
    humanity.
    The porpose of HUMANITY is "not ( to have ) but (to be) that's to be one with our common
    original GENITOR… the CREATOR Himself.

    C'EST TOUT UN PROGRAMME… ISN'T IT ?

    Pierre

  5. Amos | February 3, 2014

    as usual, saying a lot, but not addressing the punch line.

  6. Larry Elford | February 8, 2014

    Thanks Shah, your writing is very insightful and accurate. As to where the money goes, might it be considered the worlds best designed "money laundering" system. Money laundering, as in using the power and authority of government regulation to cause money to circulate from the hands of the many to the hands of the few.

    Here in Canada, we see regulators (and lawyers and other handmaidens) doing wilfully blind securities regulation almost as a side "business" for themselves. Eg, paying regulators here as high as just over $700,000 salaries, will cause them to grant thousands of "exemptions" to securities laws. Exemptions to the laws, cause faulty investment products to be released to the public, robbing them of billions and billions of dollars. Regulators may then impose "facade" fines of a half a penny, for every dollar cheated from the public. Regulators get richer by millions, investment bankers get richer by billions, the public is cheated out of trillions over time. Money laundering as a high return, zero risk game, played by financial professionals and lawyers. Pure organized crime. A video presentation with examples here for those interested: http://www.youtube.com/watch?v=DUKH5FD59Cs&list=UUy8dpTRZHEz-0JBa_l0w7AQ&feature=share&index=3

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