On Monday, I talked to you about the mistake of a bill the Senate passed on March 14. Called the Economic Growth, Regulatory Relief, and Consumer Protection Act, the bill was enacted to reduce the number of so-called "systemically important financial institutions" (SIFIs) that are subject to tough regulations like stress tests and writing their own living wills.
Truth be told, there's a lot more to this situation than just this bill. Something fishy is going on with one of the most-used banks in the United States, and let me tell you, it stinks.
In fact, it could even affect your money as it stands now.
Now the House of Representatives, which already passed the Systemic Risk Designation Improvement Act of 2017 (H.R. 3312) by a bipartisan vote of 288 to 130 on Dec. 19, 2017, has to reconcile its American Bankers Association-sponsored "Free Willy" SIFI freedom act with the Senate's.
Those two bills will get reconciled, sent to the president, who will sign it, and the beginning of the end to the crazy, burdensome, out-of-control Dodd-Frank Act will be underway... which is a good thing.
Here's what this Senate banking bill means, what's really going on behind the scenes, and what all of this could mean for your cash.
A Wet Blanket Can't Smother an Inferno
Reducing the number of community banks subject to over-the-top regulations makes sense.
This was passed after "too big to fail" (the public's designation for SIFIs) banks and shadow banks imploded the financial system - and the economy.
But the regulations didn't stop one of the country's biggest banks, Wells Fargo & Co. (NYSE: WFC), from committing criminal activity on a scale that's simply unimaginable.
Wells Fargo proves that the regulations in place aren't the right ones.
Another financial crisis will prove Dodd-Frank regulations are superficially comforting, but nothing more than a wet blanket on a smoldering inferno.
There's a better way. There always has been. It's just too simple to ever get through a Congress that's owned by banks and financial institutions' lobbyists and campaign money.
The bill the House passed, part of the American Bankers Association's Blueprint for Growth, introduced by Rep. Blaine Luetkemeyer (R-MO), replaces the arbitrary $50 billion asset threshold for systemically important status in the Dodd-Frank Act.
Under the House bill, the Federal Reserve gets to review things like an institution's size, complexity, interconnectedness, and even global activity to determine if it's a systemically important financial institution.
The American Bankers Association (ABA), the most powerful bank lobbying institution in the country, says, "The most effective and value-added supervision regime is one that is risk-based and individually tailored, taking into account a wide variety of factors."
The U.S. Federal Reserve, America's uniquely private central bank, which is effectively controlled by the country's biggest banks and whose primary job as a central bank is to bail out its shareholder constituent banks when they have liquidity issues or fail (as was the case in 2008), is also the top regulator of all the same big banks.
You Must Act Now: America is headed for an economic disaster bigger than anything since the Great Depression. If you lost out when the markets crashed in 2008, then you are going to want to see this special presentation...
Dodd-Frank incorporates what the ABA and big banks want: for the Federal Reserve to have even more regulatory power over SIFIs.
That was accomplished by papering-in so many rules that can be gotten around, and so many that superficially look like they've tamed runaway big banks, that the public cheered its enactment.
It was always just a stopgap, put in place to appease the public, that would be hacked apart over time and reduced to nothing eventually.
That process has begun. And like I said, that's a good thing.
That's because Dodd-Frank has done nothing to rein in big banks' bad behavior.
Wells Fargo is all the proof anybody needs.
It's Not Just Bad Behavior - It's Criminal
It was discovered in the fall of 2016 that Wells Fargo employees, overseen by managers, regional managers, and maybe even higher-ups, had opened 3.5 million (take that in... 3.5 million) different kinds of accounts, sometimes two at a time (known as a double-pack).
They did this by using bank customers' phone numbers to set up email addresses and open accounts, which charged fees to account holders and resulted in sales goals being met and bonuses paid.
It's now likely there's more bad behavior - make that criminal behavior - throughout Wells.
The Justice Department, the Securities and Exchange Commission, the Federal Bureau of Investigation, and state attorneys general are investigating Wells Fargo again, this time over the bank's auto-lending practices, over-mortgages, over-foreign exchange dealings, and over-abuses occurring in the bank's Wealth Management business.
Wealth Management includes advisory, brokerage, and financial services under Wells Fargo Advisers. Wells has 16,500 advisers serving 3 million households. The unit produces about 10% of Wells' profits, which in the fourth quarter of 2016 amounted to a handsome $659 million.
The bank itself is investigating its fee calculations and sales of proprietary products to clients that carry higher fees than competing investment products and benefit other parts of the bank's operational centers.
Wells Fargo was sanctioned in February by the Federal Reserve and was told not to grow its assets beyond the $1.95 trillion it had at the end of 2017.
There are end-arounds for Wells on that, as JPMorgan Chase & Co. (NYSE: JPM) proved when it ended-around similar sanctions imposed on it over its selling of proprietary products and was fined $307 million.
Dodd-Frank, with all its layers of complexity, couldn't stop Wells Fargo from crooked behavior.
It couldn't stop it any more than it could have stopped any of the big banks from any of the criminal behavior many of them have been caught in the middle of.
And there's only one way to prevent this from happening.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
The One Solution to This Mess
As far as Dodd-Frank making banks stronger because they have more capital as a result of the legislation... Well, that's only partially true.
While Dodd-Frank imposed higher capital standards, they're not much higher than they were before the crisis. What's different right now is that banks haven't been overextending themselves, overleveraging themselves, setting up off-balance sheet companies to trade, or doing a lot of the things they did leading up to (and therefore causing) the financial crisis.
But they have plenty of room to do all that again.
The only way to safeguard customers and clients from criminal activity at banks is to prosecute everyone involved in every criminal activity and apply maximum sentencing rules.
And the only way to safeguard the economy from banks' control over the government and our lives is to "utilitize" them.
Make them like utilities - impose 25% capital reserves on banks with assets more than $50 billion, 20% on banks with $10 to $50 billion, and 15% on banks with less than $10 billion in assets.
Banks should serve capital formation, make loans, and provide basic financial and banking services.
Everything else should be left to broker-dealers, insurance companies, hedge funds, and private partnerships willing to risk their own partners' money...
...rather than risking their shareholders' money and using the public trough as a backstop after they've sunk their shareholders.
You're Cheating Yourself Out of One Monster Closeout After Another
Recently, a group of my readers saw an incredible 1,156% windfall... but unfortunately, you weren't one of them.
They're a part of my top-performing research service - one that's delivered total winning gains of 6,160% in less than a year (including partial closeouts)!
And while these folks have been getting the chance to cash in, you are missing out.
Right now, you have a shot to change your status, your bank account, and your life.
But I must warn you: In a few days, the cost of this research will drastically increase - and may be out of your reach.
You owe it to yourself to see this right away.
The post It's Not Just About the Bill Anymore - Your Money Could Be in Serious Trouble appeared first on Wall Street Insights & Indictments.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.