global financial crisis
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2012 Financial Crisis: Wall Street's Latest Scheme Uses Your Bank Account to Create the Next Crash
In 2008, reckless credit default swaps nearly obliterated the global economy. Now comes the next crisis - rehypothecated assets.
It's a complicated, fancy term in the global banking complex. Yet it's one you need to know.
And if you understand it, you will get the scope of the risks we currently face - and it's way bigger than just Greece.
So follow with me on this one. I guarantee that you'll be outraged and amazed - and better educated. You'll also be in a better position to protect your assets at the end of this article, where I'll give you three important action steps to take. So follow along...
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global financial crisis
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Fed Lets Banks Off the Hook… Again
We've told you before that the U.S. Federal Reserve puts Wall Street's interest above that of the American public. And yesterday (Wednesday) the central bank proved it... again.
Confronted with the opportunity to enact meaningful change to the regulatory system, the Fed punted on its responsibility to protect the public from the very banks that brought down the global economy.
This once again proves that the Fed, far from being a guardian of public welfare, is actually on the side of big banks.
"The Fed is an agent of the banks and, as such, it continues to come up with new ways for them to make money, risk free," said Money MorningCapital Waves Strategist Shah Gilani.
This time, instead of proposing strong guidelines that would actually do something to avoid another crisis caused by too-big-to-fail banks, the Fed put forth a plan that lacks key details and leaves important decisions in the hands of international regulators in Basil, Switzerland.
Specifically, the Fed proposal is hazy on capital requirements and minimum liquidity levels, which are crucial to ensuring a bank survives a financial emergency.
Delay has been a common theme for agencies charged with creating the regulations set out in Dodd-Frank. As of the beginning of December - 18 months after Dodd-Frank was signed into law - fewer than 25% of its hundreds of new rules have been finalized.
On Tuesday, it was the Commodity Futures Trading Commission (CFTC)voting to delay until July of next year regulations governing derivatives - the financial instruments that were at the very heart of the 2008 financial crisis.
And by forfeiting its chance to effect change, the Fed left the United States even more vulnerable to another financial crisis.
Now, not only have these vital regulations been delayed, but the process gives well-connected Wall Street bankers three months to "comment" - read "influence" - on the proposals.
Following the Fed's announcement, the banking industry didn't seem particularly worried that the finished regulations, when they do arrive, will cause them much of a headache.
"While these rules will require considerable review and comment from the industry, we are pleased to see the Fed is taking a phased-in approach to a number of these measures," Ken Bentsen, an executive vice president the Securities Industry and Financial Markets Association trade group, told Bloomberg.
A headline on CNBC summed it up nicely: "Banks Breathe Sigh of Relief Over New Fed Rules."
Indeed, Wall Street isn't concerned because at the end of the day, it knows the Fed is its ally.
"The average American has no idea how protected the big banks in this country really are," said Money Morning's Gilani. "Maybe that's because the biggest bank in the world is the U.S. Federal Reserve. And it happens to be a creation of - and 100% beholden to - the banks that it is a master shill for. It also lies to us and covers up Wall Street's misdeeds."
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Our Financial "Regulators" Just Let Us Down Again
The Dodd-Frank Act became law 18 months ago, and it may be hard to believe, but we still aren't any better off now than we were then.
Indeed, the regulators that are supposed to be protecting us from a repeat of the 2008 financial crisis can't - or refuse - to get the job done.
In fact, just yesterday (Tuesday), the Commodity Futures Trading Commission (CFTC) voted to move the effective date for rules that would add oversight to the $600 trillion derivatives market to July of 2012.
Derivatives were one of the primary culprits in creating the financial crisis in 2008.
Originally the regulations were to go into effect on July 16 of this year, but the CFTC pushed the date back to Dec. 31. And now, regulations of the item most responsible for the 2008 meltdown won't go into effect until two years after Dodd-Frank was enacted and nearly four years after the crisis occurred.
Other agencies responsible for finalizing the rules set forth in Dodd-Frank, such as the Securities and Exchange Commission (SEC) and the U.S. Federal Reserve, have been just as derelict in their duties.
In short, nothing has been fixed.
As Bad as Ever
"The structural problems are worse," Simon Johnson, a professor at the MIT Sloan School of Management and a former chief economist at the International Monetary Fund (IMF) told the Huffington Post. "[The institutions'] size, incentives -- none of that has changed."
Meanwhile, American citizens still suffering from the fallout of the last crisis are left to worry about vulnerabilities in the system and the ramifications of having a group of financial institutions that are still "too big to fail."
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