Glass-Steagall: In Memorium

Continuing on about IPS's and 1B assets requires a little backtracking on something that used to be called Glass-Steagall. (I decided to postpone my blue team story today to tackle the I-banks at the Fed discount window). This crucial bit of legislation was part of the Emergency Banking Act of 1933. It created a demarcation between what classified as a Commercial bank and what classified as an Investment Bank. The importance of this distinction cannot be overestimated.

Due to the abuses of the 1920's, having to do specifically with over-leveraging and high risk debt instruments, the Federal Government issued regulations preventing Investment banks from issuing consumer credit AND access to the Fed discount window. The overwhelming evidence that Investment Banks are almost completely responsible for the current credit securities crisis cannot be overlooked. It is no wonder that they line their reserves with 1B assets while Commercial banks are instructed to hold more fiat money 1A.

In essence Glass-Steagall or "The Emergency Banking Act of 1933" prevented banks that would hold consumer deposits from brokerage functions as well as closed off the fed fiat money spigot. Simple, I-banks were supposed to be allowed to succeed or fail upon their own merits. This act, which protected the consumer market from over-leveraging and floating junk were slowly and deliberately dismantled:

1933:

Following the Great Crash of 1929, one of every five banks in America fails. Many people, especially politicians, see market speculation engaged in by banks during the 1920s as a cause of the crash.

In 1933, Senator Carter Glass (D-Va.) and Congressman Henry Steagall (D-Ala.) introduce the historic legislation that bears their name, seeking to limit the conflicts of interest created when commercial banks are permitted to underwrite stocks or bonds. In the early part of the century, individual investors were seriously hurt by banks whose overriding interest was promoting stocks of interest and benefit to the banks, rather than to individual investors. The new law bans commercial banks from underwriting securities, forcing banks to choose between being a simple lender or an underwriter (brokerage). The act also establishes the Federal Deposit Insurance Corporation (FDIC), insuring bank deposits, and strengthens the Federal Reserve's control over credit.

The Glass-Steagall Act passes after Ferdinand Pecora, a politically ambitious former New York City prosecutor, drums up popular support for stronger regulation by hauling bank officials in front of the Senate Banking and Currency Committee to answer for their role in the stock-market crash.

In 1956, the Bank Holding Company Act is passed, extending the restrictions on banks, including that bank holding companies owning two or more banks cannot engage in non-banking activity and cannot buy banks in another state.

1960's-1970's:

Beginning in the 1960s, banks lobby Congress to allow them to enter the municipal bond market, and a lobbying subculture springs up around Glass-Steagall. Some lobbyists even brag about how the bill put their kids through college.

In the 1970s, some brokerage firms begin encroaching on banking territory by offering money-market accounts that pay interest, allow check-writing, and offer credit or debit cards.

1986-1987: GREENSPAN

In December 1986, the Federal Reserve Board, which has regulatory jurisdiction over banking, reinterprets Section 20 of the Glass-Steagall Act, which bars commercial banks from being "engaged principally" in securities business, deciding that banks can have up to 5 percent of gross revenues from investment banking business. The Fed Board then permits Bankers Trust, a commercial bank, to engage in certain commercial paper (unsecured, short-term credit) transactions. In the Bankers Trust decision, the Board concludes that the phrase "engaged principally" in Section 20 allows banks to do a small amount of underwriting, so long as it does not become a large portion of revenue. This is the first time the Fed reinterprets Section 20 to allow some previously prohibited activities.

In the spring of 1987, the Federal Reserve Board votes 3-2 in favor of easing regulations under Glass-Steagall Act, overriding the opposition of Chairman Paul Volcker. The vote comes after the Fed Board hears proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions to allow banks to handle several underwriting businesses, including commercial paper, municipal revenue bonds, and mortgage-backed securities. Thomas Theobald, then vice chairman of Citicorp, argues that three "outside checks" on corporate misbehavior had emerged since 1933: "a very effective" SEC; knowledgeable investors, and "very sophisticated" rating agencies. Volcker is unconvinced, and expresses his fear that lenders will recklessly lower loan standards in pursuit of lucrative securities offerings and market bad loans to the public. For many critics, it boiled down to the issue of two different cultures - a culture of risk which was the securities business, and a culture of protection of deposits which was the culture of banking.

In March 1987, the Fed approves an application by Chase Manhattan to engage in underwriting commercial paper, applying the same reasoning as in the 1986 Bankers Trust decision, and in April it issues an order outlining its rationale. While the Board remains sensitive to concerns about mixing commercial banking and underwriting, it states its belief that the original Congressional intent of "principally engaged" allowed for some securities activities. The Fed also indicates that it will raise the limit from 5 percent to 10 percent of gross revenues at some point in the future. The Board believes the new reading of Section 20 will increase competition and lead to greater convenience and increased efficiency.

In August 1987, Alan Greenspan -- formerly a director of J.P. Morgan and a proponent of banking deregulation -- becomes chairman of the Federal Reserve Board. One reason Greenspan favors greater deregulation is to help U.S. banks compete with big foreign institutions.

Tomorrow we'll cover how Glass-Steagall was further interpreted away until it's eventual repeal in 1999. Somehow, when you give the red team and I-banks access to fiat money, they find a way to sink it...again. Also, a return to Dutch State Pension and the robbery of 1b assets from the consumer market.

Tier 1 Trading

Alright, so before I get started on why investment banks are constantly raping the blue team (that's you) and why members of the insurance industry and other red team hacks (that's me) are getting rich off your deaths it's critical to understand one thing: tier 1 assets.

Since the Fed and ECB both insist that their tier guidance is the same (which is not true, but we'll come back to that) we'll use the ECB's guidance on what exactly classifies as tier 1: ECB
Upon a cursory glance you can easily see that level 1A is full of central government and central bank securities. Level 1A clearly defines the demarcation between true assets (1D), value assets (1C), CSV (Cash Surrender Value) or Pfandbrief assets (1B) and Central and Government Securities (1A) fiat money assets. So, in short, the top tier for reserve requirements in the Euro Zone is plainly fiat money. Fiat money backing more fiat money with the imprimatur of the holy ECB.

So what does this have to do with you dying? Stay with me here. We've established that both the Fed and ECB require commercial banks to carry 1A to back their loans, deposits, etc. So your hard earned fiat money deposits are backed by fiat money reserves. Gotta love the system. So what do the Central Banks and International Pension systems get in return for these useless digitized assets?

Before that, let's quickly define why the IPS is important. IPS's invest trillions each year into the equity markets to keep the machine flowing, the big player here is the Dutch State Pension system. So much so that the moniker it carries with Swiss RE is "the freezer" or place where you put dead things. Catch the meaning? Hidden among those trillions is the discrete and deliberate purchase of hundreds of billions of dollars of 1B assets.

1B is simply this: your life value. You purchase life insurance, permanent, term or otherwise for some purpose. Our market studies show that 60% of the US population has some form of life insurance. Highest in importance amount these are Cash Value Life or CSV policies. These policies hold cash in their accounts that grow year after year with each premium payment. These effectively become a savings account with dividend returns. What happens when you stop paying these premiums after 10 years, a year, or a month? Common knowledge is that this policy lapses and the books are clean. NOT TRUE. Every day lapsed policies are packaged and bought up by ISP's and Central Banks to secure their positions. These are then STRIPPED and packaged into securities sold to Credit Suisse, UBS, HSBC and other investment banks for pennies on the dollar. The net effect of this is that your life value, which would have been returned to your heirs upon your death now is turned liquid and paid to the banks upon your death. There are no reliable estimates of how much M3 growth is being attributed to the liquidation of life value, but I would venture the idea that it is significant. Not only do these policies get sold, but the MIB (Medical Information Bureau),the clearing house for all life insurance purchases, eliminates the record of their being an outstanding policy on your life.


Tomorrow I'll relate story of exactly how this practice screwed a middle class blue team member, and also why the selling of CSV to the central banks is costing you more in insurance premiums from your car to your life. Also, a more in-depth examination of European state pensions and why they are instrumental in the downfall of the dollar.

Starting this off.

I couldn't quite decide on where to begin with this new blog. So I suppose some broad strokes will suffice. My major topics will be the fiat money system, and the banking, insurance, and brokerage firms' stranglehold on American Liquidity.
Here's the rub: I play for the banks. I play for the insurance companies. I play for the brokerage houses. I play against the American middle class. I play against freedom, against choice, and against a debt free America. I play for the red team. I also have a decent sense of sportsmanship so I figure the blue team might as well understand what is going on in broad daylight every single day.
That's the general direction in which I will proceed. I will attempt to update this daily with new experiences and commentary. I'll begin a new series this week, the topic: how do the investment banks and international pensions line their pockets? Short answer: your deaths. Interested? Check in tomorrow.