The Ghost of Dodd-Frank:

The checkers and savers, who believed their bank accounts were secure, will find themselves in a grossly unfair situation, losing their hard-earned savings. Meanwhile, large financial institutions will be rescued from their own reckless decisions, and their highly leveraged, super-high-risk, and defaulted derivative contracts will be bailed out.

The derivatives market is largely unregulated. Lobbyists representing large banks convinced the US Congress to allow banks to invest in derivative contracts with minimal regulation. The Dodd-Frank Act has authorized future derivative claims from losses to have a super or senior priority for repayment over all other claims against the defaulted banks.

The Dodd-Frank Act also reorganized the priorities of all debts, after the costs of administration necessary in any liquidation process, first to the government, then to the banks, then to derivatives, then to secured and unsecured creditors (including checkers and savers) of the bank, and then finally to equity (stockholders). Bank shareholders could be subject to substantial losses in liquidation, as derivative claims are typically preferred over them. Counterparties to derivative losses will have their claims covered and paid before shareholders and depositors.

Claims are prioritized if Financial Institutions Become Insolvent and the Decision to trigger the Bail-In Provision of Dodd-Frank:

This is stated in 12 USC 5389 and 12 USC 5390

As stated, a series of rules allow for the orderly liquidation of assets and the payment of claim holders according to a list of priority payments. The receiver refers to this as an orderly liquidation authority. Claims are paid in the following order. Anyone involved with a bankruptcy court knows everyone gets cared for; the innocent investors are the last.

When the government seizes money from your accounts, it ceases to be yours. You become an unsecured creditor, and unsecured creditors are the last to be considered. This lack of control over your savings can be a deeply unsettling realization.

1) Administrative costs. The government would hire private companies to administer the process. Who gets paid big bucks?

2) The government; the costs of government employees who are in no hurry.

3) Wages, salaries, or commissions of employees.

4) Contributions to employee benefit plans.

5) Any other general or senior liability of the company. This would include amounts under derivative defaults. This may be an astronomically large number that would gobble up all proceeds confiscated from the public under the bail-in provision. 12 US Code 5389 refers to rules and regulations concerning the rights, interests, and priorities of creditors, counterparties, security entitlement holders, and others concerning such covered financial companies. Please note that this includes counterparties of defaulted derivatives.

6) Obligations to shareholders, members, general partners, and other equity holders.

7) Unsecured creditors for 3rd party claims. (This includes bank checkers and savers who are uninsured by the FDIC. The FDIC has no money. It only holds very low-yielding U.S. Treasuries, which essentially makes it insolvent.

The system, including lawyers, judges, consultants, receivers, government employees, and employees of insolvent financial institutions, will continue to receive payments and accrue benefits. At the same time, the public is left to bear the brunt of this.

The liquidation could result in the depositors' savings in the insolvent bank being redirected to future equity (stock) and, consequently, lost as a savings asset. The only alternative for the depositors is for the bank to repay the owed amounts over up to 30 years. This potential loss of savings should be a cause for immediate concern.

The rationale behind the theft:

The prosperity of the US government, which pumps trillions of fiat currency into the economy, is used primarily to further its political objectives. Political objectives almost always involve propping up public employee labor unions, private company labor unions, and major corporations.

The government's policy of forced near-zero interest rates benefits only Wall Street and the federal government.

The fractional reserve banking system, which has been in effect for approximately 300 years, should be replaced with a zero-reserve banking system.

The Dodd-Frank Act of 2010, a significant financial reform law, included a provision known as 'bail-in'. This provision allows the US Federal Reserve to use funds from private party checking and savings accounts to rescue failing financial institutions. Put another way, your savings could save a bank from trouble.

Article:

Part II expands the conversation to include multiple actions taken by the Federal Government and large major financial institutions that harm the safety of public checking and savings account balances.

While the American public is being relentlessly flogged with propaganda, accusations of racism, conditioned to feel guilt and submissive, indoctrinated, degrading us for our successes, and bombarded with advertising, at the same time, institutional banditry is in full bloom.

Picking the pockets of the productive people and transferring the wealth to the administrative state and the top 1% has become ingrained in the American Enterprise.

Historic banking is dramatically different from today's banking:

Most people are correctly under the impression that federally insured banking institutions were historically created to collect public deposits and use those proceeds to lend to creditworthy consumers (borrowers). Collateral included taking a security interest (deed or mortgage) on real property, unsecured, based upon a borrower's good credit or some form of government-backed insurance program. This system was designed to be the primary driver of growth in the US economy.

Historically, banks were allowed to use depositor proceeds to lend to borrowers, charging them market interest rates, typically in three categories: consumer installment, commercial business, or real estate. The ability to pool deposits and make loans to multiple borrowers at interest rates higher than the depositor's interest rates paid out created a positive spread in the form of gross revenue for the bank or financial institution. Banks also added charges, such as overdraft fees, for banking services received from depositors, which enhanced the banks' profits. Many banks' primary income stream now comes from overdraft charges and default interest charges. One could argue that this business model has a predatory nature. But could you save your breath? They oversee the federal government.

Bank balance sheets differ from those of other businesses because the money deposited from the public (capital) that the bank loans out to borrowers is considered a bank asset. Bank deposits are also considered liabilities or unsecured debt. In simpler terms, if a bank defaults, the people who have deposited money in the bank (the 'unsecured creditors') have no legal guarantee that they will get their money back.

Today, banks and non-bank financial institutions are some of the US's most highly leveraged operating companies. They have been protected through multiple financial bailouts, much like a monopoly cartel, because Wall Street has a propensity to install advocates at all levels of government.

The banking industry appears stable due to a combination of historical fractional reserve banking and insured deposits through the Federal Deposit Insurance Corporation (FDIC). What I mean by 'historic' is that our banking laws required a reserve of about 10% of deposits to be held and not loaned out, in case the bank needed cash to meet its obligations in emergencies.

As of March 26, 2020, banks are no longer required to maintain reserve deposits on their balance sheets. The US has moved away from fractional reserve banking to zero-reserve banking.

Our banking system is now unraveling because all public safety mechanisms and reassurances of confidence have been removed. Banks can now invest, with very minimal limits, in extremely high-risk and highly leveraged securities. Banks no longer need to worry about these pesky reserve requirements.

The banking system makes tremendous profits based on highly leveraged bets that things will go its way. The real question is how long it can keep up with today's hyper-casino-styled, highly leveraged investment strategies. The consequences could be severe if there is even a moderate downturn in the stock market. A 200-basis-point increase in the interest rate would bring the economy to its knees.

FDIC insurance of $250,000 per individual account and the illusion of depositor protection:

In 1933, during the Great Depression, the Federal Deposit Insurance Corporation (FDIC) was established as an independent federal agency. Its primary purpose was to restore public confidence in the banking system by insuring deposits in case of bank failures. This was a crucial step to prevent the 'run-on-the-bank' scenarios that had devastated many banks during the Depression.

Today, depositors are insured for up to $250,000 per separate account at all banking institutions participating in the FDIC insurance program.

The public perceives that the Federal Deposit Insurance Corporation (FDIC), somewhere, maybe stashed on a shelf, has the money in reserve to pay out large amounts of insurance claims if any bank(s) default. It does not! Insured deposits are an economic and propagandized illusion. If the FDIC needed significant funds, the US Department of the Treasury had to print new money out of fiat (out of thin air) and issue corresponding debt securities (US Treasury bonds) for public or international investors to purchase. All incoming cash proceeds from these public sale securities are available to spend on all federal government financial obligations. This would include the FDIC liabilities.

FDIC insurance claims could become staggeringly large. The government may look elsewhere for funding for FDIC claims, and bank depositors' funds became legal under the Dodd-Frank Act of 2010. As usual, highly leveraged financial companies take on the maximum risk, enjoy the benefits of success, and pass any losses on to the public.

Investment in US Treasuries and US Savings Bonds is considered low-risk because the full faith and credit of the US Government backs them. The newly created debt securities become US Federal debt, also known as central government debt or sovereign debt, and are a financial obligation of future US taxpayers. Yes, the taxpayers, not the government employees who created the debt, are responsible.

The government's propensity to continue printing money has accelerated year after year, continually increasing in size, with the current total over $28-30 trillion. Whenever economic headwinds appear, governing elites tend to print more money. Build Back Better, or some other phony mantra, is permanently attached to sell to the unsuspecting public. Printing more money is an easy decision for weak and non-existent national leadership.

Our current administration is attempting to increase the national debt to $35 trillion+/-/-. We are witnessing a seat-of-the-pants strategy: kick the can down the road and hope. Unfortunately, hope is not a strategy. Our current strategy is just a temporary gimmick.

Accrued national public debts are not included in public disclosure. Keep the public unaware:

The US-accrued sovereign debt does not include unfunded and underfunded pensions and medical obligations of Social Security, Medicare, Medicaid, and federal and state government pensions, estimated to be over $ 200 trillion. Government leaders from both major political parties never provided any solution to pay for this tsunami of accepted economic benefits over the next 20-30 years.

Borrowing $200 trillion is the answer, and we should kick the can down the road as though the road to financial wealth will never end. Massive inflation and reduced purchasing power are the preferred schemes.

Maybe injecting older folks, weaker folks, and those with pre-existing conditions with a gene-modifying substance may be the answer to reducing the future social safety net cost.

Our current national economic strategy reminds me of the Weimar Republic between 1914 and 1923 (a German city where the republic was headquartered), Venezuela, and Argentina, where hyperinflation destroyed otherwise beautiful countries. Our headlights are on high beam, providing clear vision in front for hyperinflation. Raising interest rates to combat inflation is the only practical solution. The Wall Street elites will not allow this to happen.

FDIC Insurance and Safety Deposit Box Security:

In theory, depositors' checking, savings, and certificates of deposit, up to $250,000 per separate account, are FDIC-insured if the proceeds are placed or purchased in participating institutions. FDIC insurance does not cover financial instruments such as stocks, bonds, US Treasury securities (T-bills), safe deposit box contents, annuities, insurance products, and money market funds. Could you check with your bank representative for clarification on coverage?

When were banks and large financial institutions allowed to engage in high-risk investment strategies?

The repeal of the Glass-Steagall Act of 1933 in 1999 was designed to separate risky investment banking activity from depositor funds. The repeal no longer prevented banks from operating only as commercial and investment banks.

Federal Legislators from both major political parties joined the sellout. I'm sorry that your political party and the opposing party (your drastic enemy) sold you out.

The Repurchase Agreements (REPO) market:

The US Treasury is considered a safe investment and serves as collateral for overnight borrowers, typically banks and major financial institutions. Buyers of US treasuries act as short-term lenders, and sellers (banks and financial institutions) act as short-term borrowers.

The Repurchase Agreement Market (Repo) is a key component of the US financial system. Repo refers to short-term borrowing instruments through approved dealers in government securities. The dealers sell the securities to investors overnight and repurchase them the next day or later at a slightly higher price. This process is fundamental to central banks, which constantly need to raise capital to meet the government's cash flow requirements and fulfill banks' capital reserve requirements.

On September 17, 2019, the Repo market froze up. Liquidly became so strained that the Federal Reserve began providing hundreds of billions of dollars per week in Repo Loans to participant trading houses. Since then, the government has created an additional $ 9 trillion to primarily bail out mega banks and Wall Street, while dumping the debt on the backs of taxpayers. The National Debt increased from $ 22 trillion to around $ 28 trillion in just three-quarters of a year. The public was too busy watching the news (mainstream propaganda discrimination) to notice.

The subsequent US financial implosion will be bigger, faster, and more ferocious. Everything appears rosy if the Federal Government continues to mandate close-to-zero and below-inflation interest rates. The size of the economic bubble can and will continue to grow to the stratosphere.

The illusion of assumed and increased wealth and financial stability permeates every corporate boardroom and media outlet. Stock buybacks account for 40% of the current daily trading volume. Rising G.D.P.s, rising corporate profits, stock buybacks with cheap borrowed money, taking on highly leveraged debt, and the continued speculative frenzy are all necessary to prevent a financial implosion.

Inflation in the prices of all asset classes will continue to skyrocket. Investors on Wall Street and the public will experience a corresponding reduction in the purchasing power of each dollar, right up until the day the frantic financial speculative watch stops ticking.

The catalyst for the next economic crash will be a systemic implosion of a massive number of derivative contracts that default, causing the insolvency of the counterparties, primarily the too-big-to-fail banks.

Derivatives as investment instruments by large banks are a ticking time bomb:

A written derivative contract is a contractual or hedging-bet agreement that derives its value based on pegging value movements with or against other financial assets. The amount of speculation here is very high. The process requires multiple (sophisticated) parties and (refined) counterparties to bet on whether fluctuations will or will not occur. Typically, hedging instruments are based on the interest rate movements of underlying financial assets, such as bonds, commodities, and currencies.

Derivative contracts are contractual agreements among counterparties that are off-balance-sheet hedging bets. The profitability potential is very high, but the risk of downside reversal and loss of corporate and bank capital is also very high. The corporation retains profits, but losses can now be transferred to innocent third-party depositors in a public bank.

Dodd-Frank of 2010 - With the passage of this legislation, the US Government has made bank depositors and savers subject to having their deposits confiscated to pay the losses created by central bank and financial institution defaults.

One could question whether a significant bank default constitutes a central bank default. Yes, absolutely! But if you are an elite financial powerhouse member who controls the federal government, and the government allows you to transfer the losses to someone else, why not? The public is too busy watching daily news and consuming misinformation to notice.

History of Derivatives Losses:

Derivative losses were the catalyst for the 1998 collapse of Long-Term Capital Management, Inc., a prominent hedge fund, and the near-collapse of the global financial system.

The federal government and the Federal Reserve have caved in and provided bailout schemes to large financial institutions, Wall Street trading houses, and publicly traded corporations. Very minor exceptions would include Leman, who was a competitor of Goldman-Sacs. Goldman eliminated its major competitor because it controlled Washington as it does today.

Federal bailout programs following the 2008 economic collapse totaled approximately $29 trillion. It was and will be expected in the future for the federal government to agree to bail out companies like the largest insurer in the world, American International Group (AIG), to the tune of $185 billion to cover derivatives losses. AIG is a multinational finance and insurance corporation that operates in over 80 countries and jurisdictions. Another example in this boneyard was how the $11 billion stock equities of General Motors were extinguished and the proceeds reallocated to the labor unions. This $29 trillion is now a debt to be owned by taxpayers rather than the businesses that took an extremely high risk and lost.

A Bit of Perspective:

The U.S. Gross Domestic Product (GDP) is about 30.5 trillion annually. Taxation generates approximately $5 trillion per year for the government. If the government spends $10 trillion annually, it must create a difference by injecting it into the system.

Too Big to Fail Banks: The high-risk derivatives business.

The six too-big-to-fail (TBTF) banks account for 67% of all outstanding bank assets in the United States.

The risk in the derivatives market is concentrated in the US. In 2011, four US banks held 95.9% of US derivatives. Should derivative contracts fail, causing bank defaults, minimal government insurance proceeds exist unless the government prints additional money by issuing new debt to replace the funds paid out in defaulted bank insurance claims.

The government's full faith does not back derivatives, but losses have been deemed more important than the public assets of checking and savings. Therefore, the losses will be transferred to the public. In effect, the Dodd-Frank Act has shifted the ultimate risk for losses from highly speculative derivatives to depositors in US banks, typically members of the working middle class.

Warren Buffett has called derivatives financial weapons of mass destruction. The bank statistics below explain why: Market capitalization refers to the total value of a company's outstanding shares, commonly used to measure its worth.

The above totals fluctuate over time. Could you consult your broker for the exact figures?

Conclusion:

FDIC government-insured deposit accounts held by the public are now expressly subordinated to derivative losses of banking participants in the event of a market collapse. The risk associated with the total sum of $288 trillion in counterparty bets in the derivatives market by these banks through Wall Street trading houses is primarily hedging interest rates. Not all derivatives would lose in a market collapse, triggering a meltdown. With counterparty betting, there will be winners and losers. In the settlement process, the real crisis will occur when central banks become insolvent and are unable to cover their losses. That is when the government will reach into the pockets of the depositors to cover the losses.

Depositor accounts held in the US banking system carry the most significant risk of loss or the potential for a long-delayed or deferred recovery. If approximately $17 trillion in deposits currently held in commercial banks and bail-in provisions allowed the government to confiscate one-half or more, $8.5 trillion would not go very far towards covering $ 10 trillion of derivative losses.

Remember the phrase, You can take it to the bank? This means a third-party source can verify something as accurate and is assumed to be reliable. The new phrase should be, Do not rely on receiving your money back if you deposit it in the bank. You are better off with your deposits held in small regional banks or, better yet, state-chartered credit unions.

I have researched the above subjects through various data sources. There may be conflicts, especially with time and different data sources. Thank you for taking the time to read this article. I hope you found the information valuable.