A Clean Break is Needed (I)

The ghastly attack on an army school in Peshawar last Tuesday appears to be a topping point, finally, in Pakistan’s existential struggle with terrorism. Will the Pakistani leadership rise to the challenge? An equally daunting challenge awaits the policymakers in New Delhi. How does the Indian leadership of Prime Minister Narendra Modi respond to the watershed event of last week in Peshawar?..

Strategic Culture Foundation

Russian Roulette: Taxpayers Could Be on the Hook for Trillions in Oil Derivatives

The sudden dramatic collapse in the price of oil appears to be an act of geopolitical warfare against Russia. The result could be trillions of dollars in oil derivative losses; and the FDIC could be liable, following repeal of key portions of the Dodd-Frank Act last weekend.

Senator Elizabeth Warren charged Citigroup last week with “holding government funding hostage to ram through its government bailout provision.” At issue was a section in the omnibus budget bill repealing the Lincoln Amendment to the Dodd-Frank Act, which protected depositor funds by requiring the largest banks to push out a portion of their derivatives business into non-FDIC-insured subsidiaries.

Warren and Representative Maxine Waters came close to killing the spending bill because of this provision. But the tide turned, according to Waters, when not only Jamie Dimon, CEO of JPMorgan Chase, but President Obama himself lobbied lawmakers to vote for the bill.

It was not only a notable about-face for the president but represented an apparent shift in position for the banks. Before Jamie Dimon intervened, it had been reported that the bailout provision was not a big deal for the banks and that they were not lobbying heavily for it, because it covered only 5% of their derivatives. Why the sudden push to salvage a mere 5% of their bets?

A Closer Look at the Lincoln Amendment

The preamble to the Dodd-Frank Act claims “to protect the American taxpayer by ending bailouts.” But it does this through “bail-in”: authorizing “systemically important” too-big-to-fail banks to expropriate the assets of their creditors, including depositors. Under the Lincoln Amendment, however, FDIC-insured banks were not allowed to put depositor funds at risk for their bets on derivatives, with certain broad exceptions.

In an article posted on December 10th titled “Banks Get To Use Taxpayer Money For Derivative Speculation,” Chriss W. Street explained the amendment like this:

Starting in 2013, federally insured banks would be prohibited from directly engaging in derivative transactions not specifically hedging (1) lending risks, (2) interest rate volatility, and (3) cushion against credit defaults. The “push-out rule” sought to force banks to move their speculative trading into non-federally insured subsidiaries.

The Federal Reserve and Office of the Comptroller of the Currency in 2013 allowed a two-year delay on the condition that banks take steps to move swaps to subsidiaries that don’t benefit from federal deposit insurance or borrowing directly from the Fed.

The rule would have impacted the $ 280 trillion in derivatives primarily held by the “too-big-to-fail (TBTF) banks that include JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. Although 95% of TBTF derivative holdings are exempt as legitimate lending hedges, leveraging cheap money from the U.S. Federal Reserve into $ 10 trillion of derivative speculation is one of the TBTF banks’ most profitable business activities.

What was and was not included in the exemption was explained by Steve Shaefer in a June 2012 article in Forbes. According to Fitch Ratings, interest rate, currency, gold/silver, credit derivatives referencing investment-grade securities, and hedges were permissible activities within an insured depositary institution. Those not permitted included “equity, some credit and most commodity derivatives.” Schaefer wrote:

For Goldman Sachs and Morgan Stanley, the rule is almost a non-event, as they already conduct derivatives activity outside of their bank subsidiaries. (Which makes sense, since neither actually had commercial banking operations of any significant substance until converting into bank holding companies during the 2008 crisis).

The impact on Bank of America, Citigroup, JPMorgan Chase, and to a lesser extent, Wells Fargo, would be greater, but still rather middling, as the size and scope of the restricted activities is but a fraction of these firms’ overall derivative operations.

A fraction, but a critical fraction, as it included the banks’ bets on commodities. Five percent of $ 280 trillion is $ 14 trillion in derivatives exposure – close to the size of the existing federal debt. And as financial blogger Michael Snyder points out, $ 3.9 trillion of this speculation is on the price of commodities.

Among the banks’ most important commodities bets are oil derivatives. An oil derivative typically involves an oil producer who wants to lock in the price at a future date, and a counterparty – typically a bank – willing to pay that price in exchange for the opportunity to earn additional profits if the price goes above the contract rate. The downside is that the bank has to make up the loss if the price drops.

As Snyder observes, the recent drop in the price of oil by over $ 50 a barrel – a drop of nearly 50% since June – was completely unanticipated and outside the predictions covered by the banks’ computer models. The drop could cost the big banks trillions of dollars in losses. And with the repeal of the Lincoln Amendment, taxpayers could be picking up the bill.

When Markets Cannot Be Manipulated

Interest rate swaps compose 82% of the derivatives market. Interest rates are predictable and can be controlled, since the Federal Reserve sets the prime rate. The Fed’s mandate includes maintaining the stability of the banking system, which means protecting the interests of the largest banks. The Fed obliged after the 2008 credit crisis by dropping the prime rate nearly to zero, a major windfall for the derivatives banks – and a major loss for their counterparties, including state and local governments.

Manipulating markets anywhere is illegal – unless you are a central bank or a federal government, in which case you can apparently do it with impunity.

In this case, the shocking $ 50 drop in the price of oil was not due merely to the forces of supply and demand, which are predictable and can be hedged against. According to an article by Larry Elliott in the UK Guardian titled “Stakes Are High as US Plays the Oil Card Against Iran and Russia,” the unanticipated drop was an act of geopolitical warfare administered by the Saudis. History, he says, is repeating itself:

The fourfold increase in oil prices triggered by the embargo on exports organised by Saudi Arabia in response to the Yom Kippur war in 1973 showed how crude could be used as a diplomatic and economic weapon.

Now, says Elliott, the oil card is being played to force prices lower:

John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.

. . . [A]ccording to Middle East specialists, the Saudis want to put pressure on Iran and to force Moscow to weaken its support for the Assad regime in Syria.

If the plan was to break the ruble, it worked. The ruble has dropped by more than 60% against the dollar since January. But it came at a cost: not only are US oil producers hurt, but the derivatives banks will get killed if oil prices don’t go back up soon.

At least they would have been killed before the bailout ban was lifted. Now, it seems, that burden could fall on depositors and taxpayers. Did the Obama administration make a deal with the big derivatives banks to save them from Kerry’s clandestine economic warfare at taxpayer expense?

Whatever happened behind closed doors, we the people could again be stuck with the tab. We will continue to be at the mercy of the biggest banks until depository banking is separated from speculative investment banking. Reinstating the Glass-Steagall Act is supported not only by Elizabeth Warren and others on the left but by prominent voices such as David Stockman’s on the right.

Another alternative for protecting our funds from Wall Street gambling could be done at the local level. Our state and local governments could establish publicly-owned banks, and our money – public and private – could be moved into them.

Max Keiser

What is the Community Press Group and why does it have it in for David Icke and the UKColumn?

This is a mainstream-lite operation based in Potters Bar north of London with its director, a former police officer called Dave Eden

Why do you want to damage David Icke, police officer Dave Eden?

Why do you want to damage David Icke, Sonia Poulton, who called you out for being a diva and the way you treated people?

Why would these people attempt to damage the work of someone who was at the front line 25 years ago before there was a ‘truth movement’ and has already done more to alert people to the truth worldwide than this lot will do collectively if they live to be a thousand?

Who benefits? The System.

Why would they be so quick to criticise the UK Column which is way further down the rabbit hole than they will ever be prepared to go?

Who benefits? The System.

Just thinking.

You can expect some major attempts to discredit me in the next few months which are bubbling in the background at the moment because I am getting far too close to the truth and they know that I won’t be intimidated or silenced.

I take it as a compliment and I’ll just run at them quicker.

Watch this space and all that.

Well, thank you, Sonia Poulton

See here …

David Icke Talks About The Background To The People’s Voice, Sonia Poulton, Police Officer Dave Eden and the Community Press Group

Community Press Group Account Suspended

See here …

David Icke

Down The Rabbit Hole w/ Popeye (12-10-2014) America Goes To The Woodshed

 

DTRH - (12-10-2014) America Goes To The Woodshed

(FEDERALJACK)   On this edition of DTRH Popeye takes America itself to the woodshed. Freshly back from a trip to Amsterdam in the Netherlands, Popeye offers an interesting perspective on what this country looks like to the rest of the world. First he gets into the controlled racial tension that is being amped up in this country on purpose in order to bring about a racially charged civil war. Next he covers the release of information confirming we tortured people, including children, for information in the name of fighting the so called war on terror. And the fact that so many people in this country agree with it. Moving on he covers the American police state, police brutality, and the war on drugs. Finishing up he plays an inspirational audio clip and offers real world solutions to these problems.

YOU CAN ALSO LISTEN ON YOUTUBE

LINKS TO THE ARCHIVE PAGES, LISTEN LIVE PAGE, FACEBOOK & TWITTER

DTRH W/ POPEYE FULL DOWNLOADABLE ARCHIVES

DTRH w/ POPEYE FULL ARCHIVE PAGE

DTRH LISTEN LIVE PAGE

THE TRUTH FREQUENCY RADIO NETWORK

FACEBOOK

TWITTER ACCOUNTS:

FEDERALJACK

DTRH W/ POPEYE

Federal Jack

Down The Rabbit Hole w/ Popeye (12-10-2014) America Goes To The Woodshed

 

DTRH - (12-10-2014) America Goes To The Woodshed

(FEDERALJACK)   On this edition of DTRH Popeye takes America itself to the woodshed. Freshly back from a trip to Amsterdam in the Netherlands, Popeye offers an interesting perspective on what this country looks like to the rest of the world. First he gets into the controlled racial tension that is being amped up in this country on purpose in order to bring about a racially charged civil war. Next he covers the release of information confirming we tortured people, including children, for information in the name of fighting the so called war on terror. And the fact that so many people in this country agree with it. Moving on he covers the American police state, police brutality, and the war on drugs. Finishing up he plays an inspirational audio clip and offers real world solutions to these problems.

YOU CAN ALSO LISTEN ON YOUTUBE

LINKS TO THE ARCHIVE PAGES, LISTEN LIVE PAGE, FACEBOOK & TWITTER

DTRH W/ POPEYE FULL DOWNLOADABLE ARCHIVES

DTRH w/ POPEYE FULL ARCHIVE PAGE

DTRH LISTEN LIVE PAGE

THE TRUTH FREQUENCY RADIO NETWORK

FACEBOOK

TWITTER ACCOUNTS:

FEDERALJACK

DTRH W/ POPEYE

Federal Jack

Schneier: Over 700 Million People Taking Steps to Avoid NSA Surveillance

Famed technologist and EPIC Advisory Board member Bruce Schneier pushed back against media claims that Edward Snowden’s revelations about the NSA have had little impact on Internet users. A recent global survey found that 39% of Internet users who have heard of Snowden have taken steps to protect their online privacy. Some news articles have characterized these users as “merely 39%” and “only 39%.” But Schneier did the math and found that Snowden’s impact has been far from insignificant: “706 million people have changed their behavior on the Internet because of what the NSA and GCHQ are doing.” A recent Pew survey also indicates that the NSA revelations have had a dramatic impact on Internet users. Last year, EPIC filed a petition to the U.S. Supreme Court to stop the NSA’s collection of domestic telephone records, following the release of the “Verizon Order.” For more information, see EPIC: In re EPIC, EPIC: Smith v. Obama, and EPIC: Foreign Intelligence Surveillance Act Reform.

epic.org