Do the Big Banks Control Everything?


Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Guest Blogger

Recently I wrote an article that discussed how the FDIC and the Bank of England had written a joint paper agreeing on how to deal with failing large banks in the post Dodd-Frank world.  Banksters  In my research for a follow-up to that article, I discovered that Congress was busy at work trying to do everything in its power to water down or eviscerate Dodd-Frank.  I guess I should not be surprised that Congress might be trying to defeat a law that was passed in an attempt to make sure that ordinary citizens would not be asked to bail out the large banks once again.  While Dodd-Frank is far from perfect, it is a step in the right direction.  At least for the taxpayers.

Congress has stepped in to and has attempted to allow the Banksters to continue on their wild gambling spree by exempting these huge financial organizations from the bailout prohibitions of Dodd-Frank if they are gambling with depositors funds.  Under the joint FDIC/Bank of England plan discussed in my previous article, the depositors funds could be grabbed by a failing bank in lieu of a taxpayer bailout.  Under the latest House proposals, the Congress just sweeps away the prohibition against tax payer bailouts if the subject bank is gambling in just the right kind of financial products.

“Almost all of these bills turned out to be aimed directly at Title VII of the Dodd-Frank Act, i.e. the derivatives portion. They included:  H.R. 992 would “repeal most of Dodd-Frank Section 716” of the Dodd-Frank Act. This section, also known as the “Lincoln Rule,” was one of the hottest of hot potatoes during the negotiations for the Dodd-Frank bill (see here for more details).

That portion of Dodd-Frank began with a simple, bold statement:

“Notwithstanding any other provision of law,” it read, “no Federal assistance may be provided to any swaps entity with respect to any swap, security-based swap, or other activity of the swaps entity.”

In other words, no matter what other laws are written, the federal government doesn’t bail out any “swaps entities” or “activities of the swaps entities.”  This sounds great, except Congress then decided on an exception or two to that law – among other things, federally-insured banks would be permitted to engage in swaps trading, so long as it was for “bona-fide hedging” and “risk-mitigation efforts.”  Put another way, so long as the bank is merely guarding against loss, such behaviors are okay and bail-out-able.”  Common Dreams

The Big Banks and Wall Street seem to have both side of the aisle in their pocket as there is bipartisan support for the bills designed to water down Dodd-Frank.   “But apparently this wasn’t enough. This new bill in the House baldly expands the universe of trading activities that we may later have to bail out. It’s actually written that way – check out this summary of H.R. 992, the “Swaps Regulatory Improvement Act” (God, I love the names):

Declares the prohibition against federal government bailouts of swaps entities inapplicable to: (1) a foreign banking organization supervised by the Federal Reserve; and (2) an insured depository institution or a U.S. uninsured branch or agency of a foreign bank that limits its swap and security-based swap activities to hedging and similar risk mitigating activities (as under current law), non-structured finance swap activities, and certain structured finance swap activities.

In English, this just means that in addition to hedging, which we banks think is pretty much everything we do, we’d like to be eligible for bailouts when we engage in “non-structured finance swap activities and certain structured finance swap activities.”  If you read the fine print, what they mean by “certain structured finance swap activities” are swaps of a type and quality “to which the prudential regulators have jointly adopted rules,” i.e. to be determined later during the rule-making process.

So to sum up, we banks would like to remain eligible for bailouts when we engage in hedging, which we think is everything we do, and also additionally when we engage in “certain structured finance swap activities,” which will mean whatever we tell the rule-makers it means after the bill is passed.  This bill passed by a vote of 53-6 in the Financial Services Committee. Only six House members voted against expanding the types of financial behaviors that we may later have to bail out. Go figure.”Matt Taibbi

Some of these bills actually attempt to allow the Banksters to shop for the best regulator or laws that pertain to their particular trading activities.

“Then there was H.R. 1256, the “Swap Jurisdiction Certainty Act,” which:

. . . exempt[s] a non-U.S. person in compliance with the swaps regulatory requirements of a G20 member nation from U.S. swaps requirements unless the SEC and CFTC jointly determine that the regulatory requirements are not “broadly equivalent” to U.S. swaps requirements.

This is yet another leprechaun trick. What it basically means is that if you’re Goldman or Chase and you have an office in some place like Mexico or Turkey or Russia or Saudi Arabia, you can do all the swaps business you want from there, undet whatever film of derivatives regulation exists in that country, without having to comply with U.S. swaps rules.   That is, unless the SEC and the CFTC make a joint determination that country’s laws are not “broadly equivalent” to our own.

This really just gives banks permission to go around the world regulator shopping. “It just makes it harder for the SEC to prevent regulatory arbitrage,” is how one analyst put it to me. “That’s all it does.”  That one passed 48-11″    Matt Taibbi

It seems obvious to this writer that Congress is firmly in the pocket of Wall Street and the Big Banks.  It is not just a Republican problem or a Democratic problem.  It is a money problem.  That is a too much money in the political system kind of problem.  Without the removal of money in our political system, we will never be able to get beyond this kind of one-sided legislation that attempts to put the Banksters first, and you and I second.

Citizens United accelerated the problem and the 501c4 politically motivated “social welfare” organizations that were spawned by Citizens United are bringing huge amounts of secret money into the political system and the legislators who receive those tax-deductible donations or receive the benefit of those donations, must do their bosses bidding.  Isn’t it far past the time that we allow Banks and Wall Street to decide what laws they will or will not be subject to?

As Professor Turley suggests in his article The Rise of the Fourth Branch of Government   the Federal Agencies are beginning to take on a role that was not imagined by our Founders.  I submit that what makes the rise of these agencies even more damaging to our Democracy is who is really writing these new regulations.  Or maybe I should say, who is really “paying” for these regulations.  What do you think?

15 thoughts on “Do the Big Banks Control Everything?”

  1. Fulfill the promise of $10k federally insured. Otherwise, bail out nothing! But they will do whatever they want to the detriment of the people who suffer the devaluations on their dollars & pay the most per capita income taxes, including a tax on negative interest! (less interest than inflation) We all know that if Wells Fargo, B of A & a dozen others,as well as the big mortgage banks, all went under, better, more efficient banks would willingly take their place.

  2. Tony,
    Let’s see some evidence of your claims that a majority of the members are Illegal aliens or aliens on a green card. The 33 million that you are claiming are mostly already here and some may be members of the union, but let’s see your evidence.

  3. The problem here is simple. The vast majority of Politicians are “owned,” in some manner, by just about every special interest group there is. Take for example Senate bill (S-744), the so called “Illegal Alien Amnesty Bill.” Why would the SEIU Labor union support a bill that would cost $6.3 TRILLION DOLLARS to enact and allow over 33 MILLION aliens into the country over the next 10 years? Simple, because the majority of the members ARE either ILLEGAL or Legal aliens working on “green cards.”

    There is no doubt that some members of the so called “Gang of Eight” senators, who are attempting to force this TRAVESTY down our throats, have received “contributions” from the union(s).

    Consequently, the banks themselves want American Taxpayers to “foot the bill” when they “gamble” with our money. The banks simply call the “pocket
    politicians” when they want to make sure THEIR interests are protected.

    The majority of Americans are either complacent or too busy fighting to stay afloat, to DEMAND an end to this “KICK BACK SYSTEM” the politicians have created for themselves.

    So…….as we are distracted with the day to day struggle to keep our jobs, homes and cars, or to just simply feed ourselves, the “politicos” laugh all the way to the “bank” as they make policy, often without much “fan fare” or input from the average American Citizen. Policies that more often than not, benefit the rich and powerful, the corporations and of course, the political establishment.

    Too bad……….but it we ourselves who have allowed this system to FLOURISH into a GIANT MONSTER which will soon destroy our way of life.

  4. Well-researched post.

    The banksters have found bail-outs to be the ultimate risk reducer.

  5. Sure the banks control all of “it”. The general populace is powerless to do anything about it. The question is how much the banks are willing to do to keep the system flowing. They are not unlike the kings in Europe back in the day. Attacking each other only when necessary, but much more sophisticated in not fighting among themselves. New banks popping up everywhere because interest is the prime game now, pun intended. The congress will play ball and the average person will not even know what is happening. That is why moving production outside the US happens, the banks don’t care unless the overall system breaks. Lending to “new” consumers in China still makes money for the banks.

  6. Thanks AY. It is kind of scary.
    Thanks bettykath. The attempted evisceration of Dodd-Frank has gotten very little coverage. Maybe Taibbi’s article can get some Congress people off their rear ends.

  7. Big Biz writes their legislation. Congress goes begging for their docs. Congress no longer writes legislation. The only law that should matter are the Bankruptcy laws, a perfectly appropriate process for bad business practices (like swaps without regard to risk). But the US govt. which is controlled by Wall Street through the Federal Reserve (which is neither Federal, nor a Reserve) steps in with taxpayer funds, and taxpayer debt to permanently protect high-risk banking behaviors. This impoverishes the citizenry, and continues to enrich the Big Banks. When one gets rewarded (or protected) for wrongdoing, then wrongdoing becomes sport without their risk. Anyone who thinks the Federal Reserve is not a criminal institution created by the banks to enrich themselves and impoverish and control the Nation since 1913 (a banking cartel) is completely ill informed. Read “The Creature from Jekyll Island.” A movie named “Jekyll Island” will be coming out soon, (haven’t seen it yet, of course). It is critical that Americans understand this source of the perpetual crimes of the Federal Reserve.
    If money printing is so effective, why is the US economy still languishing as the official govt. stats misrepresent the truth? Go to for a reality check. We will ultimately starve by the hand of the Fed.

  8. There’s an article in yesterday’s NY Times about bank lobbyists actually writing the bills. No surprise except the Times reporting it.

  9. Thanks for the links OS. It is kind of scary to see what went down in the WikiLeaks debacle as well as how much power Big Banks have on Congress and the government. Follow the money.

  10. raff,
    Some serious food for thought. If anyone doubts their power, look at the way they can shut down donations to any organization which threatens their power and control. They pretty much turned off the donation spigot to WikiLeaks by refusing to process credit card payments to WikiLeaks account. PayPal did the same thing.

    No company or organization–or government–should have that kind of power.

    PayPal spokesmen were booed in Europe when they tried to claim the US State Department had told them contributions to WikiLeaks were illegal in the US. The State Department may have told them to cut WikiLeaks off, but there is that bothersome thing called the First Amendment which made the second part of the claim ludicrous. The crowd knew it.

  11. The big banks control everything until they don’t because they’re obviously allowed to. Too big to fail and too big to jail. It might be a while yet, but it’s going to implode, globally. Derivatives, massive debt, currency devaluation, etc.

    How will they try to continue to control everything? War.

  12. Do the Big Banks Control Everything?

    I submit that what makes the rise of these agencies even more damaging to our Democracy is who is really writing these new regulations. Or maybe I should say, who is really “paying” for these regulations. What do you think?

    The Big Banks Myth that must be addressed, before I answer your good question rafflaw, is that the Big Banks are not exclusively American companies.

    They are international companies.

    That makes all the difference.

    Especially when we try to figure out “what in the world were they thinking?” by pondering, among other things, “how could an American do that to fellow Americans?”

    The answer is not pretty.

    But it is compelled by the evidence of an Epigovernment that is not loyal to America exclusively.

    It explains a lot.

  13. Big banks don’t control everything, just almost everything. Multi national corporations, billionaires and big churches control the rest! Isn’t it wonderful to be a human, blamed for everything, criticized for not taking PERSONAL Responsibility, living a a world controlled by legal fiction persons (LFP) who are accountable for nothing.

  14. Good column.

    The more that I see of government, the more cynical I get.

    The volume of knowledge required to be an informed voter is daunting – worse the “guardians” of the republic have either been co-opted or focus their energies on social dramas (eg the 10 Commandments in courthouses or evolution being taught in schools).

    While we fight the good fight, I can’t help but feel that we are fighting a rear guard action and that the social cycle will follow its course – regardless of what we Cassandras say/do.

    Keep writing – I will keep reading and forwarding.

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