I get asked this all the time: what is the big deal about all these Occupy Wall Street Protestors? What’s their gripe? Certainly our news media seems more than a tad confused. Well, I can explain a large part of it best by the example of these two recent news stories:
First (but not the worst) Story:
Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday. […]
Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.[…]
In any case, what led to the unaccounted-for cash could violate a tenet of Wall Street regulation: Customers’ funds must be kept separate from company money. One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis.
How much money? At least $700 Million. MF Global filed for bankruptcy on Monday. Odds of the people who invested in MF Global for their own account getting repaid in full for what I consider THEFT? Well let’s just say I wouldn’t bet on them doing too well in the bankruptcy.
But that’s peanuts compared to what Bank of America did to screw over the American Taxpayers in a Second, Far Worse Story: Bank of America transferring TRILLIONS of DOLLARS of WORTHLESS MORTGAGE BACKED DERIVATIVES to its FDIC insured bank unit. Why is this worse? Because in the event of a bankruptcy all the “counter-parties of those derivatives” (i.e., the people who would normally lose every penny they invested in the fraudulent scheme concocted by Merill Lynch–the investment house that sold these crappy securities as AAA rated investments– the same Merrill Lynch that Band of America purchased) would be paid first under the 2005 Bankruptcy Reform Law.
That would leave all of Bank of America’s other customers out in the cold. It would also force the FDIC to bail out all of Bank of America’s depositors. Needless to say this would cost the American taxpayers another who knows how many BILLIONS of DOLLARS as the FDIC insures the accounts of those depositors.
Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.
For perspective, the entire Federal bailout of the Savings and Loan Crisis, for all those Savings and Loan Associations that went belly up after Reagan deregulated the rules that restricted them to making residential mortgage loans, was roughly 153 BILLION DOLLARS as of 1999. That figure does not include state bailouts from their own thrift insurance funds.
So, the shift of derivatives to Bank of America’s FDIC insured bank unit has the potential to exceed the cost of the Savings and Loan Crisis (the previous largest banking crisis since the Great Depression) by a conservative estimate of at least 400 BILLION DOLLARS and quite possibly much more. As many Democratic Legislators have complained, what Bank of America is doing is shifting the risk of losses on these derivatives from its investors to the FDIC and thus the American taxpayers.
Oct. 27 (Bloomberg) — Congressional Democrats are asking regulators whether they explored possible risks connected to Bank of America Corp.’s moving of derivatives from Merrill Lynch into its deposit-taking unit after a credit downgrade.
Eighteen lawmakers signed onto letters from Representative Brad Miller and Senator Sherrod Brown seeking information about whether agencies consulted on the transfer considered the potential impact on the bank’s health and customer accounts.
“Because of the favored treatment of derivative contracts in receivership, it appears highly likely that losses on derivatives would result in losses to insured deposits ultimately borne by taxpayers,” Miller wrote in his letter, which was signed by eight House Democrats. The transfers were first reported by Bloomberg News on Oct. 18.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/10/27/bloomberg_articlesLTQVRY1A74E9.DTL#ixzz1cSZWzVif
In short, Wall Street owns the government, and is treating the Federal Treasury and the Federal Reserve as their own private piggy bank. And no one is stopping them. Meanwhile Republicans rail on Cable TV the street that the problems with America are all related to greedy unions, bad teachers, government workers, social security and Medicare recipients, the unemployed and federal regulations.
Considering unregulated Wall Street banks and investment houses crashed the Economy through their risky and fraudulent derivatives schemes, took billions of free money from the government it doesn’t take a genius to see why Occupy Wall Street has taken of like it has all around the country. Wall Street firms received federal bailouts and are now making obscene profits at a time when their actions crashed the economy, required billions of taxpayer funded bailouts, created massive unemployment, pay freezes or cutbacks in benefits for middle class and poor American workers, an increased loss of medical insurance coverage for millions of Americans and unprecedented rates of foreclosures. I think these two examples of Wall Street’s continuing piracy makes it very clear why people are angry with a political and economic system that favors corruption, greed and income inequality on behalf of individuals who caused this mess in the first place, and are now continuing to profit from it.
