Cyprus-style confiscation of depositor funds has been called the “new normal.” Bail-in policies are appearing in multiple countries directing failing TBTF banks to convert the funds of “unsecured creditors” into capital, and those creditors, it turns out, include ordinary depositors.
Putting the Brakes on the Wall Street End Game
Besides eliminating the super-priority of derivatives, here are some other ways to block the Wall Street asset grab:
1) Restore the Glass-Steagall Act separating depository banking from investment banking. Support Marcy Kaptur’s H.R. 129.
2) Break up the giant derivatives banks. Support Bernie Sanders’ “too big to jail” legislation.
3) Alternatively, nationalize the TBTFs, as advised in the New York Timesby Gar Alperovitz. If taxpayer bailouts to save the TBTFs are unacceptable, depositor bailouts are even more unacceptable.
4) Make derivatives illegal, as they were between 1936 and 1982 under the Commodities Exchange Act. They can be unwound by simply netting them out, declaring them null and void. As noted by Paul Craig Roberts, “the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system.”
5) Support the Harkin-Whitehouse bill to impose a financial transactions tax on Wall Street trading. Among other uses, a tax on all trades might supplement the FDIC insurance fund to cover another derivatives disaster.
6) Establish postal savings banks as government-guaranteed depositories for individual savings. Many countries have public savings banks, which became particularly popular after savings in private banks were wiped out in the banking crisis of the late 1990s.
7) Establish publicly owned banks to be depositories of public monies,following the lead of North Dakota, the only state to completely escape the 2008 banking crisis. North Dakota does not keep its revenues in Wall Street banks but deposits them in the state-owned Bank of North Dakota by law. The bank has a mandate to serve the public, and it does not gamble in derivatives.
A motivated state legislature could set up a publicly owned bank very quickly. Having its own bank would allow the state to protect both its own revenues and those of its citizens while generating the credit needed to support local business and restore prosperity to Main Street.