We Speak with Dylan Ratigan on Bank Extraction from the Economy Posted on December 12, 2011 by Yves Smith We had a conversation with Dylan Ratigan about how banks take more than their fair share. You can listen below or find an overview and transcript here. Greedy Bastards Antidote Ep 5 – Yves Smith and Extractionism by Dylan Ratigan Post navigation ← Links 12/12/11 Philip Pilkington: A Scribbler’s Response to Marc Lavoie on MMT → Subscribe to Post Comments 38 comments truthseek December 12, 2011 at 8:14 pm Came across this post: Explosive Interview Jim Willie “JP Morgan Crashed MF Global to Avert COMEX Failure, they stole all the accounts that were going to take delivery” Cheyenne December 12, 2011 at 9:22 pm I caught that too. Sick thing is I’ve yet to see a better explanation than Willie’s. For value, “the clients’ money just vanished, dude” ranks just below a dog-homework exacta ticket and just above a pile of dogshit. Separately, I know of lawyers, until recently uninitiated in the ways of PM’s, who were savagely educated by panicked clients right after MF’s surprise bk. And didn’t JPM break the land speed record for getting a COMEX vault license earlier this year? And yet I know countless legal luminaries who got absolutely POUNDED INTO THE SAND–to the tune of 50-75% in 2008 alone–who won’t let such questions slow down their breathless dash for MSM’s piss chalice morning, noon, or night. ohmyheck December 13, 2011 at 10:40 am Well, if you want to get the shit scared out of you, listen to all three segments of jim willie. Oy. Off now to take my daily dose of Valium…happyhappyjoyjoy…. ohmyheck December 13, 2011 at 11:14 am Bruce Krastings has an informative post, but the comments are a must-see for the rest of us po-dunk investors who are afraid of getting MFG’ed. http://brucekrasting.blogspot.com/2011/12/fed-mfg-and-reg-t.html#comment-form Any smartypants observations by the NC-crowd here would be appreciated. Thanks. LeonovaBalletRusse December 13, 2011 at 6:16 pm Re the Krasting link, to be read in entirety. The real issue is the definition of *collateral*. History shows that *collateral* is the material wealth that a debtor owns, which has been placed in escrow against the owner’s debt, which must be forfeited if the debt is not repaid. According to the Krasting link, the Fed employs the word “collateral” to mean “the customer’s money placed into an account–usually a “Money Market Account”–to be held in that (segregated) account intact, until such time as it is released in whole or in part to a *broker* for a specific investment. AT NO TIME is the money in this account the “collateral” of the banker/investmentbanker/broker, for the funds in this account are the SOLE PROPERTY of the account holder. For the Fed to arbitrarily deem that this *customer property* is the PROPERTY OF THE HOUSE, i.e. the house’s COLLATERAL, is surely a violation of Contract Law and Property Law. The Fed may be able to create %USD “by fiat,” but the Fed is NOT empowered by U.S. Law to change Contract Law and Property Law by fiat, nor can an individual *house* commingle a client’s funds with its own, by U.S. Law. Client funds are NOT “collateral” owned by the *house*. LeonovaBalletRusse December 13, 2011 at 6:30 pm CORRECTION of Par. 2 above: “…the Fed employes the word “collateral” perversely. In actuality, “collateral” is “the customer’s money…” So, the Fed, perverts the standard MEANING of the WORD, “collateral” in Contract Law and Property Law of the United States. The Fed stands the Law on its head, declaring–*by fiat*: “So be it done”–that the client’s collateral IS one and the same as the collateral of the house in question. Only in the City of London is this so, under Tory rules of “possession of all.” The fact that the MFGlobal embezzlement of client funds was finessed through JPM in London does NOT nullify U.S. Law, the Law of the Land in which MFGlobal, the house holding the client collateral, did reside at the time of the embezzlement, and does reside. gs_runsthiscountry December 13, 2011 at 11:06 pm The collateral damage caused by MF does put a spotlight on things. Given where we are, this might be a time for folks to revisit Money Market Rule 2a-7. Google: This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied Should retailer traders/investors step back and reassess how safe their funds are – even in equities or MM Funds? (especially retirees!) We may have reached that tipping point – the point where you fold up shop and just close out your brokerage accounts. lambert strether December 12, 2011 at 9:43 pm Rather like a sucking leech takes more than its “fair share” of blood. Just saying. MRW December 12, 2011 at 10:22 pm Extraordinarily important to listen to. Glen December 12, 2011 at 10:49 pm Nice job, Yves. Interesting to hear that people are afraid of the banks power. Forcing a real BK (like with GM) would be a real step in the right direction. Timmy’s G’s policy of kissing banksters a$$es looks like a massive, massive FAIL. readerOfTeaLeaves December 13, 2011 at 12:39 am Agree with another commenter that this is important to listen to – for me, the mention that it requires some familiarity with calculus to understand some of what was going on is important — how many at the SEC or other regulatory bodies took much calculus? I’ll bet not many. That, plus the chilling sense that people are so very intimidated by the banks they won’t even press charges (!). Beyond appalling. Procopius December 13, 2011 at 8:28 am Actually, when I started my major in Business Administration (Accounting) at MSU back in 1960 I was required to take two quarters of calculus. I believe it was required of all business majors. Maybe they don’t require it any longer, but I didn’t think it was particularly hard. Since most of the people at the regulatory agencies have at least BA degrees I would expect that most of them know calculus. I could be wrong, of course. readerOfTeaLeaves December 13, 2011 at 2:13 pm Thanks for the info. I’d be interested to know how many of the regulators have enough calculus to have any real sense of what’s going on with the CDO formulas. I doubt anyone tracks such things. LeonovaBalletRusse December 13, 2011 at 6:01 pm reader, they don’t need to know calculus. They *just take orders* to facilitate *Financial Lebensraum* by the Reich. reason December 13, 2011 at 4:24 am Yves, this discussion is too limited, banks extract value in other ways than that. You have to look at punitive interest rates and charges, and you have to look at the debt/asset inflation connection which has made the middle debt peons. reason December 13, 2011 at 4:25 am oops … middle class … Rcoutme December 13, 2011 at 4:34 am It took calculus (up through Calc III). I also took two ‘business courses’ (Macro1 and Accounting I). The business majors were dropping out of those two courses like flies in a Raid aerosol. I got easy A’s in the business courses. I majored in Chemistry and minored in Physics. Now I know why the banks hired physicists to create the payment schedules. Thanks. :D Tom Parsons December 13, 2011 at 11:10 pm Jeez, how common this must be! An online acquaintance of mine *was* a physics prof, but got hired by a hedge fund to handle their software, years ago! LAS December 13, 2011 at 7:13 am Here’s a very reductionist way of seeing financial services… They borrow money to create assets/business models if you will, and sell those assets/businesses to investors; they sell a future income stream that is all pro forma. The future value of those assets/businesses is based solely on more or less reckless assumptions or knowlege. Banks charge fees or prices according to how credulous the market is and what they can get away with (hence the importance of transparency – its presence or absence). It is extremely important for banks to foster the image that they are smarter than you, the investor, and have something to teach you the investor. In fact they don’t have anything but intimidation to work with. The investor gets the actual asset/business and all the trouble of managing it long-term for actual value extraction. If the investor is buying blind, quite often the estimated value is not achieved because – after all – it was estimated on assumptions. Likewise, the entities from whom banks borrow money to create these assets bear a short-term risk, particularly when the assets created by the bank are not very good and do not sell well. In the middle are the bankers and traders. Bankers and traders are not carrying that much risk anymore. Only the risk that they will collapse as a credible conduit for others to give them money to use. Real risk is foisted on others (lenders, debtors, investors, savers and finally the public) who really haven’t got a clear picture until its too late. Banks are expert at sucking up wealth incognito, imposing private taxes on society. For example, those rewards credit cards that pay back 2% to consumers… where do you think that 2% comes from? It comes from charging retailers excessive hidden fees per transaction and that cost is added to the price of all products sold. Banks would not be giving you 2% rewards if they were making any less than 3%-4% per transaction. All the rise in the price of goods over the last 5 years is due to the cost of commodities (traded) and transaction fees. None is going to labor. Indeed the median wages of households is falling, showing that labor is being rewarded less than ever. Many a young adult WANTS to work for the system, be one of the few that get rich, either as a banker, trader, lawyer or something like that. It is only when he/she understands how slim those odds of prospering that the learning really begins. The other thing that sickens our society is how young people who aspire to higher education so often have to finance it. You would think the public would understand the value of higher education for society overall and do more to support it. Instead we let young people finance their education from these same bankers and traders. How is the young adult cohort going to jump start a sluggish economy when they are so indebted at the outset? Max424 December 13, 2011 at 9:12 am We need a 28th amendment? Is that what I heard at the end there? If the amendment includes We the People taking control of our sovereign currency for the first time in a long time (first time ever?), then I’m all for it. Gotta be careful, though, at the mere suggestion our Oligarchs will piss and moan. Try to work something tangible, toward a real vote, and our Oligarchs will respond by getting plumb dog mean. Think the Fascism is bad now? Wait till you try to pry away the Oligarchs ability to print money. They’ll kill anything and anybody (including themselves, I suspect) before they give up that privilege. LeonovaBalletRusse December 13, 2011 at 6:36 pm Max424, how well you know the enemy. Tim Solanic December 13, 2011 at 9:21 am Great! Yves – you were talking about doing video. I’d suggest forgetting that. Expand your audio selection and get it in iTunes and/or some place so it can be downloaded too. Fíréan December 13, 2011 at 9:37 am Dylan Ratigan saying it how it is, in louder tones than the Yves Smith interview. I disagree with the title given at youtube; he didn’t loose it, he found it. ( excuse me if this has been posted recent here) http://www.youtube.com/watch?v=G4yDCUJJm_U F. Beard December 13, 2011 at 9:58 am “I don’t have the answer for that [the power of the banks]. Yves Smith First realize that banks are not necessary. MMT indicates that banks are not necessary for government money since the government can simply spend money into existence and tax it out of existence. As for the private sector’s need for money, common stock is an ideal and ethical private money form that “shares” wealth and power rather than concentrates them. “The issue which has swept down the centuries and which will have to be fought sooner or later is The People vs. The Banks.” – Lord Acton, Historian, 1834 – 1902 from http://www.freewebs.com/classaction/ Note: Any quote I use is not necessarily an endorsement of the site I obtained it from. Pwelder December 13, 2011 at 6:03 pm Thanks for that quote from Lord Acton, Historian. I wonder if Newt Gingrich, (well-paid)Historian, might see it the same way. Because Chris Whalen, who seems to have his head screwed on and has graced these precincts on occasion, recently wrote a Gingrich-for-President endorsement in which he noted the existence of Main Street Republicans with an Andrew Jackson attitude about the banks. I’ll say it again: there’s a coalition there for someone with the wit to put it together. Lafayette December 13, 2011 at 10:34 am Nice, refreshingly vituperative thread. There’s a solution boys ‘n girls. It is: Tax the Piss Outta Them! Confiscatory taxation on all income above some reasonable level. From half a megabuck up to that level of gross income (compensation as well as capital gains worth more than 1 megabuck?) From the presently 35% progressively to 95 (confiscatory). Why does the thieving happen? Because the thieves can. They can literally rob a bank and walk away scot-free. So, let’s make them honest and tax the piss outta them. It’ll take some of the mojo out of their game. Which is goodness. There is no justification for the level of income currently being paid to corporate executives for so-called “achievement”. A megabuck and a half year would be more than enough for them to have a decent salary for their “work”. Jill December 13, 2011 at 12:17 pm I thought about this when I heard Merrill Lynch “made” 75 trillion dollars. If ML really made 75 trillion dollars this economy would be looking a whole lot better than it is! But its tanking along with the imaginary 75 trillion that Merrill Lynch “made”. Yves, I don’t agree that the SEC can’t step up to the plate. They won’t because they are serving those who commit fraud. I know their staff has been cut but you could fully staff them all you want at this point. Those staffers would be hand picked to do what they’re told–help, not stop criminal theft. Jill December 13, 2011 at 12:19 pm I should have added, thank you Yves and to others here for the well laid out information. Blunt December 13, 2011 at 12:26 pm The more read and understand the more I am convinced that banks are simply criminal syndicates that for some reason the governments have made legal. It’s difficult to tell the difference between Meyer Lansky and Jamie Dimon, for instance. In fact, I become convinced that there is no difference and that if there were a no-holds-barred investigation that Dimon would be found to have ordered the murders of some folks. I think I’m becoming a Jacksonian Democrat and would see the razing of the banking system to a point about twenty floors below ground and the entirety to be sown with salt. Start agin with something else. Lafayette December 13, 2011 at 12:53 pm Start agin with something else. Thanks for the rant. Now, pray tell, what “else”? They are not too big to fail, but they ARE too big to function in the best interests of we, the sheeple. The market should be fractured (downsized with investment separated from commercial banking) and a market watchdog (with teeth) put in place. But even all that will not stop the greed, unless there are perp-walks for past negligence, and not future negligence when the house-of-cards has tumbled down around our ears once again. Or, we just institute a super-tax on corporate profits for uniquely the Finance Industry. It’s just too easy for them to make money and the industry needs badly some consumer protection laws. Meaning “business not as usual, but business nonetheless”. F. Beard December 13, 2011 at 1:14 pm Now, pray tell, what “else”? Lafayette How many times must you be told? But in a nutshell: 1) Forbid the banks from any further credit creation. 2) Bailout out the entire population equally, including savers, till ALL private debt is paid off at a rate at least equal to the repayment of existing credit. 3) Remove all legal impediments to private currencies for private debts. Blunt December 13, 2011 at 6:54 pm -Thanks for the rant. Now, pray tell, what “else”?- Umm, LaFayette, that was definitely not a rant, just an expression of what I see, and I would imagine that you see as well, although you seem to have a softer place in your heart for the criminal classes than I. I’d begin with a French invention, a guillotine and a line of tumbrels first in NYC and DC. The pageant can be moved to other locales as necessary. After that, probably some sort of Fuller-inspired and Marxist-inspired program, based on the notion that the world, humankind and the seasonal life that is of a human-size are all round and are sustainable without being “growth-driven.” The notion that growth MUST be achieved simply doesn’t jibe with any sort of natural context for life as we know it. Neither does the very existence of capitalism which has again and again shown that it’s inimical to human beings except in the most limited sense. That of maybe 1200 families throughout the world. walter_map December 13, 2011 at 1:00 pm http://real-world-news.org/bk-quigley/00.html Tragedy and Hope A History of the World in Our Time By Carroll Quigley New York: The Macmillan Company 1966 Introduction By Michael L. Chadwick There really is a “world system of financial control in private hands” that is “able to dominate the political system of each country and the economy of the world.” I call this system the World Trade Federation. It is an ultra-secret group of the most powerful men on the earth. They now control every major international institution, every major multinational and transnational corporation both public and private, every major domestic and international banking institution, every central bank, every nation – state on earth, the natural resources on every continent and the people around the world through complicated inter-locking networks that resemble giant spider webs. This group is comprised of the leading family dynasties of the Canada, United States, Britain, Germany, France, Italy, Japan, Russia and China. This self-perpetuating group has developed an elaborate system of control that enables them to manipulate government leaders, consumers and people throughout the world. They are in the last stages of developing a World Empire that will rival the ancient Roman Empire. However, this new Empire will rule the entire world, not just a goodly portion of it as Rome did long ago, from its ultra-secret world headquarters in Germany. This group is responsible for the death and suffering of over 180 million men, women and children. They were responsible for World War I, World War II, the Korean War, and Vietnam, etc. They have created periods of inflation and deflation in order to confiscate and consolidate the wealth of the world. They were responsible for the enslavement of over two billion people in all communist nations — Russia, China, Eastern Europe, etc., inasmuch as they were directly responsible for the creation of communism in these nations. They built up and sustain these evil totalitarian systems for private gain. They brought Hitler, Mussolini, Stalin and Roosevelt to power and guided their governments from behind the scenes to achieve a state of plunder unparalleled in world history. They make Attila the Hun look like a kindergarten child compared to their accomplishments. Six million Jews were tortured and killed in order to confiscate billions of dollars in assets, gold, silver, currency, diamonds and art work from the Tribe of Judah–a special group of people. The people in Eastern Europe suffered a similar fate as the armies of Hitler overran these countries, murdered, enslaved, robbed and plundered the unique people who resided there. For the last two and one half centuries wealth and power have been concentrating in the hands of fewer and fewer men and women. This wealth is now being used to construct and maintain the World Empire that is in the last stages of development. psychohistorian December 13, 2011 at 6:31 pm Laugh the global inherited rich out of control of “Western Democracies” and into rooms at the Hague where they can be prosecuted for our social degradation. It is way past time for more of us to start laughing in this manner, IMO. LeonovaBalletRusse December 13, 2011 at 6:54 pm walter_map, Bill Clinton was deeply influenced student of Carroll Quigley. Since Bill was *invited into the Club* through a Rhodes Scholarship, he became a dutiful Agent of The Victorian Reich (“The British Empire”). Hence, his support of GATT, NAFTA, and the repeal of Glass-Steagall, hand and hand with Robert Rubin for *the Club*. “THE ANGLO-AMERICAN ESTABLISHMENT: from Rhodes to Cliveden” (by Carroll Quigley, 1949) to YALE/Bones/OSS-CIA and Dynasties Walker-Bush, Dulles, Sullivan and Cromwell, and other Victorian Reich + Holy Roman Reich + Olde Confederate M-I Monopoly Reich “NOBILITY DNA.” And that’s what it’s all about: the “foreign power” our Constitution warns us about, in the case of TREASON by Agents of the foreign power within our three branches of government. CRY TREASON! Arrest, detain, convict Traitors in Government and Banking. Our “Traitor-Presidents* were/are: Nixon-Kissinger, G.H.W. Bush, Reagan-Bush, Carter-Brzezinsky, Clinton-Bush, Bush-Cheney, Obama-Kissinger. By our Constitution, the penalty for treason is “to be hanged by the neck until dead.” There is NO statute of limitations on treason. Geoffrey Robertson’s “The Tyrannicide Bried” shows the way. If not now, when? LeonovaBalletRusse December 13, 2011 at 7:03 pm Correction of ERROR: The Tyrannicide BRIEF” (not bried). I keep making this typo. Can someone explain it? LeonovaBalletRusse December 13, 2011 at 7:04 pm only got 4 hours of sleep last night. Maybe that’s why? Blunt December 13, 2011 at 7:27 pm The lack of sleep and the fact that your finger is hitting one key short of the “f”. Can’t think of what another explanation might be, unless you make that same type consistently. *shrug* Comments are closed. Tip Jar Please Donate or Subscribe!