WHY 308,127,404 AMERICANS ARE GOING TO GET HOSED

by SIMON BLACK  January 11, 2012

Last week, the US government’s Financial Crimes Enforcement Network (FinCEN), an agency of the US Treasury Department, published its 2011 annual report. There are a few numbers that are pretty startling.

We’ve discussed before that FinCEN is the executive agency tasked with ensuring that every US banker is an unpaid government spy through Suspicious Activity Reports.

A Suspicious Activity Report, or SAR, includes details of any transaction that may be deemed ‘suspicious’. Naturally, there’s no clear guidance on what is/is not considered suspicious. Banks, brokerages, money service businesses, precious metals dealers… even casinos are required by law to fill them out.

If you withdraw an unusual amount of cash from your bank account, that could be deemed suspicious. If you set up a new payee in your billpay service, that could be deemed suspicious. Anything and everything is fair game.

Banks and other businesses who do not fill out SARs face hefty penalties, including imprisonment. If they disclose to a customer that s/he is the subject of a SAR, they have hefty penalties, including imprisonment.

When push comes to shove and they have to choose between a nasty penalty, or submitting a SAR about your unusual cash withdrawal, which option do you think they’ll pick?

Unsurprisingly, nearly 1.5 million ‘suspicious activity reports’ were filed across the US banking system in 2011, well over twice the number reported in 2004. On top of this, there were an additional -14.8 million- ‘currency transaction reports’ filed in 2011, a 6% jump over last year.

It’s an unfortunate trend which highlights not only the end of financial privacy, but also the massive amount of data being collected by the government to keep tabs on its citizens.

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Yesterday Fed chairman Ben Bernanke attacked Bloomberg claiming that its reporting was misleading. It looks like the Fed missed the mark on just about every issue.

Perhaps the most important issue is the Fed’s claim that it did not lend at a below market rate to banks, thereby effectively giving them a subsidy. In fact, it is almost definitional that the rate did provide a subsidy.

No one forced the banks to borrow from the Fed. If they had better options, they would have borrowed elsewhere. Instead the Fed made large amounts of money available to banks at a time when liquidity carried an enormous premium. This meant that the banks could relend the government’s money to others and earn a substantial profit.

This lending may have been justified to stem the financial crisis, but in principle the government could have imposed conditions (e.g. real caps on executive pay, downsizing the too big to fail banks, modifying mortgages) on the banks as the price of getting access to credit at below market rates. Bernanke and Congress did not seek to impose such conditions.

Given Bernanke’s strenuous opposition to the release of data on the bailout programs it would be interesting to know if he now feels that it is more difficult for the Fed to conduct monetary policy.

(Source: theamericanbear)

By Jérôme E. Roos On December 6, 2011

The beautiful words about “Europe pulling together” are a mere chimera; what we are really witnessing is just a thinly-veiled theater play in which governments are launching an assault on their own people in the hope that the audience, mostly made up of wealthy bankers, will revel at the spectacle and reward the cast with a warm applause in the form of reduced borrowing costs.

As Wolfgang Münchau just wrote for the Financial Times, “contrary to what is being reported, Ms Merkel is not proposing a fiscal union. She is proposing an austerity club, a stability pact on steroids. The goal  is to enforce life-long austerity, with balanced budget rules enshrined in every national constitution.” Ultimately, these measures will provide the legal framework for a permanently depressed periphery, making a cascading series of defaults inevitable.

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Somehow you just know we are all going to be paying for this debacle  .  .  .  and soon.

Major central banks around the globe took coordinated action Wednesday to ease the strains on the world’s financial system, saying they would make it easier for banks to get dollars if they need them. Stock markets and the euro rose sharply on the move.

The U.S. Federal Reserve, European Central Bank, Bank of England and the central banks of Canada, Japan and Switzerland were all taking part.

“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the central banks said in a joint statement. 

As Europe’s debt crisis has spread, the global financial system is showing signs of entering another credit crunch like the one that followed the 2008 collapse of U.S. investment bank Lehman Brothers. Banks are afraid to lend to each other, since no one is really sure what institutions are holding how much bad government debt.

Greece, Ireland and Portugal have all been forced to take international bailouts, and Italy, Spain and Belgium are seeing their borrowing costs rise sharply. Banks already had to agree to forgive 50 percent of the value of their Greek debt holdings — and many fear that other struggling European countries might also demand a so-called “haircut” on bonds.

A ratings downgrade by Standard & Poors for six major U.S. banks on Tuesday added to fears that Europe’s woes would hurt the entire financial system. If one or more European governments default, that would unleash a shock to the world’s financial system that at the very least would lead to recessions in the United States and Europe, severe losses for banks and a global stranglehold on lending.

The central banks agreed to reduce the cost of temporary dollar loans they offer to banks — called liquidity swaps — by a half percentage point. The new, lower rate will be applied to all central bank operations starting Monday.

Read more: World’s Central Banks Act to Ease Market Strains