On the weekend of November 16th, the G20 leaders whisked into Brisbane, posed for their photo ops, approved some proposals, made a show of roundly disapproving of Russian President Vladimir Putin, and whisked out again. It was all so fast, they may not have known what they were endorsing when they rubber-stamped the Financial Stability Boardโs โAdequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,โ which completely changes the rules of banking.
Russell Napier, writing in ZeroHedge, called it โthe day money died.โ In any case, it may have been the day deposits died as money. Unlike coins and paper bills, which cannot be written down or given a โhaircut,โ says Napier, deposits are now โjust part of commercial banksโ capital structure.โ That means they can be โbailed inโ or confiscated to save the megabanks from derivative bets gone wrong.
Rather than reining in the massive and risky derivatives casino, the new rules prioritize the payment of banksโ derivatives obligations to each other, ahead of everyone else. That includes not only depositors, public and private, but the pension funds that are the target market for the latest bail-in play, called โbail-inableโ bonds.
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The Latest Twist (in the USA): Putting Pensions at Risk with โBail-Inableโ Bonds
First they came for our tax dollars. When governments declared โno more bailouts,โ they came for our deposits. When there was a public outcry against that, the FSB came up with a โbufferโ of securities to be sacrificed before deposits in a bankruptcy. In the latest rendition of its bail-in scheme, TBTF banks are required to keep a buffer equal to 16-20% of their risk-weighted assets in the form of equity or bonds convertible to equity in the event of insolvency.
Called โcontingent capital bondsโ, โbail-inable bondsโ or โbail-in bonds,โ these securities say in the fine print that the bondholders agree contractually (rather than being forced statutorily) that if certain conditions occur (notably the bankโs insolvency), the lenderโs money will be turned into bank capital.
However, even 20% of risk-weighted assets may not be enough to prop up a megabank in a major derivatives collapse. And we the people are still the target market for these bonds, this time through our pension funds.
..........................................................................................................................................then onto OZ - - - - - - -
To the Australian Parliament:
Donโt seize our bank accountsโpass Glass-Steagall!
http://cecaust.com.au/main.asp?id=bail-in-ad.html
We, the undersigned, are unalterably opposed to the legislation now being drafted to enable the โbail-inโ (seizure) of Australian bank deposits as happened in Cyprus in March of this year. The stated purpose of such legislation, in Australia and internationally, is to save the โToo Big To Failโ megabanks whose unbridled speculation has caused the present financial crisis in the first place. But, as in Cyprus, such legislation will plunge this country into mass misery and even worse.
There is overwhelming evidence that such legislation is indeed being planned for Australia, as in a 15 April report of the Financial Stability Board (FSB) of the Swiss-based Bank for International Settlements which is overseeing the global bail-in process; that report states flatly on page 5 that such legislation is โin-trainโ for Australia.1 The FSB and the IMF have classified Australiaโs โBig Fourโ banks as โSystemically Important Financial Institutionsโ, which must be saved at all costs.
There is overwhelming evidence that such legislation is indeed being planned for Australia, as in a 15 April report of the Financial Stability Board (FSB) of the Swiss-based Bank for International Settlements which is overseeing the global bail-in process; that report states flatly on page 5 that such legislation is โin-trainโ for Australia.1 The FSB and the IMF have classified Australiaโs โBig Fourโ banks as โSystemically Important Financial Institutionsโ, which must be saved at all costs.
The Solution
Instead of โbail-inโ, the Australian Parliament must pass legislation modelled upon the U.S. Glass-Steagall law which functioned so successfully from its passage in 1933 until its repeal in 1999, which separated commercial banking from investment banking. Without such a separation, banks are free to speculate with customersโ deposits, which, for instance, is why Australian banks now hold some $21.5 trillion in highly risky derivatives. Numerous prominent individualsโeven from the City of London and Wall Streetโhave spoken out to urge the reinstatement of Glass-Steagall, and legislation to do so has been introduced into both the U.S. House of Representatives and Senate, as well as in numerous other countries.
