Suit Against Banksters Joined by FDIC: End of Rigged Game?
|May 7, 2014||Posted by Staff under Financial|
This 2014 excerpt of TruthDig, Apr 13, is by Ellen Brown of Web of Debt.
Taxpayers are paying billions of dollars for a swindle pulled off by the world’s biggest banks, using a form of derivative called interest-rate swaps; and the Federal Deposit Insurance Corporation has now joined a chorus of litigants suing over it.
Being sued are sixteen of the world’s largest banks – including the three largest US banks (JPMorgan Chase, Bank of America, and Citigroup), the three largest UK banks, the largest German bank, the largest Japanese bank, and several of the largest Swiss banks.
The swap is an ongoing bet on interest rates. The borrower owes both the interest on its variable rate loan and what it must pay out on this separate swap deal. Interest rate swaps are now a $426 trillion business. That’s trillion with a “t” – about seven times the gross domestic product of all the countries in the world combined.
While banks are still collecting fixed rates of 3 to 6 percent, they are now paying public entities as little as a tenth of one percent on the outstanding bonds – an outcome which amounts to a second bailout for banks.
In 2008 and 2009, during the height of the financial crisis, the cost of the swaps that municipalities had taken out jumped in price at the same time that their borrowing costs went up, which was exactly the opposite of how the swaps were supposed to work, and it was chiefly due to manipulation. Nearly every major bank conspired to rig bids and drive up the fixed rates state and local governments pay on their derivative contracts.
Unlike most banks, big ones make most of their money not from ordinary commercial loans but from interest rate swaps. In the fall of 2008, the Federal Reserve dropped the prime rate (the rate at which banks borrow from each other) nearly to zero. This was a giant windfall for the major derivative banks; it lowered what they had to pay their big buyers of swaps.
Fraud is grounds for rescission (terminating the contract) without paying penalties, potentially saving taxpayers enormous sums in fees for swap deals that are crippling cities, universities, and other public entities. Fraud is also grounds for punitive damages, something an outraged jury might be inclined to impose.
Ed. Notes: We really should not let so much money be collected into one place, tempting banksters, in the first place. The most fundamental way to prevent this concentration is to quit buying land from individuals, which often requires a mortgage from a bank, and to start renting land from one’s community, and paying rent is something even the poorest can usually afford without having to borrow. Since most debt is debt for land, that would instantly reduce the enormous flow of funds to banks.
Further, once residents start getting an extra income — a share of those rents for land (and resources and EM spectrum, etc) — then they won’t need much in the way of government services. Government could be streamlined and would no longer have much need to borrow. Public debt is the other huge source of income to banks.
Without fat mortgages, and without indebted governments, big banks would be left with nothing of interest to anyone to swap. Plus, citizens would be getting dividends. That’s how you solve problems: view the bigger picture then apply geonomics.