Racketeering 101: Bailed Out Banks Threaten Systemic Collapse If Fed Discloses Informationby Tyler DurdenZero Hedge Aug. 29, 2009 |
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And so the guns come out blazing. The Clearing House Association, another name for all the banks that were bailed out over the past year with the generous contributions from all of you, dear taxpayers, are now threatening with another instance of complete systemic collapse if Bloomberg's lawsuit is allowed to proceed unchallenged, let alone if any of the "Audit The Fed" measures are actually implemented. As a reminder, The Clearing House Association consists of ABN Amro, Bank Of America, The Bank Of New York, Deutsche Bank, HSBC, JP Morgan Chase, US Bank and Wells Fargo. In a declaration filed in the Bloomberg Case (08-CV-9595, Southern District of New York), the banks demonstrate no shame in attempting to perpetuate the status quo with regard to the Federal Reserve and demand that the wool over the eyes of the general population remain firmly planted in perpetuity. The Clearing House submits this declaration because the Court's Order threatens to impair the ability of our members to access emergency funds through the New York Fed's Discount Window without suffering the severe competitive harm that public disclosure of their identity will cause.Surely transparency would facilitate rumor-mongering to an unprecedented degree. After all rumors spread much easier when everyone knows the true financial condition of banks. And here, in plain written Times New Roman, you see what racketeering by a major bank consortium looks like: If the names of our member banks who borrow emergency funds are publicly disclosed, the likelihood that a borrowing bank's customers, counterparties and other market participants will draw a negative inference is great. Public speculation that a financial institution is experiencing liquidity shortfalls - which would be a natural inference from having tapped emergency funds - has caused bank customers to withdraw deposits, counterparties to make collateral calls and lenders to accelerate loan repayment or refuse to make new loans. When an institution's customers flee and its credit dries up the institution may suffer severe capital and liquidity strains leaving it in a weakened competitive position.Pardon me if I am a broken record here, but would rumors not spread much less if there was more transparency, if investors and other financial intermediaries were fully aware of the conditions of their counterparties, if banks did not have to cover their billions in reserve losses by pretending they are viable and essentially being constant wards of the state? The Banks' racketeering has gone on for far too long. And yet, it does not stop: the conclusion from the banks' letter: In sum, our experience differs from the factual conclusions the Court appears to have reached about the nature of competition in the banking industry:In a nutshell - the banks want their complete opacity cake and eat it too, or else, the racket goes, the transparency that will somehow promote massive rumor mongering will again destroy capitalism. In the meantime, the Ken Lewises of the world can continue touting how stable their businesses are based on optimistic future projections, while implicitly, they continue to survive merely thanks to the cash granted them by you, taxpayers. Full filing here: Clearinghouse_Decl - AttachmentSize Clearinghouse_Decl.pdf183.3 KB |