Cypriots vented anger in the streets on Tuesday and were desperate to learn what would happen to their savings, with the government yet to reveal details of controls it will impose to prevent a run when banks reopen after a painful bailout.
A special administrator was appointed to run the country’s biggest bank, which will take over accounts from the second biggest bank as part of the restructuring package designed to bail out and rein in the oversized financial sector.
Cyprus’s banks were ordered to remain closed until Thursday, and even then will operate under as-yet-undisclosed capital controls imposed to prevent depositors from emptying the vaults.
The Central Bank governor said the controls would be “loose” and would apply to all banks in the country. The restrictions would be “temporary” but he would not say what form they would take or how long they would last. Earlier, the finance minister said they could be in place for weeks.
The same people who brought you Wikileaks are back, and this time, they’ve created a virtual currency called Bitcoin that could destabilize the entire global financial system. Bitcoin is an open-source virtual currency generated by a computer algorithm that is completely beyond the reach of financial intermediaries, central banks and national tax collectors. Bitcoins could be used to purchase anything, at any time, from anyone in the world, in a transaction process that it is almost completely frictionless. Yes, that’s right, the hacktivists now have a virtual currency that’s untraceable, unhackable, and completely Anonymous.
And that’s where things start to get interesting. Veteran tech guru Jason Calacanis recently called Bitcoin the most dangerous open source project he’s ever seen. TIME suggested that Bitcoin might be able to bring national governments and global financial institutions to their knees. You see, Bitcoin is as much a political statement as it is a virtual currency. If you think there’s a shadow banking system now, wait a few more months. The political part is that, unlike other virtual currencies like Facebook Credits (used to buy virtual sock puppets for your friends), Bitcoins are globally transferrable across borders, making them the perfect instrument to finance any cause or any activity — even if it’s banned by a sovereign government.
You don’t need a banking or trading account to buy and trade Bitcoins - all you need is a laptop. They’re like bearer bonds combined with the uber-privacy of a Swiss bank account, mixed together with a hacker secret sauce that stores them as 1’s and 0’s on your computer. They’re “regulated” (to use the term lightly) by distributed computers around the world. Most significantly, Bitcoins can not be frozen or blocked or taxed or seized.
What is being sacrificed to maintain the euro and the E.U./U.S. banking cartel? Everything of value: liberty, democracy and sovereignty.
Today we present the culmination of the previous entries ( Global Crisis: the Convergence of Marx, Orwell and Kafka and Are You Loving Your Servitude Yet?): A brief commentary by longtime correspondent Harun I. on Mario Draghi’s market-moving statement: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Nice, Mr. Draghi, but at what cost? And who will ultimately bear this cost? It is already far beyond the measure of mere money; democracy, truth and sovereignty have all been destroyed to prop up the central bankers’ Status Quo. We can presume Mr. Bernanke and the Federal Reserve are in on the propaganda campaign, and so we need to examine the words and promises of these two central bankers, as well as what they have not said.
Is talking about printing money as good as actually printing money? It would seem so. Is promising to “do whatever it takes” as good as actually doing whatever it takes? Once again, it seems so; global markets leaped at the “news” that the financial Status Quo was going to be “saved” yet again.
What if it is beyond saving?
What if the cost in treasure, blood, liberty, sovereignty and truth is not worth the ‘saving” of a broken, unsustainable, corrupted, parasitic, predatory system? Do we get to choose, or are we just passengers on the train as the central bankers accelerate toward the chasm ahead?
Here is Harun’s commentary:
“THE consumption tax doesn’t have a snowball’s chance in hell of being passed.” So wrote one (usually astute) American economist in December, banking on what has been one of the canons of Japanese politics for the past decade and a half—that few politicians are either brave or reckless enough to risk raising Japan’s most contentious tax.
Surprisingly, to the relief of some and chagrin of others, on June 15th prime minister Yoshihiko Noda’s Democratic Party of Japan (DPJ), though at war with itself, agreed with the main opposition parties to raise the sales tax from 5% to 8% in April 2014, and to 10% in October 2015. The only (ill-defined) proviso is that the economy is strong enough to withstand the increase.
A fiscal-reform bill was expected to clear the lower house of the Diet (parliament) after The Economist went to press, paving the way for its passage in the upper house this summer. If it is enacted, not only will it break a taboo of Japanese politics. It will also deepen the debate in Japan, as elsewhere, about the merits of austerity versus growth.
Politically, the tax rise is certainly daring. When the consumption tax was introduced in 1989 at 3%, and raised in 1997 to 5%, the moves undermined the popularity of the governments of the day. So contentious is the issue still that Mr Noda may feel he has to dissolve the Diet soon after passing the consumption-tax legislation. Either way, he may also face a leadership challenge from within the DPJ in September
While I do not agree with reinstating Glass-Steagall wholesale, putting a legal wall between commercial banks and investment banks is probably the only solution to the problem of how to break up the Too-Big-To-Fail banks short of nationalizing them.
Q: You think had it [the Volcker rule] been in place, we wouldn’t be talking about this?
WARREN: Well, I’m going to put it this way. The Volcker Rule would help. We don’t know exactly the nature of these trades. But if the question is is the Volcker rule enough, or do we need more, look, I’m somebody who believes we really should have boring banking. That banking should be — the part that’s about savings accounts and checking accounts and our money system — should be separated from the kind of risk-taking that Wall Street traders want to take. That was originally what the Glass-Steagall Act was about, it was repealed in 1999. There was an effort to get it into Dodd-Frank in the 2010 bill. That effort failed. I think we really do need that kind of separation. We need to go back to boring banking. The people who want to take risks need to take risks with their own money and do it somewhere else.
Radical suggestion after having watched this: Reform the motherfathers already! Probably the most hope-inspiring are the young Wall Street professionals, (former) bankers, traders, and analysts who know the game and have decided to formulate proposals to change it (see, for instance, occupythesec.org and mathbabe.org ). Think of ex-burglars as being the most qualified people to instruct security companies.
Stolen from here.
If you haven’t watched Part One, yet, you should:
The front page for Frontline’s Money, Power and Wall Street has lots of other great stuff like additional interviews worth watching, e.g. this one with Cathy O’Neill.
It’s not easy being a big bank these days. Consumers hate them, shareholders have beef with them and regulators can’t figure out what to do with them.
At the end of the day though, a bank’s gotta do what a bank’s gotta do: make money. But how banks go about making that money is one way to differentiate them. The New York Times today writes about a few banks out there looking to boost business by offering low-income consumers products laced with loads of fees and plenty of interest.
Some banks, namely U.S. Bank, Regions Financial and Wells Fargo, are luring low-income consumers to sign up for things such as prepaid debit cards and payday loans-products that typically come with all sorts of fees and charges, the Times reports. Why are banks courting these customers with pricey products? Well, besides the obvious (fees) the products themselves weren’t subject to all the regulatory overhaul brought by the Dodd-Frank reform act. That leaves more room for banks to make money in an environment where doing so has become more difficult.
The Times story features David Wegner. He makes about $1,200 a month and is looking for a checking account. He ends up with U.S. Bank where he is offered all sorts of financial products geared toward low-income consumers. The branch offered him prepaid cards, check cashing and short-term loan options. He tells the Times that he felt like he was being treated like a second-tier consumer.
The truth is that when it comes to profitability Wegner is indeed a second-tier customer compared with other customers with higher checking balances. And you know what? There are higher tier consumers than them too like the ones with bigger checking balances. Consumers with multiple mortgages, checking accounts, savings, brokerage accounts and loans are valued more.
Nancy Bush, a bank analyst, puts it this way, “It goes back to the way some people have viewed banking. They treat banking like an electric utility where if you flip the switch it has to be there for you. But the truth is banking is a business that aims to makes profits for shareholders.”
Consider that 25% to 40% of checking accounts at the big banks are money losers. That’s according to Dick Bove who says the way banks used to make money from those unprofitable checking accounts is through debit card swipe fees and/or overdraft fees. Regulations like the CARD Act and Durbin Amendment have dramatically shrunk the revenue from those activities. “In response, banks are are either kicking out those unprofitable consumers by driving up fees or providing them with other products that are higher in cost,” Bove says.
Note that other big banks like Bank of America, JPMorgan Chase and Citi aren’t mentioned in the Times story. That’s because they don’t offer these so-called alternative lending products for low-income consumers Bove says. Those banks aren’t relying so heavily on the retail banking sector for revenue and profits while banks like Wells, Regions, U.S. Bancorp and Fifth Third Bank are much more retail banking consumer for business.
The bigger problem here is that low-income consumers don’t have much of an alternative when it comes to banking. There’s a growing population of people who don’t have a bank accounts because they feel they can’t afford it. They are called the un-banked and under-banked; people who don’t have enough funds and/or mostly deal in cash transactions and who say they can’t afford bank fees. They turn to things like pre-paid debit cards which according to the Federal Reserve is the fastest growing non-cash method of payment.
Unfortunately they can also be laced with an alarming amount of fees and a lot less protection than your regular old debit card.
Products geared toward low-income consumers have typically been offered by payday loan companies and storefront lenders or even big retailers like Wal-Mart. Consumer Reports analyzed the pre-paid card industry recently and here’s what it found:
Fees can be high, multiple, and confusing
Not all prepaid cards provide adequate protection against theft of funds using the cards or card account numbers
Promised credit lines or features to build a credit record may be expensive and overstated
Federal deposit account insurance for prepaid cards applies differently than i does for bank accounts and may be capped at less than the value of all of the prepaid cards issued by a particular card program.
In its analysis the group sampled 16 prepaid cards and found 13 of the 16 prepaid cards charge monthly fees, ranging from $2.95 for the nFinanSe card to $9.95 for the Vision Premier card and the Univision card. ATM withdrawal? Twelve of the 16 cards impose a fee for checking balances at ATMs, ranging from 45 cents to $1 per balance inquiry.