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The White House gets its way again. They get their way on two measures that would have given the people at least a little control of the “too big too fail” banking system. But how they got it, well that might just be the REAL story of the day.
“I mean this really sounds like market manipulation to me. This is outrageous.”
The “HOPE” of real getting real banking reform under this administration is dead. Dead on arrival. What is left is the “Chris Dodd Big Banking Giveaway Plan” which is to banking “reform” what Obamacare was to “healthcare reform”.
Last night the Brown/Kaufman amendment was shot down by a vote of 61-33. The amendment would have broken up the largest 6 banks and then set limits on the size these institutions could become so their failure could not threaten the entire system. Thus… “too big too fail” would have been a thing of the past. 27 senate democrats voted with the large majority of republicans to kill the amendment and for the most part, the 30 who voted for the bill were either coming up on an election cycle this year, or they switched their votes after seeing the bill was going to fail. A clever little trick legislators use to end up on the “right side” of a voting issue.
Though top Obama administration officials have not publicly opposed the amendment, its leading economists have opposed ending Too Big To Fail simply by breaking up the nation’s financial behemoths. Austan Goolsbee and Larry Summers have both fought back against this idea, as has Treasury Secretary Timothy Geithner.
… Sen. Mark Warner (D-Va.) and Dodd of Connecticut spoke against the amendment.
Sen. Judd Gregg (R-N.H.) was indignant. “I don’t understand this Brown-Kaufman amendment. Basically, what it says is if you’re successful…you’re going to break them up? I mean, where does this stop? Do we take McDonald’s on?” Huffpo
This took place yesterday while another popular piece of legislation was being gutted by one of its authors.
Ron Paul is livid and he has pulled his support from the “Audit the Fed” bill.
I know that sounds crazy… Ron Paul has been pushing for this kind of accountability from the for-profit Federal Reserve Bank for decades. But yesterday, when the bill looked as if it were going to be passed, Ron Paul pulled his support and is actively campaigning against it.
He has good reason.
In a move frighteningly reminiscent of the now infamous Air Force One flight where single-payer advocate and “Obamacare” opposition leader Dennis Kucinich was brought before the anointed One, Barack Obama, for a little position changing “chat”, Bernie Sanders was brought in to the White House late yesterday to work out a “compromise” on the “Audit the Fed” bill. No one knows why the “compromise” was even needed with the Pro-Banking Industry Obama White House since by all accounts, the bill had the votes to pass in the Senate as it was.
But, Bernie Sanders was brought before “the man” and had a little pow-wow in the White House. Since Sanders is one of the authors of the bill, he was authorized to change it, and “CHANGE” is what the White House got…
Thursday afternoon, Deputy Treasury Secretary Neal Wolin voiced the administration’s opposition to the audit proposal. But hours later, following negotiations with Sanders, Wolin withdrew the opposition. Raw Story
“Bernie Sanders has sold out and sided with Chris Dodd to gut Audit the Fed in the Senate. His “compromise” is what the Adminstration and banking interests want: they’ll allow the TARP and TALF to be audited, but no transparency of the FOMC, discount window operations or agreement with foreign central banks. We need to take aciton and stop this!” Ron Paul
The audit is only allowed back to December 2007, which leaves most of the work of the Fed’s Open Markets Committee in the dark — they were the ones who were supposed to be watching over Wall Street when they were laying the groundwork for the collapse. And according to Jay Newton-Small of Time Magazine, there will only be one audit — it will not be ongoing.
Ron Paul and Alan Grayson worked like dogs to get this through the House. And the White House would not have gone to Sanders if they’d been able to peel off the votes to tank the amendment. But with 68 Senators having voted for it or cosponsored it in the past year, that was a heavy lift. Bernie was the weak link. Firedoglake
How did all this happen late yesterday afternoon? What was the threat that forced all of these legislators to vote against the will of the people and to suddenly side with the corrupt banks? How on earth did all this happen LATE YESTERDAY AFTERNOON?
Hmmmm…. what else happened yesterday, PRIOR to the vote in the senate and Bernie Sander’s meeting in the White House? Hmmm…
Could it be the “glitch” in the supercomputer that crashed the stock market by nearly a 1000 points in a few minutes? Could that have had something to do with it?
Could it have been Goldman Sachs and the big 6 mega banks sending a message to congress that if they think they are going to break up their hold on this nation, they will bring it all down with their stock market manipulating supercomputer?
The following are some of the most common theories being put forward to explain what happened….
#1) A Bad Trade
It has been widely suggested that a “fat finger trade” was responsible for triggering the panic. According to CNBC, “sources” have told that network that a trader (possibly at Citigroup) entered a “b” for billion instead of an “m” for million in a trade involving Procter & Gamble.
However, Citigroup has already announced that it has found “no evidence” that it was involved in any erroneous trades. In fact, a statement was released in which Citigroup spokesman Stephen Cohen said this….
“At this point, we have no evidence that Citi was involved in any erroneous transaction.”
#2) A Computer Glitch
New York Stock Exchange spokesman Rich Adamonis says that “there were a number of erroneous trades” on May 6th, and that these could have been caused by computer error.
And the truth is that trading in the financial markets is more automated and more reliant on computers than it ever has been before. Trading literally moves at lightning speed now, and a number of analysts are warning that the pace of the market is so fast at this point that it is really easy for things to spin out of control very quickly.
But if this was really primarily caused by a “computer glitch”, how are investors supposed to have any confidence at all in the market? After all, if a computer error can wipe out half your account in less than an hour, why invest at all?
#3) Cascading Stop Losses
Once the market hits certain technical levels, it is going to automatically start triggering stop loss orders. Once those stop loss orders are triggered, it will push the market down further thus triggering more stop loss orders.
While there have been some protections implemented to guard against this kind of thing, the reality is that it does still happen.
Hackers have become more sophisticated and more cunning than ever before. In fact, the bigger a target is, the more enjoyment most hackers get out of taking them down. Is it a possible that someone could have hacked in to the New York Stock Exchange?
Rogue nations and terrorist organizations have been developing their “cyber warfare” capabilities for some time now. We have been repeatedly warned that someday we will see an “Internet 9/11″. Could this stock market plunge be a preview of that?
#6) Fear Of The European Debt Crisis Spreading
There are mounting concerns in the financial markets about Greece’s financial condition and that the European debt crisis could spread around the globe.
In fact, the Dow has lost 631 points, or more than 5%, in just the last three days amidst worries about the situation in Greece. This represents the biggest three day drop since March 2009.
#7) Stop Hunting
Anyone who has spent much time in the Forex market knows what this is all about. The truth is that some of the big financial sharks in the marketplace seem to really enjoy blowing out stop losses.
So could have this have been a situation where a stop loss hunting expedition spun wildly out of control?
#8) A Real Panic
There is also the possibility that this was a real financial panic. There are huge concerns about what is going on in Europe and the currency markets are fluctuating wildly. The Dow was already down several hundred points even before the massive plunge took place. The reality is that there is a lot of fear in the financial markets right now.
The so-called PIIGS nations (Portugal, Ireland, Italy, Greece and Spain) have about $600 bln in funding needs this year alone according to Bank of America. Total financing needs for the PIIGS over the course of the next three years is nearly $2 trillion.
The total debt of these countries is a staggering $3.9 trillion, according to a recent New York Times article.
Europe bares the brunt of this risk, due to the complex web of financial interconnectedness that has emerged in the region over the past decade, but the risks certainly don't end there. The pain may be initially contained, but if the large French, Swiss and British banks start feeling the pinch, it's just a matter of time before that pain gets exported to America.
A Barclays Capital report back in February indicated that US banks had about $176 bln in exposure to Greece, Portugal, Spain and Ireland.
Most of that risk being concentrated at the top-ten largest US banks; those likely still considered "too-big-to-fail."
** More recently, Wells Fargo reported that JPMorgan -- the second largest US bank -- has exposure to the PIIGS totaling 28% of its Tier-1 capital. For Morgan Stanley, that risk is a whopping 69% of Tier-1 capital.
Tier-1 capital is a bank's core capital, including equity capital and disclosed reserves. It's not hard to imagine, that if a large chunk of core capital suddenly became illiquid and perhaps even worthless, US banks would be sprinting back to the government till, looking for yet another bailout of their own.