Congresswoman Capito, an embedded member of Congress running for a seventh-term, is chairman of the House Financial Institutions Committee's most important and powerful subcommittee. She's pushing banking regulators to make the Transaction Account Guarantee -- TAG -- program, a $1 trillion-plus stealth bailout from 2008, permanent (it's suppose to go away at the end of this year). Capito's father, also a career politician, was a two-term governor of West Virginia who went to prison for corruption. Her husband, Charlie, is a banker who worked for Citi Smith Barney and United Bank (the largest bank headquartered in West Virginia) and now works for Wells Fargo. Over the years, she's taken a lot of money from banks and it is her turn to give back. If she is successful, this will mean "Too Big To Fail" will go on forever. Where is Ron Paul on this? Why haven't we heard from him? He's on the Financial Institutions Committee too. Where is the Tea Party on this? Aren't they supposed to be fighting waste and corruption by our elected officials? Even on an asset-weighted basis, the mega banks are four (4) times more reliant on TAG deposits than community banks. What ever happened to let the healthy banks function and the un-healthy banks fail? The enormity of moral hazard and waste is something lost on most. Wake up America, Capito is about to nationalize our banking system. This corruption needs to see the light of day. The bankers are hoping to sneak this in as a stealth amendment.
Icarus. What are you saying..Is there another 1 trillion dollar bailout to be done in secret? Are the banks getting free money from the TAG? Regards Errol 43
Hi Errol, sorry for not replying sooner. Seems the site had some trouble. Yes, to answer your question this extension or proposed extension of TAG has the potential to be the mother of all bailouts, yet we don't hear about it in the news. Why? Because it benefits the 4 largest banks in the USA primarily because they hold the preponderance of TAG deposits (60+%). The smaller banks that would benefit are the unhealthiest of banks that need government backing or else they would fail on their own legs (as they should). That's one of the issues surrounding TAG. The other issue i have uncovered in my research is not only the corruption and favors being done for Capito (such as campaign contributions to fill her coffers) is this would essentially make all the banks (7,300+) Too Big To Fail. You see, FDIC insurance is a fund. A fund which banks themselves pay into premiums which are assessed based on the banks size. So each bank pays its own fair share of the fund - risk and premium. And should a bank fail, a depositor is insured by this fund for up to $250,000 per tax id. With TAG, you have the US Government (already over extended in their liabilities) backstopping more than a TRILLION dollars. And here is where is gets even more outrageous. Well, the big banks like JP Morgan got wise to this and figured out that they can get free money from the government at zero interest. Then they can turn around and invest this money back at the Fed for 25 basis points (1/4%) so they make a nice spread taking zero risk and use tax payer dollars to backstop this risk. The Fed doesn't need the money, if they did they would just print. And the last I looked this doesn't fall within the Fed's mandate. Here is a well written article below by Chris Whalen for The American Banker periodical just this week on this subject. If this doesn't raise your shorthairs, I don't know what else could. The biggest silver market manipulator, JPM, using taxpayer dollars to earn risk free income. Congresswoman Capito should be called to task for this transparent abuse of power and her office of influence. If you or I were to do this we would be in a jail cell for bribery, corruption, collusion and probably a long list of other illegal activities. Need I say, the apple doesn't fall far from the tree. More Evidence TAG Helps Only the Big Banks By Christopher Whalen JUN 19, 2012 12:12pm ET Last week, JPMorgan Chase CEO Jamie Dimon appeared in the Senate to explain why his bank lost several billion dollars on what was essentially a rogue hedge fund operating in the bank's treasury area. But the real revelation came when Dimon said the job of JPM's chief investment office was to invest the bank's more than $300 billion of excess deposits. American Banker has reported over the past several months on how community banks are being priced out of loans by larger banks willing to offer lower rates. Well, duh. That is a direct result of the Federal Deposit Insurance Corp.'s emergency coverage for transaction balances, known as the transaction account guarantee program, or TAG. This emergency program attracted hundreds of billions of dollars of risk-averse funds into non-interest bearing deposits at the megabanks such as JPM and Wells Fargo. Impending changes by the SEC to money market funds are another big factor favoring the largest banks when it comes to liquidity. Under TAG, the large banks' cost of funds advantage has grown tremendously, despite the promise that it would do the opposite namely help smaller banks. For one thing, clients that normally parked transaction balances in institutional money market funds (which also pay no interest) were given an incentive (the newly unlimited guarantee) to shift these transactional balances to banks. Since these clients are generally too large to deal with community banks, the low-cost funding disproportionately went to the banking Goliaths. Also, large-dollar deposit broker networks are maxed out, so money that can't be placed through those channels ends up at the big banks by default. At a Senate Banking Committee hearing on June 13, Dimon revealed the bank had $1.1 trillion in deposits and only $700 billion in loans, and that the CIO had $350 billion to "manage." What Dimon did not say then was that his bank had over $200 billion in TAG deposits in the last quarter. That $200-plus billion is almost 20% of the bank's $1.1 trillion of deposits and is equal to 60% of the $350 billion in the CIO's portfolio. Excess deposits the difference between deposits and loans have to be used for something. So in this case JPM was using FDIC-insured TAG balances to speculate on credit derivatives. But JPM is hardly the biggest problem facing small banks. Wells Fargo now has a 30% share of the national mortgage origination market. Wells is able to use the vast non-interest bearing deposit base swelled by TAG to annihilate community and regional lenders in the mortgage market. Even "small" players like USBancorp and BlackRock (which has been trying to launch a securitization conduit) cannot compete with the Wells Fargo mortgage origination monopoly. Between the Fed's zero rate policies and TAG, the "too big to fail" banks are able to underprice mortgage loans in a way that violates the spirit of antitrust laws. The behavior of Wells Fargo harkens back to the anti-competitive behavior of the original J.P. Morgan & Co. and the Money Trusts a century ago. TAG hurts small banks' competitiveness, yet the Washington lobbying organs for smaller banks such as the Independent Community Bankers Association are supporting the extension of TAG. As I told Cam Fine over lunch earlier this year, I think ICBA and other organizations supporting TAG are making a terrible mistake that ultimately hurts the regional and community banks we all support. No surprise, then, that one of the biggest supporters of JPMorgan, Wells Fargo and the other TBTF banks, Rep Barney Frank (D-Mass.), recently circulated a letter to House Financial Services Chairman Spencer Bauchus (R-Ala.) supporting the extension of TAG. The emailed Frank letter reportedly caused more than a little ruckus among committee Republicans. TAG "has been an extremely valuable tool for our nation's community banks as they continue their important work furthering our economic recovery," effuses Frank. "We feel that the program has worked well, and should be preserved." Frank and other House Democrats tried to make the TAG permanent in Dodd-Frank legislation, but fortunately there was strong Senate opposition to doing so. Frank notes that "extending this insurance is one of the community banks' highest legislative priorities," meaning that the ICBA hopes to push through TAG legislation by the end of the year. What the ICBA and small banks should be pushing for on Capitol Hill is an end to TAG and, more important, legislation to terminate the treatment of transaction balances as "core" bank deposits. Once these non-interest bearing transaction accounts are removed from bank balance sheets for the purposes of leverage and capital, the size advantage enjoyed by the TBTF banks in the market for mortgage loans will disappear. It's time to level the competitive playing field. Between the new Basel III capital rules and an end to the treatment of transaction balances as core deposits, JPMorgan, Wells Fargo and all of the rest of the zombie banks will be forced to shrink and competitive pricing will be restored to the home and commercial lending markets. Then all we'd need to do would be to convince the Fed to let short-term rates rise a little and a true economic recovery in the U.S. will be in sight. Christopher Whalen is senior managing director of Tangent Capital Partners in New York. He is co-founder and vice chairman of Institutional Risk Analytics, the Los Angeles based provider of bank ratings, risk management tools and consulting services
Interesting read. By the way, you should really put a link to the original articles in your posts - such that we can check it out ourselves, and from a plagiarism/referencing perspective (I see that the author's name is clearly written there, but it is good practice in case it is not).
Here is a link to the American Banker article so that you can check yourself. http://www.americanbanker.com/bankt...ntee-program-hurts-small-banks-1050230-1.html More bad news for TAG poster boy and ICBA shill Ronald Paul from EagleBank in the D.C. suburbs. Home town newspaper the Washington Post ran a piece today that Mr. Paul enjoyed a 293% compensation increase in 2011 once EagleBank repaid the money the federal government lent it to survive the 2008 crisis and compensation limits the program imposed were lifted: www.washingtonpost.com/business/capitalbusiness/eaglebank-hiked-ceo-pay-after-repaying-tarp/2012/06/22/gJQAfPaC0V_story.html About 40 percent of Paul' $3.3 million compensation was a stock award: (110,000 shares according to the bank's proxy statement). The bank said the big or rather, "pig" pay day was because of income growth. And no wonder: TAG deposits, about 20 percent of Eagle's total deposits, cost the bank nothing and even if the bank cannot lend them out at market rates in one of the country's few strong local economies, it can park them with the Fed at 25 basis points. And how did Eagle finally pay off all the money the federal government loaned it? With more money from the federal government! As the Post earlier reported: www.washingtonpost.com/business/capitalbusiness/eaglebank-settles-up-tarp-tab/2011/07/19/gIQAvk8wWI_story.html. Yes, Paul used one bailout program to pay off another bailout program and got a huge paycheck for transferring the funds. This cynical manipulation only makes his role as poster boy for extending TAG another bailout program he's milking all the more outrageous. The Post story today did point out that Daniel J. Schrider, the CEO if Eagle's competitor, Sandy Spring Bank, also a strong player and former TARP participant, got a nice, big raise once compensation limits were lifted: 28%. That's nothing to sneeze at but it is still less than one-tenth of Mr. Paul's haul. "It's a Wonderful Life for Mr. Paul." For the rest of us, we're watching Bedford Falls being transformed into Pottersville.
I don't get all in the in's and outs of it but this does look an awful lot like perpetual motion now The only thing to stop it, is the rest of the World throwing out the $US as the reserve currency. Otherwise this can just keep going... Shocking but not surprised.
