Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Ugly Truth About Bank Bail-ins, Magic Wands and Con Men

Politics / Credit Crisis 2013 Apr 12, 2013 - 12:38 PM GMT

By: Money_Morning

Politics

Shah Gilani writes: Last week, I was emailed a link to Barry Ritholtz's "The Big Picture" site.

That's where David R. Kotok, Chairman and Chief Investment Officer of Cumberland Advisors, posted a piece on the "bail-in" of Cypriot banks, versus the bailout fixes that we're used to seeing.

As it was an email, a lot of people were copied on it. And a lot of them hit "Reply All," and forwarded their reactions and comments.


I read everyone's responses.

No one had any clue about what's really going on, or how to fix the banking mess the world faces, or whether bailouts or bail-ins are the answer.

Myself? I got really angry.

I can't believe so many smart people can be so oblivious, or worse, are themselves knowingly a part of the problem - to the degree that they twist the truth. Like great prestidigitators (magicians) who point to over "here" while manipulating tricks over "there."

Watch the birdie. Pay no attention to the man behind the curtain...

David Kotok, by not legitimately addressing the real cause of bank failures, performs the usual trick. He obfuscates, clouding the issue by addressing bailouts versus bail-ins.

It bothered me that Mr. Kotok, representing Cumberland Advisors, an independent fee-for-services money management firm, with approximately $2.2 billion under management, was talking up his services - and not cutting to the chase instead.

He said, "At Cumberland, in thinking about bail-in vs. bailout, we see the following issues in portfolio management. First, credit analysis is important. Risk needs to be identified and evaluated with the highest standard of integrity. In a private firm, one can give counsel to banking clients and portfolio-management clients and act to sell securities in which there may be very early warning signs of credit deterioration. From a portfolio-management point of view, one should not wait around. Our approach is to run quickly from credit deterioration and hope it does not get worse. Let someone else take that risk, not our client."

What's my problem with that?

It came on the heels of addressing the "transformation underway with regard to bank-deposit safety" in terms of government and taxpayer bailouts being potentially augmented with depositor exposure, where deposits above insured amounts are seized. That's the new "bail-in" bailout of insolvent banks.

Mr. Kotok advocates that depositors do credit analysis and due diligence on the institutions they bank with.

Of course, not many depositors have the skill set to do that. And virtually none of the hundreds of millions of depositors - trusting their money to the very institutions that are supposed to be safe - have the time to do that.

That's where Cumberland comes in. They do that for their customers. Sure, that's talking up his "book" of services, but you can't blame the guy for that. He has a job to do.

He also points out that there are problems with crying wolf when it comes to analyzing banks. Crying fire in a crowded bank could cause a run and get you in trouble.

With regard to analysts offering warnings, Mr. Kotok himself warns, "providing that warning also puts the service provider at great risk, because there are laws, in most jurisdictions, against sharing information that might trigger a run on a bank."

I'm writing this and I'm getting really angry... again.

The whole game is rigged. So how in the world can depositors trust any bank?

How can anyone do due diligence when bank transparency is a myth?

Remember the financial crisis? Every single big American bank CEO came out in public and told us they were in excellent health. They were - and are - all liars. They were all taking money, indirectly and directly from the Fed and the Treasury.

The Chairman of the Federal Reserve is a liar. Ben Bernanke was flooding banks with "liquidity" through the Discount Window, and a whole host of multi-lettered programs they invented on the back of matchbooks. There was no planning.

They rushed money to banks here and around the world, and to insurers and corporations. Oh yeah, and they rushed it to governments, too.

And what was he telling the world? After he said that the subprime slump would pass without affecting the economy, he said the banks were all safe and sound, so sleep tight.

Now we know why they are all liars. They don't want to be accused of causing a run on their own banks. What a bunch of hogwash.

I say, directly to them: You are all liars, and I challenge any and all of you to debate me in public. Afterwards, you presumably won't mind taking a lie detector test.

This is what we've come to. Liars leading liars, lying to the public that banks are safe institutions. Liars are lying to equity investors, bondholders, and depositors to get their money just to make more for themselves. And central banks give them all the backstopping they need to lie their way out of insolvency, to play the game again until they are back in the business of making themselves and their protectors rich - make that richer.

So, what Mr. Kotok should have said is that he knows what the problem really is, and he knows how to solve it. But then he wouldn't have so many clients coming to him, asking for analysis of banking institutions, and which ones they should put their money in.

There is no need for bank bailouts. And there is certainly no need for any bail-ins. Ever.

Banks are utilities, only they have the power to point over "there" and say they are capitalist tools, while over "here" they are making us tools of their trade in lies.

We can fix the lack of transparency problem in a matter of a few regulatory waves of the truth wand.

To end the problem of banks ruining economies - and people's lives - all we have to do is raise the reserves they have to keep against loans and the other "assets" that they hoard.

What's wrong with a reserve ratio of 25% rising to 50%? We have to put up 50% margin when we buy stocks, don't we?

Nothing is wrong with substantially higher and more straightforward protective reserve ratios. Except that banks won't be as rich and powerful - and dangerous - as they are, that's what's wrong with it.

I've haircut the answer to what ails banks to save we, the people - who rely on them as safe institutions - but it's a start.

Of course, the details of what assets are, and how they are classified in terms of risk has to be addressed, as well as how to make banks truly transparent. But it can all be done easily.

The whole Basel regime is nothing more than a bunch of bankers pretending they're making the system safer, when in fact they are pointing to over "there" while they take care of themselves under cover of what's really in their interests over "here."

If you're not angry about the lies and the red-herring discussions constantly being used as a smoke screen for the power banks wield, you might want to learn to read between the lines of most of what you read.

Or, stop by the Magic Castle in Hollywood, California, and see for yourself how great magicians can use prestidigitation to make you believe that pigs really do fly.

Best,

Shah

[Editor's Note: If you'd like to read David R. Kotok's "solution" to the banking mess we're in, click here. Just watch for the smoke and mirrors.]

Source :http://moneymorning.com/2013/04/12/the-ugly-truth-about-bail-ins-magic-wands-and-con-men/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in