The Flip Side of Housing Affordability
We need to pay more attention to the wage side of housing affordability.
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Stupid has arisen as the byword of banking. Last week I pointed out [Let’s Do Stupid All Over Again!] that banks were loosening their lending standards and taking on more risk, reminiscent of the years prior to the financial collapse of 2008. Almost a year ago, in a piece entitled It’s The Derivatives, Stupid!, I wrote that the Office of the Comptroller of the Currency [OCC] had reported that “insured U.S. commercial banks and savings associations had exposure to $192.2 trillion notional (face amount) of derivatives.” (Translation: Derivatives = Shit) With all that risk out there, most think their funds are protected by the Federal Deposit Insurance Corporation (FDIC). Not so. In an article for Wall Street on Parade on 27 December, Pam and Russ Martens write that eight years after the crash of 2008 the FDIC has $80.7 billion in its Deposit Insurance Fund. Sounds like a hefty amount but there are almost $7 trillion of “insured” deposits.
How did we get there? The Martens explain: “In 1999, Clinton signed the repeal of the Glass-Steagall Act which had kept the nation’s banking system safe for 66 years. This allowed Wall Street’s speculative trading activities in its investment banks and brokerage firms to merge with commercial banks holding insured deposits that are backstopped by the U.S. taxpayer. But Clinton did two other horrendous banking deeds: in 1994 Clinton signed into law the Riegle-Neal Interstate Banking and Branching Efficiency Act. This permitted bank holding companies to acquire banks anywhere in the nation and invalidated the laws of 36 states which had allowed interstate banking only on a reciprocal or regional basis. And, finally, Clinton signed into law the Commodity Futures Modernization Act of 2000, allowing trillions of dollars of OTC derivatives [AKA Shit] on Wall Street to escape regulation.”
Today, the Martens updated an article on derivatives they published last January in a piece entitled “Shhh! Don’t Tell this Bank Regulator We’ve Got a Derivatives Problem. The problem is that the total amount of notional derivatives on the books of these banks, more notably the U.S. banks ( Citigroup, JPMorgan Chase, Goldman Sachs Group, Bank of America and Morgan Stanley) now have $252 trillion in notional derivatives (AKA Shit) on the books. Clearly the OCC is failing in its regulatory duties and the FDIC cannot possibly respond to the deposit insurance demands of depositors.
But on a more day-to-day level, what can we do as consumers who need banking services? We can stop doing business with these banks. I closed my accounts with one of these giant banks last year and opened new accounts in a local credit union.