Banking Testimony – Treasury Secretary Mnuchin Discusses “Too Big” and 21st Century “Glass Steagall”…

Sip slowly, this explainer was hard to write.   There is a considerable amount of perplexed frustration following on the heels of Treasury Secretary Steven Mnuchin testifying to the Senate Banking Committee earlier today and specifically saying:

02:20 Glass-Steagall? “we do not support a separation of banks from investment banks, we think that would have a very significant problem on the financial markets, on the economy, on liquidity; and we think that there is proper things that potentially we could look at around regulation, but we do not support a separation of banks and investment banks.”

That statement runs counter to the Trump administration’s prior policy statements outlining a preference for a reinstatement of some form of “Glass-Steagall” regulatory separation between commercial banking and investment banking.

In essence when combined with the totality of Mnuchin’s testimony before the committee, Mnuchin is saying the current “too big to fail” (‘too big to succeed’) issue has created a problem for lending liquidity.  Specifically, if divisional separation is required – the banks best interests would naturally put the investment division ahead of commercial lending and the liquid capital within the overall economy would shrink.

I think we have a handle on what the administration is doing based on the executive orders signed and explained earlier.  Bear with me…

Back in July 2010 when Dodd-Frank banking regulation was passed into law, there were approximately 12 to 17 banks who fell under the definition of “too big to fail”.

Meaning 12 to 17 financial institutions could individually negatively impact the economy, and were going to force another TARP-type bailout if they failed in the future.  Dodd-Frank regulations were supposed to ensure financial security, and the elimination of risk via taxpayer bailouts, by placing mandatory minimums on how much secure capital was required to be held in order to operate “a bank”.

One large downside to Dodd-Frank was that in order to hold the required capital, all banks decreased lending to shore-up their liquid holdings and meet the regulatory minimums.  Without the ability to borrow funds, small businesses have a hard time raising money to create business.  Growth in the larger economy is hampered by the absence of capital.

Another downstream effect of banks needing to increase their liquid holdings was exponentially worse.  Less liquid large banks needed to purchase and absorb the financial assets of more liquid large banks in order to meet the regulatory requirements.

In 2010 there were approximately twelve “too big to fail banks”, and that was seen as a risk within the economy, and more broad-based banking competition was needed to be more secure.

Unfortunately, because of Dodd-Frank by 2016 those twelve banks had merged into only four even bigger banks that were now even bigger risks; albeit supposedly more financially secure in their liquid holdings.   This ‘less banks’ reality was opposite of the desired effect.

The four to six big banks (JP Morgan-Chase, Bank of America, Citigroup, Wells Fargo, US BanCorp and Mellon) now control $9+ trillion (that’s “TRILLION).  Their size is so enormous that small group now controls most of the U.S. financial market.

Because they control so much of the financial market, instituting a Glass-Steagall firewall between commercial and investment divisions (in addition to the Dodd-Frank liquid holding requirements), would mean the capability of small and mid-size businesses to get the loans needed to expand or even keep their operations running would stop.

2010’s “Too few, too big to fail” became 2016’s “EVEN FEWER, EVEN BIGGER to fail”.

That’s the underlying problem for a Glass-Steagall type of regulation now.  The Democrats created Dodd-Frank which: #1 generated constraints on the economy (less lending), #2 made fewer banking options available (banks merged), #3 made top banks even bigger.

This problem is why President Trump and Secretary Mnuchin are working to create a parallel banking system of community and credit union banks that are external to Dodd Frank regulations and can act as the primary commercial banks for small to mid-sized businesses.

The goal of “Glass Steagall”, ie. Commercial division -vs- Investment division, is created by generating an entirely new system of banks under different regulation.  The currently remaining ten U.S. “big banks” operate as “investment division banks” per se’, and the lesser regulated community banks/credit unions operate as would be the “Commercial Side”.

Instead of firewalling an individual bank internally within its organization, the Trump/Mnuchin plan looks to be firewalling the banking ‘system’ within the U.S. internally.  Hope that makes sense.

Therein lies the fundamental breakdown in communication between Secretary Mnuchin and Senator Elizabeth Warren.

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167 Responses to Banking Testimony – Treasury Secretary Mnuchin Discusses “Too Big” and 21st Century “Glass Steagall”…

    • Ziiggii says:

      But SD’s explication makes sense.

      Liked by 10 people

      • WSB says:

        It does, Two types of banking..one firewall in between. Bigger banks fail, the economy and Main Street are insulated.

        Now, for years I have always surmised that one way to assist the small community banks would be to de-centralize Social Security.

        Keep the name, because the UniParty would howl. However, if you deposit your paycheck in your local bank, your Social security savings could also be accounted for in your bank, and if 20% of your savings could be invested, your local bank could have the liquidity it needs. And the Feds would not be able to steal it.

        It really could be a life savings/health savings combination. In other words, your own money would be working for you and Main Street, rather than the Swamp.

        Not being even a financial novice, I could be crazy, though…

        Liked by 22 people

        • NJF says:

          You’re not crazy.

          The other week I was listening to Andrew Wilkow’s show & he offered an interesting take on why SS doesn’t really serve those who pay into it.

          He said “imagine that you attend a retirement investment seminar and you browse all the booths and take all of their glossy literature. One booth has no traffic, no one seems to be stopping or asking questions. So you wander over to see what’s up. Unlike the other investment products, this one takes the $$ right out of your paycheck. The literature offers no no rate of return info, there is no avenue to access the money early in case of emergency & to top it off, you can’t pass any of the investment to your children after you die.”

          Why would anyone signup for that? They wouldn’t.

          Liked by 13 people

        • Yep, you are crazy WSB. Apparently you feel that you should be in control of the property you earn! You shall need complete re-education and possibly should serve some 600 hours of community service. That should straighten you out and remind just who is in charge.

          Yes! OUR own hard earned property (money) should be working for us and Main Street!
          Great comment. The “feds” andthe “fed” have stolen nearly all of our “wealth” to the point millions have 0 retirement. That, is evil. Purely evil.

          Everyone should look for local community banks to use. 9 Trillion between four globalist banking entities is sick.

          Liked by 6 people

        • M33 says:

          Mahalo, WSB!
          A deep-thinking stalwart of the CTH!

          Liked by 3 people

        • Peter says:

          WSB – that’s brilliant interpretation and vision. Sundance should amend his comments with yours…visionary

          Liked by 1 person

        • WVPatriot says:

          Spot on… WSB!!!

          Designated an “expect” does not make one an expert.

          Liked by 1 person

    • Deplorable_Vespucciland says:

      “perplexed frustration” 🙂

      Thanks for a bit of clarity Sundance.

      Liked by 4 people

  1. SR says:

    Trump needs to make a deal with big banks. These 5 banks and CoC control the rats and RINO. Trump knows how to find Middle way with business people. He needs to cut money supply to rats and fake MSM .

    Liked by 5 people

    • Duhders says:

      I’d prefer letting them think they control the financial destiny while building the CU and community banks for small business and personal lending. Considering small business is the backbone of the economy, let the big 4-6 get in their inevitable Chinese stink bug bog and simply tell them “we’re good, you’re on your own.” when they coming crying about their failed fake paper economy.

      Liked by 17 people

    • setup2100 says:

      And who beside TRUMPis going to go along with that SR? Jared, PREIBUS, Ryan, McConnell or how about the Big Media/Dem Party???

      Liked by 1 person

  2. RedBallExpress says:

    Yep. Starve the cancer.

    Liked by 10 people

  3. bessie2003 says:

    Thanks for this explainor, (that’s not a word, is it?) – while watching this today was trying to follow along, got hints of what you’re outlining, but when Sen. Warren started her diatribe all I could think of was ‘how nice for her, she’s got her soundbite for the evening news cycle’ and after screaming at the TV had to shut it off. Secretary Mnuchin is fantastic! He just let her get her soundbite out and moved on.

    Liked by 16 people

  4. Larry Bucar says:

    So “looks to be firewalling the banking ‘system’ within the U.S. internally” means nationalizing the banks? I hope not.

    Like

    • sundance says:

      No, not nationalizing the banks at all. Just differentiating the federal regulations based on the financial size of the bank itself. Less regulations on smaller banks, more regulation on bigger banks.

      Liked by 35 people

      • wheatietoo says:

        Which could motivate the bigger banks to split themselves up into smaller banks, to avoid the additional regulations.

        Liked by 12 people

      • Larry Bucar says:

        OK, thx… Mnuchin sure got Pocahontas in a tizzie hahahahahah

        Liked by 6 people

        • Liawatha is a tizzy. One sick and demented freakshow. Should be on American Horror Story.

          Liked by 4 people

        • WVPatriot says:

          Why are most borderline idiots so arrogant? Their inability to grasp a concept and continue to ask the same question(s) over and over and over and over — AD INFINITUM; NEVER understanding the concept no matter how many different ways it has been explained.

          ROLLING EYES!!!

          Liked by 3 people

          • El Torito says:

            Liawatha is not in the same league as Mnuchin, intellectually. She just kept looping the same statement, cut him off so he couldn’t answer her, and asked the question again. I only finished watching because watching his facial expression was worth it.

            Liked by 1 person

        • Phantom Limp says:

          The division between them stems from the simple fact that Warren does not understand banking or economics.

          You can explain banking to a donkey, but the donkey is incapable of understanding it.

          Like

      • ALEX says:

        I caught about twenty minutes of this during lunch and that point was made by a number of Senators and agreed to in principle by Mnuchin….Pocahontas is a partisan hack and these types give us all the trouble in my business…

        It’s like the crowd that chants break up the banks or the Wall isn’t built in 100 days…No point arguing when agenda and reality clash…It really is pathetic how disingenuous people are. The environmental movement has this in spades as well…

        Liked by 6 people

        • ALEX says:

          Mnuchin was even discussing the cut off point for larger banks receiving certain tax benefits…He said something similiar to wanting to make sure the bigger institutions can’t find a way into these benefits…Basically a cut off that would get some much need capital down on the streets..

          Liked by 11 people

      • 2x4x8 says:

        kinda blows your “Wall St vs Main St” trains off the track

        the Parable of the 2 Wolves is the one you feed, regulation does not stop the Piranha

        its not regulation but penalization ie tax that is the answer

        big banks benefit over small banks by economies of scale, Government has to put the thumb on and tip the scales in the small banks favor if they want a desirable outcome

        Liked by 1 person

      • WVPatriot says:

        BRILLIANT solution!

        Like

      • Cowboy79 says:

        Regulations, yes, but they must be relevant and discourage risky practices. Cash reserves , ala Dodd-Frank, don’t cover the actual risks on the secondary market which, without Glass-Steagall types of firewalls, are intractable risk wormholes. This circumstance allows banks to make loans, sell them to FNMA, claim 100% fractional reserve resources, then make more loans. At the same time, the investment side sells derivatives for the bundled tranches the bank just sold to the Govt. This insulates the bank from the derivative risk while enabling the investment side of the house to profit from risks offloaded to the Govt and FDIC. The key, if there is one, is to require the banks to hold a random portfolio of their loans to full term and require the investment side to bear risk for the tranches sold that involve MBS less than full term. IOW, the problem is allowing a majority of risk to be transferred to the Govt / People instead of the banks/investment firms/ investors. See: https://www.thebalance.com/role-of-derivatives-in-creating-mortgage-crisis-3970477

        Like

  5. JustSomeInputFromAz says:

    Credit Unions still survive and a portion of my cash is in two in my locale.

    Do my checking (bill paying from one of them).

    Liked by 10 people

  6. thluckyone says:

    EXCELLENT post explaining matters that usually are WAY out of my range of understanding. AND, if some globalist “diversity law” does not show up requiring our credit unions to traffic in shariah compliant financial instruments (supporting islamic lending practices and terror financing), then I’m 100% behind the idea of credit unions – more power to them! THANK YOU, Sundance!

    Liked by 9 people

  7. MK says:

    Banks have NO business being on the investment side. Banks were responsible for the recession because they were losing customers to investment products that, in the end were worthless. but they wanted in on the action.

    Banks don’t know a dam thing about companies run their business, they do know how to manage risk. And its tough to get any loan from a bank today.

    Like

    • 2x4x8 says:

      MK means Stock Market and Derivatives, that is called “speculation” and not “investment”, bonds are hard assets, and used to be the bedrock for banking, Credit Default Swap is quicksand

      Liked by 1 person

      • Orygun says:

        I don’t think that Banks should take peoples retirement accounts and put them in high risk situations. If I wanted to go to Vegas and put all my money on red and spin the wheel that should by my stupid decision not theirs.
        That being said most of the financial disasters have been due to government mandates

        Like

      • Over the years the percentage of the banks assets they are allowed to invest in risky speculation has increased.

        This is something that needs to be brought back into line.

        Also the “hands off” running of the Federal Reserve is something that has bothered me for years.

        I would like President Trump’s administration to take a good look at what in heavens name is going on there.

        That place is controlled with more secrecy, and more information is kept from the US voting public than the inner rooms of the pharaoh’s temples from the Egyptian plebes..

        Like

    • MaineCoon says:

      Yes. The .08 crisis banking crisis was scary. These things continue to be scary: derivatives, bail-ins (think Cyprus) and the fact that upon deposit of funds the depositor is basically loaning that money to the bank. They in essence become unsecure creditors and if the bank fails they get in line with all other unsecured creditors – at least that’s how I understood it.

      Like

      • MaineCoon says:

        I couldn’t even watch all of Shkreli’s video. Disgusting.

        I had been with a CU for 20+ years when it merged with another CU. Mine wasn’t the surviving entity. I noticed my auto-deposit payroll checks weren’t appearing on my statement. The “new” CU customer service had no explanation. Finally got an original CU’s customer service person on the phone who figured it out. The surviving entity had an account number the same as mine. And, pray tell, why wouldn’t this be determined prior too merger?

        Got my money, opened a checking account with USAA (already had ins. Coverage). USAA sucked the $$ out of that CU account.

        USAA is great. They put Morgan Stanley in their place also when MS would not transfer my 401(k) to USAA. They got immediate action there too.

        I call USAA my personal banking vacuum cleaner. They suck out $$ from other financial institutions without me having to deal with them. Mission accomplished.

        Go USAA! 27 year member.

        Like

    • Daniel says:

      That is actually a myth. The banks were relatively stable prior to the Fed, except for a few periods that can be tied directly to govt interference. See Tom Woods’ discussion of this.

      Liked by 1 person

  8. yohio says:

    So has Mnuchin lost his Wolverine status that will tell me all I need to know?

    Like

  9. Donna in Oregon says:

    Thanks Bill Clinton. Idiot got rid of Glass Steagall. Yes, firewall is the best plan. Let them leap out of their windows when the derivative bubble they created (AGAIN) bursts. It will be worldwide, including the Chinese.

    The Federal Credit Unions etc. can be used for small business. Looks like we will have 2 economies. Fine. Move them offshore, give the big 4 economic reasons to move offshore and leave us.

    Liked by 4 people

  10. “Unfortunately, because of Dodd-Frank by 2016 those twelve banks had merged into only four even bigger banks that were now even bigger risks; albeit supposedly more financially secure in their liquid holdings. This ‘less banks’ reality was opposite of the desired effect.”

    Perhaps ‘less banks’ was precisely the desired effect? Seems to have worked out considerably well for Bank of America, JP Morgan-Chase, Wells Fargo, and CitiBank!

    First they declare certain banks ‘too big to fail’ and promise to bail them out in an attempt to create ‘less banks’. A few years later they’ve created fewer and even larger banks still ‘too big to fail’, and when financial crisis arises they bail out the banks with taxpayer money. Seems like more fleecing of American wealth disguised as a “smart”, “sensible”, and “well-intentioned” regulatory system, and all the more reason they desperately needed Hillary to win.

    I have full confidence in God, Trump, and the Trump administration to fix this mess at just the right time, in just the right way. In the meantime I will do my part and bank at my local community banks and credit unions. 😉

    Liked by 13 people

    • Jmbuck says:

      Yes, that was my first thought, that is was done with full knowledge that it would concentrate that power to fewer banks. After her questioning and with all the political posturing I am not sure she has a clue or even cares about the outcome.

      She did not want to understand. She just wanted to create the image that the Trump administration is for big banks and she is against that even though that’s what the Dem’s legislation produced, bigger and fewer banks.

      My question is, Does she understand at this point that separating those banks would be disastrous and she does not care, just wanted an opportunity to make the administration look bad OR does she simply not understand the situation and is clueless as to how things work. Either way all I can say is she is an embarrassment to herself and to the country as a United States Senator.

      Thank goodness the adults are in charge and have our best interests at heart.

      Liked by 2 people

  11. jefcool64 says:

    Thanks for the input, this isn’t something that can be explained easily. Most certainly not by the talking heads. This stuff usually goes over my head but I thought you gave it a good effort.

    Liked by 4 people

  12. Sammy says:

    God she is so ignoring purposes keeps mistaking his position and than plays dumb while asking the same question over and over with strawman argument that she makes by pretending she doesn’t know what he saying and by cutting him repeatly so HE CAN’T answer her strawman questions

    Liked by 6 people

  13. CathyMAGA says:

    Man, that was hard to watch. I wanted to punch her in the head, and gag her with a dirty sock….she is whacked. I hope the democrats run her for 2020…..

    Liked by 11 people

  14. Pochahantas is an insufferable ideologue with tunnel vision. As an aside: extremely rude, intolerant, and just plain blind to the merits of any concept, plan, policy, procedure that she cannot grasp upon presentation and review. In other words; Pochahantas is an utter fool with a huge ego.

    Liked by 11 people

  15. andrewalinxs says:

    This explanation and article is exactly why I come here. I could not get such analysis anywhere else that I know of.

    Liked by 15 people

  16. “Instead of firewalling an individual bank internally within its organization, the Trump/Mnuchin plan looks to be firewalling the banking ‘system’ within the U.S. internally. Hope that makes sense.”

    This makes perfect sense. I use a local credit union exclusively. I do not understand why anyone would use one of the Big Banks (Chase, Wells Fargo, etc.), with their Indian call centers, rip-off fees, lack of branches, etc. Using a Big Bank only makes sense for financing really Big Things beyond the lending capabilities of local credit unions, like building a skyscraper or airplane factory.

    Small/local credit unions with small rules for people and small business, Big Banks with Big Rules for Big Business.

    Not tired of winning!

    Liked by 9 people

  17. 4sure says:

    Will the small banks evolve into big banks?

    Like

  18. This makes sense to me. When I started my career, I was with a Savings & Loan that eventually failed in the big S’& L crisis… fast forward 20 yrs and I was with a Global Insurance Company. We consolidated all of our banking with J.P. Morgan. When I expressed concern that this consolidation seemed risky to me (all your eggs in one basket – and the S&L crisis in my history) the CFO told me that if JP Morgan failed, it would mean a global monetary collapse and money would be meaningless – apocalyptic he said, therefore managing banking solvency risk was useless.

    This could work. Definitely worth a try.

    Liked by 3 people

  19. Aqua says:

    The lending and investment portions of the large banks are distinctly different. But as much as this, the massive number of redundant “checkers” overseeing every credit decision combined with now vast compliance departments have diverted many, many lending resources into these internal, excessively bureaucratic functions. This Dodd-Frank induced morass has hurt borrowing across the country.

    Same resources, expended in a different way. Perhaps 1/3 or more fewer calling officers, as there are now perhaps 2/3 more internal double, triple and quadruple-checkers on every credit portfolio and loan decision.

    For those that aggressively defend Dodd-Frank, I’d ask first if they have read the law, and the stacks of attached regulations. Then I’d also point out that this did NOTHING to detect or prevent the last “large bank” scandal on the fake accounts (which went on for years and was not as much a surprise as one might think, outlier cross-sale ratios easily observed by publicly available FDIC data). Too, ex-employees talk.

    Liked by 4 people

    • M33 says:

      This is so true.
      I have been waitings for months for our bank to get back to us on doing a SBA loan.
      Even the bankers are scared of the underwriters.

      Like

  20. Big Bruce says:

    The Indian comes across so arrogantly incredulous, that only she can grasp the supposed contradiction. Imagine having to sit acoss a dinner table with that each night while decompressing about your day.

    Liked by 3 people

  21. M33 says:

    So, essentially, we still are getting a Glass-Steegle, just in a very very different sort of way.

    I’m on board if Trump’s on board.

    Liked by 3 people

  22. NJF says:

    Thanks for your clear, concise explanation.

    I saw this clip and had to change the channel bc that woman’s voice rivals Shillary’s in the shrilling dept.

    Liked by 2 people

  23. Translation: PDJT got our backs. Now lets cover his. We need a rally.

    Liked by 5 people

    • Bull Durham says:

      Grassroots has to organize our own rallies, and invite Trump to them.
      50,000 minimum crowd. Good weather, should be easy. Always invite LEOS, bikers and military vets as a large component. Have a theme that fits his program that needs a push.
      Infrastructure, tax cuts for small business (individuals), repatriation, Healthcare, Vets, Vocational Education and Skill training. Plenty of very important issues that are not going to attract counter-demonstrations and protestors in large numbers.

      Liked by 4 people

  24. MVW says:

    So, does this mean there will be greater risk for meltdown in small banks due to less regulations, and a recession will hit them hardest? So, no big, but few failures, but lots of little ones?

    Or is it Glass Steagall for small, and no Glass Steagall for big, but big has more regulations to compensate?

    Liked by 1 person

    • A2 says:

      I surmise, if they get the regulations right, the Big Four will naturally become ‘investment banks’ only and shed commercial banking that I suspect they already wish to do with their fees for service that affects the ‘little guy’. If smaller, local and regional banks are treated fairly by regulations, they will prosper for the main street crowd. And, that would accomplish a 21st Century Glass-Steagall.

      Liked by 2 people

    • CharterOakie says:

      MVW — no, it doesn’t mean greater risk of meltdown in small banks, etc. As confirmed in Mnuchin’s answer to Kennedy, the smaller banks would stlll be regulated by their primary regulator as now. But they wouldn’t also be subject to Dodd-Frank and other regulatory requirements that were mainly intended for the ‘too-big-to-fail’ giant financial institutions, most of which combine both commercial and investment banking operations.

      Glass-Steagall was the Depression era law that required separation of depositor-funded commercial banks from generally riskier investment banks, so that Federal guaranteed deposits of commercial banks would not be put at undue risk from riskier investment banking operations in the same institution.

      On that basic point Mnuchin and Fauxcahontas agreed, but very importantly he pointed out the real issue behind the original separation of Glass-Steagall: conflict of interests among managements overseeing both types of banking in the same institution operating with FDIC-insured deposits. Fauxcahontas, stuck on stupid, only wanted to hear “separation” end of story.

      Glass-Steagall, whether the 1930s version or the “21st century” version (if ever enacted) is essentially irrelevant to the scope of operations of small banks, which are community- and small business-oriented. They’re not Wall Street investment banks.

      Liked by 1 person

  25. Southpaw says:

    Banks don’t invest other people’s money. Once you make a deposit it is their money. That is why you have a debit card. When you withdraw money out of your account the bank when reconciling reduces cash, asset on debit side of the ledger. They reduce accounts payable, you, a liability.

    Liked by 1 person

  26. rsanchez1990 says:

    And here I turned so quickly against Mnuchin on the other post. Wow! It’s staggering just how badly the Democrats booby trapped the economy with Obamacare and Dodd-Frank.

    Many people in alternative media (especially the preppers) have been saying for years the system will inevitably crash and reset because too much garbage has accumulated. They’ll tell their audience that they need to prepare for the crash (and inevitably try to sell them products that the hucksters assure will be essential to survival). They generally approach the problem on a personal basis, thinking that the bigger picture will be anarchy.

    Thank God that our President sees a different picture. Secretary Mnuchin is conceding that without action, there will be a crash and reset. When one big multinational bank fails, they are so entangled with each other that they’ll all go down. Without a backup system, there will be anarchy. The community and credit union banks will be the backup! When the globalists come begging for money, they’ll be blown to smithereens, and the people will have a real chance to start over.

    One question that does pop up is: where will the money for the community and credit union banks come from? We’ve seen stories come up occasionally of foreign entities pledging to invest some amount of money in the United States, often in infrastructure, after the election of President Trump. Two examples are the Saudis, who reportedly seek to invest $40 billion in the US, and Japan’s Softbank, who announced in December last year an intent to invest $50 billion. In a CNBC article, the Saudi energy minister is quoted as saying:

    “The infrastructure program of President Trump and his administration is something that we’re interested in because it broadens our portfolio and it opens a new channel for secure, low-risk yet healthy return investments that we seek.”

    http://www.cnbc.com/2017/05/11/saudis-reportedly-plan-to-invest-40-billion-in-us-infrastructure.html

    American small and medium sized businesses will be a low risk investment that yield healthy returns in an economy that grows >3% GDP annually. The community and credit union banks, the business/financial *infrastructure* for the new system, will yield healthy returns on investment. Now I’m starting to wonder where the foreign money is going to go…

    Best of all, the President doesn’t need Congress for most of this. It will be the free market at work. The only thing we’ll need Congress for is re-instituting Glass-Steagall after the collapse of all the big banks (and that’s where we can help the President and the country in 2018).

    I won’t doubt President Trump and his Cabinet. It’s an ambitious plan (and I gope I’m interpreting it correctly), but it’s a plan that’s in very capable hands.

    Liked by 1 person

  27. aredtailblog says:

    Where would BECU credit union figure?

    Like

  28. jupitercomm says:

    Whether Mnuchin was a infiltrator in disguise or caved to some pressure is beside the point. Only he knows the truth about that

    Like

  29. A2 says:

    One size does not fit all.
    A2nomics 101.

    Liked by 3 people

  30. scott467 says:

    “That’s the underlying problem for a Glass-Steagall type of regulation now. The Democrats created Dodd-Frank which: #1 generated constraints on the economy (less lending), #2 made fewer banking options available (banks merged), #3 made top banks even bigger.”

    _______________

    Was this not the *actual* purpose and the *actual* goal, regardless of how it was “sold” to the public?

    As discussed here many times, our ‘legislators’ do not ‘write’ laws anymore, and haven’t, for perhaps two decades. Many current congressmen couldn’t write a ‘bill’ if they had to, they’ve never done it before and never seen it done, at least that’s the gist of other articles here on CTH.

    The laws are written by the CoC and the multinational corporations and their lobbyists.

    Since the beneficiaries of the legislation were the same corporations who wrote the laws (Dodd-Frank included), why would anyone expect a different outcome?

    When is this TREASON against our nation going to be exposed and stopped?

    .

    Liked by 2 people

  31. Trumpelstiltsken says:

    Forgive me for dumbing down the discussion, but how stunning is Mnuchin’s fiancée, Louise Linton? She’s the blonde behind him.

    Liked by 2 people

  32. xyzlatin says:

    Elizabeth Warren puts me in mind of other women I have known over the years, all socialists. They know best and they will put their jackbooted foot on the throat of anyone who opposes them. She’s not dumb, she is a demagogue.

    Liked by 1 person

  33. Jeff says:

    ” This problem is why President Trump and Secretary Mnuchin are working to create a parallel banking system of community and credit union banks that are external to Dodd Frank regulations and can act as the primary commercial banks for small to mid-sized businesses. ”

    ABSOLUTELY !!! BRILLIANT Dodd/ Frank and the Repeal of Glass/ Steagall were INTENDED TO KILL CAPITALISM under the guise of supposedly protecting the people .

    Same lie as Obamacare !!! was supposed to save every family $2,500 a year and you can keep your doctor .

    It doesn’t take a rocket scientist to figure out that WHAT EVER THE COMMIES SAY they are doing …it is the exact opposite !! What ever they blame THE OTHER SIDE FOR DOING ….THAT is exactly what THEY ARE DOING ….” muh RUSSIA RUSSIA RUSSIA ”

    My dear departed Mother taught me that some times when a problem is coming at you like a freight train ….YOU SIMPLY STEP OFF THE TRACK AND LET IT GO BY !!!!

    In this case President Trump and his administration will step off the NATIONALIZED BANK CARTEL created by all democrats and UNIPARTY commie republicans to KILL THE FUEL OF CAPITALISM …CAPITAL LENDING !!

    The Trump administration in the proper role of small government will set a playing field for community banks and credit unions to COMPETE for SUPPLYING CAPITAL .

    I suspect this system to be the first stage of advancing the competing TREASURY DOLLAR when that time comes . The goal of OPERATION FORTITUDE is to begin to compete with the not at all federal …FEDERAL RESERVE NOTE . THEY control the UNIPARTY and their is NO political solution to ” END THE FED ” or “AUDIT THE FED ” not gonna happen .

    However , when the time is right president Trump can instruct his Treasury secretary to begin printing STATE MONEY in a TREASURY DOLLAR . THIS system of community banks and credit unions is the beginning of a return to DECENTRALIZED STATE MONEY BANKING in the FACE of the GLOBAL BANKING CARTEL that owns DC . https://www.youtube.com/watch?v=qOR4OiRjHA8

    Did I say ….ABSOLUTELY BRILLIANT

    Like

    • julegate says:

      Jeff, thank you for your comments. I hope this happens with the STATE MONEY and we get rid of fiat money! Also, if Im at one of the Big Banks I would be worried about a bail in to the Banks from the Depositors bank accounts. Not separating the Retail from the Investment Bank leaves customers deposit/savings accounts with the Banks and the Banks can take the money to remain solvent. All Big Banks are over extended in Derivatives….ie they are insolvent.

      Like

  34. @Sundance:

    The concept, if I grasp it correctly, would be to allow the “now yet bigger but gonna fail” Wall Street Banks to become the “Zombie Banks” if needed, while an insulated system of “Main Street Banking” is grown alongside the faltering zombies.

    Wall Street’s bad bets sit within their own bad institutions, damaging only themselves if they fail.

    Liked by 2 people

  35. jeans2nd says:

    Reading articles overnight, it would seem Jeb Hensarling, the Chairman of the House Financial Services Committee, already has a bill passed out of committee on 4 May 2017 that works with POTUS’ vision of a 21st century Glass-Steagall, the Financial Choice Act, that may ultimately help end the “too big to fail” bailouts.

    Summary
    http://financialservices.house.gov/uploadedfiles/financial_choice_act-_executive_summary.pdf

    Details
    https://www.congress.gov/bill/114th-congress/house-bill/5983

    Forbes hates it.
    https://www.forbes.com/sites/realspin/2016/07/19/financial-choice-act-goes-wrong/#76da246329c8

    Heritage Foundation loves it.
    http://www.heritage.org/report/six-recommendations-the-choice-act-20

    Analysis/Opinion.
    https://www.usnews.com/news/articles/2017-05-04/jeb-hensarlings-financial-choice-act-looms-over-dodd-franks-future

    Analysis/Opinion/Elizabeth Warren is an ID10T, Our POTUS is not.
    http://turcopolier.typepad.com/sic_semper_tyrannis/2017/05/harper-has-warren-broken-ranks-to-push-glass-steagall.html

    Your explainer was not hard to read, thank you.

    Liked by 1 person

  36. AmericaFirst says:

    I read this and all I have to say is: Tip of the Hat to you, Sundance, for this heroic effort to make sense of this.

    Liked by 1 person

  37. Bob Thoms says:

    Sundance explained it; why didn’t Munchin?

    It seems that Munchin is avoiding the topic of “a parallel banking system of community and credit union banks that are external to Dodd Frank regulations and can act as the primary commercial banks for small to mid-sized businesses…”

    Is there a political reason for this obvious avoidance?

    Like

  38. Bob Thoms says:

    A simple plan – a broad based expansion of the private equity market targeted at Main Street, America.

    Like

  39. Aguila2011 says:

    Sundance … I am in awe of your perceptive powers and words of clarity. Thank you for your efforts every day!

    Like

  40. C-Low says:

    There is NO SUCH THING AS TO BIG TO FAIL. Period Stop End. In a free market capitalist system failure at the top is not the end it is just natural reorganization. Trillions of assets, why they would crash the market? No incorrect, those Trillions are loans investments assets etc…. If a company goes tits up all that doesn’t disappear it is categorized and auctioned for what the market will bear (real right now value). Those small banks unions random investors all who did good business and have liquid available are who buys up those “to big to fail trillions of assets”. That doesn’t mean the end of the market that means a natural shifting of the market leaders to younger stronger wiser new upstarts. When the ole leaders get lazy soft and weak the young hungry strong scrappy take over.

    -Communism/feudalism fails because the leadership never changes so as the next generation takes over that is weak or the old gets soft sloppy greedy whatever, the whole systems gets weak and eventually collapses in whole.

    -Capitalism – Succeeds because as every new generation takes over it is always dog eat dog the weak soft are eaten and knocked down by the strong that rise to the top. Why we used to drive everything new because the strongest smartest are always on top the cream rises. Natural Order.

    If the banks had been allowed to collapse in 08′ the realestate market prices would have fallen farther harder but by now the assets would have all been sold. Investors would have bought those bad assets for pennies on dollars rehabed and resold at cut rates. The labor would have kept working shifting from new construction to rehab. The small banks upstarts that bought the bad paper assets at viable profit generating amounts would be continuing expanding the good business based loans that made them able to buy those assets driven even more by profits from those purchases. The market by now would have recovered driven by labor staying active, cheap while increasing prices, and solid business based loans flying out of those upstart companies. By now the realestate market would be on a real solid footing. Today the whole realestate market is fake and artificial.

    Side note rant about the current market. The banks took those bailouts and used them to buy up the foreclosures (bad MTG collateral auctions) physically secured them and put them on a shelf. They are not for sale, not for rent, nothing, just sitting vacant waiting. We are talking estimates as much as 10% of residential realestate in the country varying by area. Drive through any community not just the ghetto (they actually let those sell) but middle to upper class neighborhoods, the houses with the white peace of paper in the window saying winterized are bank owned just sitting on the shelf. The whole current system is fake the realestate shortage is artificially made. The banks are gambling the market will recover and they can unload those shelves before the interest rate raises to the point of forcing the issue. Doubt me find four of those houses call the banks then call the realtors they push you to and see if you can buy them, ghost?

    Sorry for the rant the whole to big to fail just outrages me and is the death of capitalism if it is allowed to survive as a viable idea. It is the death of our system.

    Like

  41. Interesting analysis, albeit quite presumptuous and idealistic. If this analysis is true then Capital requirements will need to skyrocket from current levels, mark-to-fantasy accounting rolled back and what constitutes on balance sheet cash equivalents reformed to just cash and US Treasury Securities. I will believe the Trump administration is serious about taking on the TBTF foxes guarding the hen house when i see such actions.

    The reality of the situation is that the major US financial institutions JPM, C, WFC, MS, GS, BAC and others most importantly Deutsche Bank then HSBC, Barclays, UBS, Credit Suisse, etc. yield more power than governments. Why?

    NOTIONAL AMOUNTS OF DERIVATIVE CONTRACTS (HOLDING COMPANIES)
    TOP 25 HOLDING COMPANIES IN DERIVATIVES
    DECEMBER 31, 2016, MILLIONS OF DOLLARS
    https://occ.gov/topics/capital-markets/financial-markets/derivatives/dq416.pdf

    ^page 36 = derivatives to asset ratio

    Also many corporations that have become bank lite in nature due to stock buyback programs and what constitutes on balance sheet cash equivalents but is actually composed mostly of the highest yielding investment grade securities allowed to be held as cash equivalents, when in reality (as saw in 2008) they are not. Until the government is in a position to unwind these institutions of credit without systemic risks to the ‘system’ at large these institutions will have unchecked power over our government and economic/market outcomes.

    Until Americans are ready to stand up and say to the next Hank Paulson we would rather have tanks in the street and social unrest instead of another bailout nothing is going to change. Why? because this same threat will be made over and over again.

    These institutions are weaponized and unless Trump declares war on them the outcome they will get is the outcome they want.

    Liked by 1 person

    • What I left out and should not as it is most important and the essence of Sundance’s point is that the idea of boxing in the TBTF system and channeling the nations credit from the Federal Reserve sponsored TBTF system to community bank/lending institutions, much in line with what has been suggested by John Allison, is what we should be doing.

      The trick in doing this is in executing it when the TBTF system will, IMO, be undermining such efforts, as will the bought congress.

      Liked by 1 person

    • Ted says:

      I can’t believe you called C-Low’s analysis presumptuous and idealistic. His observations are obvious, intuitive, and if anything simplistic (not idealistic).

      Difficult to follow most of your post and overall I think it’s non-sensical, so leading in with “The reality of the situation is…”, is a very poor use of words and awfully arrogant.

      A huge problem prior to the crash in 2008 and since is that the US Taxpayer promises, PROMISES to be the final insurer of these banks. The obvious consequence to the taxpayer is that these large banks know they can accept more risk. “Too big to fail” means theoretically that you can accept infinite risk because you have a bailout plan, a final insurer (in this case, the US taxpayer). That’s bad for any system, especially capitalism. The market will correct even with these idiotic “TOO BIG TO FAIL” regulations and clichés that most people really don’t understand.

      To C-Low’s point, just think of how stupid it is that we secured the organizations that gambled huge and lost, told them not to do it again, AND said we will bail you out though if it does happen again. As C-Low said, allow someone in the market to buy those assets up for pennies on the dollar and take their turn at using those assets efficiently and much more smartly. We’ve incentivized bad behavior.

      Note that I keep using us and we. We are the government. None of those banks, collectively or individually, have more power than us. We just don’t wield our power very often.

      Like

      • I did not disagree with what should be done. If you read my second post I say the problem with what is proposed is that those w/ power w/in the structure of our current financial system will oppose it and undermine it each step of the way.

        Additionally, what you are saying about transfer of assets to entities that will manage more efficiently and smartly is true but is also inherently a political process and would require a consensus in a BOUGHT CONGRESS to accomplish.

        Additionally, the precious ‘economy’ that is represented by the ‘stock market’ or so im told, would have the most incredible of hissy fits (deflationary bust) if the proposed solution were imposed. Yes Yes the proposed solution does make sense – what im saying is getting there is the hard part and why i said presumptuous and idealistic.

        Like

  42. dbethd says:

    So essentially create competition(other smaller banks) under less-restraining laws to take back the bank market from the control of the ten “big banks.” Am I thinking correctly per Sundance’s explanation?

    Liked by 1 person

  43. CharterOakie says:

    Fauxcahontas is absolutely insufferable. Arrogance compounded by ignorance.
    And then a grating, whiny voice on top of that.

    She demands an answer but repeatedly interrupts so as not to allow the answer.

    One of the prime reasons some states are so ‘Blue’ (e.g. Massachusetts) is because of the concentration of colleges in those states. And colleges are filled with (i) left wing professors and grad students and (ii) stupid, vapid, impressionable 18-22 year olds.

    I know, because I once was one. As were nearly all the other undergraduates around me.

    Change the voting age back to 21 AT LEAST. Maybe require property ownership and/or current tax-paying status as additional eligibility criteria.

    Go ahead, lefties, scream and howl. Stomp your feet like the mental adolescents that you are.

    Liked by 1 person

  44. wolfmoon1776 says:

    Great explanation – much appreciated.

    THIS is why Trump brought in minds like Mnuchin, who see the big picture and the big problems. This is a NEW situation, and the OLD solution won’t work, but this newer and even better solution gets the country back to exactly what Trump wants while creating MORE opportunity.

    You hire genius-level talent, you get genius-level answers.

    Liked by 1 person

    • wolfmoon1776 says:

      PS – this shows that Mnuchin has a firm grasp of evolving systems, and how certain solutions work and others don’t. The Democrat-style solutions are all non-starters – good grief – they CREATED the problems. Mnuchin clearly gets inhibition, feedback, relative rates, and all the stuff needed to solve the problem. Fauxcahontas, with her prejudicially oppositional thinking, could not even begin to understand.

      ADULTS! IN CHARGE! HALLELUJAH!

      Liked by 1 person

  45. spaulj67 says:

    “This problem is why President Trump and Secretary Mnuchin are working to create a parallel banking system” – Sundance

    The energy that powers the swamp ‘is’ the ‘unconstitutional’ money system currently in place. If we don’t cut off the fuel, the fire will never end.

    Step 1:
    We need to stand up a parallel banking system with the Federal Treasury at the center in partnership with the State Treasuries, community banks, credit unions and State banks model after the Bank of North Dakota to become the retail side of this new system. In short, over leverage too big to fail banks that colluded to this day with the international banking cartel and assumed power over us in 1913, need not apply. This new banking network forms the back bone of the tax collection and government payment system.

    Though these too big to fail banks will form a key component of the new system above in Step 2. The bail-out deal this time around though will be used acquire any assets the failed banks have in bankruptcy at fire sale prices where it makes sense for the next system. Same buildings, infrastructure and employees; just under new management and signage working with real constitutional money.

    Step 2:
    An international banking/monetary crisis of epic proportions arrives. The President under the emergency powers provisions orders the Treasury to issue a new debt free currency and electronic equivalents via the banking network above and as part of the bail-out of the too big to fail system. Federal Reserve notes or bank deposits are exchangeable, at a 1/1 ratio up to the FDIC insurance limits and then progressive increased to 20/1 for individuals, with more generous provisions for businesses based on their employment payroll per IRS filings, for the new ‘constitutional’ currency. All debts, public and private, payable in Federal Reserve notes can also be repaid at 20/1 in terms of the new currency. Federal Reserve currency or its equivalent held internationally will receive an additional conversion tax. The ability to convert Federal Reserve notes will limited in time frame at which point no Federal Reserve notes or equivalent will be accepted.

    Capital gain taxes will be removed from ‘all’ coins issued from the Treasury and those with other forms of gold, silver or platinum delivered to the Treasury or delegates, and will be payable in this new currency (paper or electronic) or in Treasury issued coins, minus a seignorage fee. The operation of any gold, silver or platinum exchange that does not enforce physical delivery and receipt of metal per the contract by both parties shall be consider counterfeiting of US money and prosecuted accordingly.

    Like

  46. Donna in Oregon says:

    When the derivative bubble bursts–and it will– the entire mega bank industry will crash and burn. The underlying motive for the mega banks is greed and it is certain that one of them will make a stupid mistake and they will all come tumbling down like a House of Cards.

    Remember Jamie Dimon before Congress in 2012 to describe how his “shark” almost started another derivative meltdown? I don’t like Rolling Stone usually, but this is the most accurate account of what is wrong with our government. They are and were appalling. Read this and you will understand why the Trump Admin. changed it’s mind and decided just to save us:

    http://www.rollingstone.com/politics/news/senators-grovel-embarrass-themselves-at-dimon-hearing-20120615

    Like

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