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Wednesday, October 19, 2011

Complaints about the banking industry

The following separate public complaints, legislative investigation and media reports about banking activities go as high up as the Federal Reserve Bank. On first impression they certainly show a dubious side to banking. What is demonstrated by these banking issues are questionable practices that may constitute extortion of money from tax payers, participation in conflict of interest, and violation of securities law all without serious repercussion.

Complaint 1: BofA shifting derivatives to FDIC insured accounts

This was reported by Bloomberg and highlighted by The Daily Bail on October 18th, 2011. Derivatives are the same type of financial instruments that caused the financial crisis of 2008; they are risky assets. To protect the bank from this risk the assets are claimed to have been moved to accounts that the Federal Depository Insurance Corporation insures. This is the same insurer that protects savings and checking accounts and is financing by the government. The complaint is that Bank of America is leaning on the U.S. Government, and hence U.S. Taxpayers, to hedge its risky decisions.

Complaint 2: Federal Reserve financing foreign governments

The Federal Reserve Bank is supposed to be the U.S. Central bank, not the global central bank or 'socialism for the wealthy'. It's primary mandate is portrayed to be the inflationary and economic concerns of the U.S. People, however  a legislative audit of the Federal Reserve Bank show $16 trillion in additional previously undisclosed liabilities, an amount not evident on its 'selected liabilities'  The fact these loans were not openly disclosed seems a little strange since the Federal Reserve Balance Sheet gives the impression of being complete, the Wall Street Journal does not show it on one of its versions of the Fed Balance sheet, and according to Senator Sanders of Vermont, a reasonable suspicion of conflict of interest occurs when banking officials receiving loans also serve the Federal Reserve Bank. The following video elaborates on this issue.

Complaint 3: JP Morgan Chase manipulating silver price

This particular concern has been spearheaded by Max Kesier of the Keiser Report on Russian Television. The claim, as illustrated in the video below is that JP Morgan Chase & Co. (JPM) practiced naked short selling, a trading method in which shares not owned are traded, with the aim of price manipulation.  A congressional hearing also took place in regard to this.

Complaint 4: Banks using loan loss reserves to report profits

This is a recent concern during Q3 2011 earnings season in reference to Citi Group in particular. NDTV describes how Citigroup earned 74 percent in Q3 using loan loss reserves to offset bad loan expenses. The accounting basis for this is also described in an October 17th, 2011 Moneycation Financial News reference to the Economic Review.