I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Thomas Jefferson, (Attributed)
3rd president of US (1743 – 1826)
(Reuters) – A long-running fight comes to a head on Monday when court proceedings begin over an $8.5 billion settlement between Bank of America Corp and investors in mortgage securities that turned sour in the financial crisis.
To understand the egregious nature of the Bank of America settlement, one must explore just how we got here.
In 1913 Congress passed a bill called the Federal Reserve Act of 1913, which allowed for an independent bank, deceptively named the Federal Reserve. The privately held bank was a monopoly given to a handful of private bankers to issue America’s money. http://criminalbankingmonopoly.wordpress.com/tag/federal-reserve-act-1913/.
In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their names on what is known today as the Glass-Steagall Act (GSA). This act separated investment and commercial banking activities.
In an effort to prevent financial conglomerates from amassing too much power, the new Act focused on banks involved in the insurance sector. Congress agreed that bearing the high risks undertaken in underwriting insurance is not good banking practice. Thus, as an extension of the Glass-Steagall Act, the Bank Holding Company Act further separated financial activities by creating a wall between insurance and banking. Even though banks could, and still can, sell insurance and insurance products, underwriting insurance was forbidden. Reference: http://www.investopedia.com/articles/03/071603.asp.
I began working for a National Bank in 1993. At that time, the banks sold securities but the investment employees had signs all over their offices that they were not FDIC insured and you invested at your own risk. In 1999 congress passed the Graham Leach Bliley Bill and President Bill Clinton signed the act into law. The bill took down the fire walls between Wall Street Banks (not FDIC insured) and commercial banks (FDIC insured) and the insurance industry. There was only about 8 Senators who voted against the repeal of Glass Steagall so the bill was veto proof and did not need President Clinton’s signature to become law.
On December 15th 2000, 3 days after the infamous Supreme Court decision in Bush v Gore, the Commodity Futures Modernization Act was passed. This law was no veto proof and President Clinton really did not want to sign this into law, but his treasury secretary Robert Rubin convinced him that there were so few people who understood the market that it would not pose any significant risk.
The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that officially ensured the deregulation of financial products known as over-the-counter derivatives. It was signed into law on December 21, 2000 by President Bill Clinton. It clarified the law so that most over-the-counter (OTC) derivatives transactions between “sophisticated parties” would not be regulated as “futures” under the Commodity Exchange Act of 1936 (CEA) or as “securities” under the federal securities laws. Instead, the major dealers of those products (banks and securities firms) would continue to have their dealings in OTC derivatives supervised by their federal regulators under general “safety and soundness” standards. The Commodity Futures Trading Commission’s (CFTC) desire to have “Functional regulation” of the market was also rejected. Instead, the CFTC would continue to do “entity-based supervision of OTC derivatives dealers.”  These derivatives, especially the credit default swap, would be at the heart of the financial crisis of 2008 and the subsequent 2008–2012 global recession.
The effects of the CFMA (Commodity Futures Modernization Act of 2000) were absolutely horrific. This article is specifically about the Mortgage Backed Securities portion of the act. Prior to the passing of CFMA, if you took out a mortgage on a home you had to have 20% down or you would have to take out a PMI (an insurance policy that would protect the bank’s interest should you default). The banks and many non-bank mortgage companies were giving out mortgages to anyone and not requiring any documentation that you were able to pay that mortgage back.
The insurance industry refused to issue insurance policies on these bad mortgages so the banks started giving out piggy back loans to cover there 20% so you could side step the insurance requirements. The banks then packaged these mortgages mixed with good mortgages into securities. The banks then paid the bond rating agencies to rate these securities as AAA so that they could be sold to investors that required investments only into low risk or AAA rated products. Those investors were teachers union, municipal projects, etc. The banks then basically placed bets through AIG that if these securities failed the banks would be paid off so it was in their interest that the securities fail.
Today, the derivative trading is estimated to be in excess of 700 trillion on any given day and is unregulated and untaxed. So for Bank of America to settle for 8.5 billion after the banks and Wall Street and the insurance industry stole trillions from investors, municipalities is an outrage to pay off the insurance industry and Wall Street. All that money came from Main Street and our infrastructure is in shambles and you have doctors without borders treating the American people in cattle stanchions in fair grounds while the CEO of United Health gets a 102 million dollar retirement plan is an.
Written By: First & Last Name: Patricia Baeten
Sources / Supporting Links / Works Cited (If none, please type “none”): http://www.reuters.com/article/2013/06/03/us-bankofamerica-mbs-idUSBRE9520BX20130603