June 24, 2022
Written by Linda S Brooks
Banking in America at the Commercial level, which is community banking, has one outstanding feature: they are the depository for the vast majority of savings accounts in the entire country; however, highly regulated regarding its use for lending. This became particularly true since the global crash of the housing market in 2005 affecting all housing in the nation valued at over $350,000 initiating a fifty percent correction in values. The house my husband and I owned in South Florida Ft. Lauderdale area , for instance, valued at just over nine-hundred thousand in 2004, dropped to four-hundred fifty thousand dollars over night and would not be regained until 2020. The cause of the global collapse was stated to be loose lending policy that resulted in bank portfolios with mortgage balances now higher than the value of the house they financed leading to bank foreclosures everywhere if you understand that banks sell portfolios of existing loans they carry that suddenly became unsellable. New regulations on lending were set in place that stiffened the ability to lend; thus, the depositories with the largest holdings of savings accounts in the United States, just sat there and together with the Federal Reserves control over interest rates, commercial banks experienced bankruptcies themselves saved only by mergers. For instance, amongst the largest banks in the country, Wachovia Bank had bankrupted then seized by the FDIC who imposed a sell to Wells Fargo.
🟠The introduction of crypto currency as a basis for global currency replacing the US dollar, the regulatory agencies in the US saw opportunity to shift the assets of commercial banks to the Central Banks who normally functioned as servicing part of the Federal Reserves regulatory system; for instance, if a commercial bank over-reached the limit for lending, it was the Central Bank they borrowed from until the limit was recaptured. Switching from the US dollar to Crytocurrency became related to having the Central Banks absorb the community banks presenting an opportunity to be able to lend at a greater degree of these excess dollars held by those banks if the commercial banks, an option that global communication technology has made practical. Necessarily a very conservative industry guarding the wealth of the nation, this temptation has not been exercised yet with the Central Banks in the US claiming cryptocurrency has not yet developed enough to be considered a safe transition. The focus at this juncture in time seems to center on a trend in US banking that is moving first to fortification through centralized authority that first of all attacking what they see as malicious bank mergers and adding political ideology especially regarding minority interests at its base which will be broadened by adding under the banking system authority currently unrelated industries while still preserving the Commercial Banking branch; however, I also see the possibility of not only fortification but also as a bridge bringing the two banking agencies together in a pre merger posture.
🟠Commercial banking is already going the way of all businesses and shopping venue in the US that exceeded the capacity of in-store earnings around 2018 achieved through the internet by an intermediate connecting the buyer with the producer electronically bringing the Central Banking idea ever closer with the national debt as a strong, though silent, driving force that could make the Federal Reserve/Central Bank-Commercial Bank transition even more attractive. According to The Economist on Monetary policy (June 18th, 2022 issue), unsustainable debt cannot be allowed to pose a risk to the Central Bank nor can government be allowed any longer the extravagance of negative spending particularly when that policy is exercised universally in either the international arena or home. Presently, the US dollar is valued at above $104 without question the cause of an expected 9% inflation rate this year in the US fostered by a number of Wars since 2002 with large amounts of money going out of the country which is what causes the dollar to appreciate as it is now not only putting a strangle hold on the US economy but amplified thru exports that will diminishes as international buyers go elsewhere for cheaper prices. The recorded example of the effect of prolonged War occurred during and following the ten year Vietnam War with the US inflation rate skyrocketing to 15% according to the Federal Reserve culminating into a Hidden Depression and is the point where stagflation began in the US.
This is a little bit of a review having talked about the cryptocurrency issue not to long ago, but worthy of mentioning since we are at the same place again at the current time having just left a twenty year War in the Middle East and then jumping into the Russia-Ukraine conflict that though the US has held back from directly engaging the conflict themselves; nonetheless funding the Ukraine to the tune of $54 billion according to the NY Times not to mention funding illegal immigrants who are being repatriated to their country of origin.
🟠The fact is, large amounts of money going out of the country hurts any country anywhere with many examples of national bankruptcies recorded in history; in the Modern era one can certainly point to the aftermath of WWI that gave opportunity for Hitler to begin his push across a continent that was financially unable to confront him even though they had a treaty. Prolonged Wars can bankrupt a country which is why War technology has already developed weaponry that will dictate a short, speedy but also brutal strategy in a future that does not intend to allow the success of a War Campaign to dictate financial collapse at home; unfortunately it is not this strategy that is being utilized that would make it possible to complete a conflict in a matter of months rather years, rather it is the WWII genre of combat that remains giving cause for restrictions at home and modifications intended to endure the ability to finance the engagement of these conflicts.
🟠These issues are strong enough to produce a cause for a protective posture. The Wall Street Journal just ran a story on a Mr. Rohit Chopra who was appointed by President Joe Biden to the Directorship of the Consumer Financial Protective Bureau which gives him a seat on the board of the FDIC; he is considered a Biden man, according to the WSJ, and counsel from the Consumer Bureau has given instructions to the Justice Department to yield to Mr. Chopra who already has a powerful presence in the industry, advancing like a steam roller claiming that former directors have underused their authority while associates in the industry and the Republicans in Congress are accusing him of dictatorial leadership. If you put together all the plans Mr. Chopra states, what he is being criticized for is that he wants to establish the presence of a greater centralized authority in his office through which he intends to create “tougher business restrictions” and greater scrutiny over bank mergers, removing some barriers while installing others, particularly regarding minorities, covering a wide agenda that is pinpointed as politically ideological; a position that has been avoided in the past following the pattern of the Federal Reserve which is a completely autonomous agency. However, its not only his agenda that’s important; but the leadership role he intends to build; a role that poses a question: is he doing the bidding of the Department of the Treasury since the OCC, the Office of the Comptroller of the Currency, is one of their bureaus. If he is allowed, it may indicate that a greater control of the commercial banks is desired but by who and for what? What would a stronger banking system ordered by the Department of the Treasury achieve with Council from the Consumer Bureau running ahead and conveying to the Justice Department to yield to Mr. Chopra? It’s got to be the money in the savings accounts held by the commercial banks; thus, the implication is that Mr. Chopra is going to be allowed to bend the rules, since he is not a rule maker, and he’s going to increase access to these monies that the Commercial bank was not allowed to do; but if the OCC is the rule makers, why do we need a Mr. Chopra and why do we need to inform the Justice Department to cover him?
NOTE:
1. I just encountered a bank merger here in Florida. It is referred to as a Black Bank: South State Bank.
Politics and other anomalies by Linda S Brook, is a Fla. LLC FEIN #88-2001600