Sentor from MA. Today in Bank Hearings Says He Will Keep NO MONEY IN BANKS

[Photoguy]

If no one is paying attention the heads of the 8 biggest banks and financial institutions are in Congress today testifying about the current conditions. The Congressman from Massachusetts Michael Capuano just said he has NO MONEY IN BANKS BECAUSE they are illegally and immorally still using the money to invest in credit default swaps and other shadow banking instruments. In other words they are not safe. This is the government talking. I will enjoy hearing responses from people who think the banking system is safe and scrupulous.

-Dennis

[Photoguy]

Here's the video.
YouTube - Congressman Capuano says "I don't have a penny of my money in your banks!!" to CEOs Feb 11 2009

[Braggi]

... Congressman Capuano says "I don't have a penny of my money in your banks!!" to CEOs Feb 11 2009 ...

So what?

-Jeff

[Hot Compost]

"i can't believe no one's prosecuted you on this"

SIV's were illegal from some time shortly after the Depression, when the Sarbanes-Oxley Act made the "bucket shops" (betting on loans, etc. - they made money on commissions. current incarnation is hedge funds.) illegal.

Sarbanes Oxley was repealed in 1999, in an act sponsored by Phil Gramm and signed by Bill Clinton, the "commodity futures modernization act".

credit derivatives (SIV'S) take 3 forms -
* mortage backed securities
* credit default swaps & credit default insurance
* other

all of these financial products have a sort of declarable worth when real estate prices were rising.

the amount of credit derivatives outstanding when things started to come apart in August 2007, ranges from $60 Trillion to $400 trillion. it is not financially transparent, and it's hard to get an exact number.

one other thing, the use of leverage. many investors in hedge funds used borrowed money.

the US government has made a commitment to bail out 2 of the 3 forms of credit derivatives - mortgage-backed securities and credit default insurance (e.g., the $150 billion for AIG).

i would say, why not let the wealthy investors take the loss on the chin, and if the margin call wipes them out, so be it.

i would also say, it is legitimate to use asset forfeiture procedures against the hedge funds and other financial institutions that engaged in fraud.

the US government has a lot of experience with asset forfeiture proceedings, e.g. using RICO laws to go after large drug dealers.

the hedge funds & investment banks made many trillions "on the way up" - from before 1999 to about 2007.

part of the situation is that these financial products are attached to the "heart of the system" - many large banks have them on their balance sheets. its like a parasite attached to the aorta of a human patient; it's hard to remove the parasite without killing the patients.

the way that the financial industry involved to, credit derivatives had the ability to wipe out all the large US banks.

that the government has chosen not to prosecute, and to bail out wealthy investors, affects every American, since they are being stuck with the bill for the bail-out.

when the senator says he wouldn't have his money in a bank with exposure to Credit Derivatives / SIV's (structured investment vehicles), he's just being fiscally prudent.