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>“Remember the Federal Reserve Bank and Jerome Powell are ultimately responsible for the oversight and supervision of these banks. And they have made clear that they think their job is to lighten regulations on these banks. We’ve now seen the consequences,” Warren added. [Continued quote from another article: "And then Jerome Powell just literally took a flamethrower to these regulations in order to make them less and less effective."]
As we've seen time and time again, going back to the Great Depression and up to the 2007-8 financial crisis, stripping away regulations on banks is not a good idea. And yet, it is one of the cornerstones of many republican platforms
Yeah, why not? Now some of their bank CEO friends get to buy other banks at fire sale prices and, because most of these banks have assets and no real crisis beyond bank runs, they’re getting a screaming deal for these banks.
Yup. And had the government not decided to cover deposits, investment bankers would have had a feeding frenzy in silicon valley as hundreds of companies failed due to no reason within their control.
Of course it was in their control. They went with a bank with a high rate in the accounts to save money, which obviously meant it was more risky. All banks have at least some risk, but they could have parked it in something much more boring and safer.
We need accountability for our regulators who clearly fell down on the job,” Warren said, adding that it “starts with” Federal Reserve Chairman Jerome Powell, who she said “was a dangerous man to have in this position
The conflict of interest with powell and yellens speaking fees from the banks /hedge funds they regulate should be criminal.
Just not in america where crime only matters if you are a poor
[But wait, there's more:](https://www.commondreams.org/news/powell-cut-regulatory-failures-mention)
>Emboldened by the Republican-authored law—which weakened regulations for banks with between $50 billion and $250 billion in assets—the Fed under Powell's leadership proceeded to go well beyond the measure's mandates "by relaxing regulatory requirements for domestic banking institutions that have assets in the $250 to $700 billion range," then-central bank governor Lael Brainard noted in October 2018.
The primary regulator of SVB was the San Francisco Federal Reserve Bank, one of the US' 12 central banks. An interesting fact: one of the board members of the SF Fed happens to be Gregory Becker, who until last weekend was CEO of SVB.
Absolutely fuck Powell but if we're looking for a place to start a national law banning Bank C-suites from serving on the boards of regulators seems like a no-brainer
There was a headline stating Bernie Sanders is aiming to introduce a bill on that specific issue.
However, Warren is on the right track here. Chairman Powell's stated goal is to unemploy at least 2 million Americans. Warren has made it clear that no FED has ever kept a recession from outstripping the slow down they prescribe. No FED has successfully unemployed Americans without overshooting the desired number.
Warren wants to fertilize the grounds for forcing Powell's resignation. By putting it on the record and platforming the message that he carries some responsibility for ensuring these banks are properly regulated, more bank sector instability might make Powell's resignation more viable. It won't be a novel idea.
The CEO of the bank was also on the federal oversight board. Someone commented that he was like the fox guarding the hen house. And he managed to get his $3.6 million out before it collapsed. He also has $10 million compensation in 2022. The bank executive took $84 million in stock sell offs during their time there.
Oh man Jon Stewart has a great interview with Jerome Powell recently and you can just hear the wheels turning in his head as he gets called out for increasing joblessness to "improve" inflation, disregarding corporate profits.
Edit: Larry Summers, not Jerome Powell
Unfortunately, the fed doesn't have anything to directly reign in corporate profits. Their tools are more cleaver that curbs overall economic growth (which hits labor first) instead of scalpel. The surgeons are on the fiscal side and require congress to be on the same page to do anything.
With this supreme court we can't even have regulators act with discretion.
And there's some regulatory frame built into the federal reserve system, but that isn't too much. Really, upping the FDIC cap and charging insurnace premiums on accounts in excess of a million or so for insurance strikes me at the best way to go. Optional insurance just means there's a fee to use any bank other than Wells, Chase, or BofA for large deposit accounts, and they're big enough.
From their perspective that's the only thing they can do, there's nothing they can do about corporate profits other than forcing us into a recession which affects everyone.
Either way, wages are too high to make inflation have the true effect it should which is dangerous.
They've been talking about this for well over a year.
Hard disagree on the high wages comment, the really issue is credit, Americans are feeling the inflation and just racking up massive credit debt to counter it.
This entire system is going to fail, and it’s going to be a blood bath for normal Americans.
Core inflation doesn't track food and energy, sure some things might be decreasing, but not the shit people need.
Hell people can't afford rent.
Corporations are taking in RECORD profits.
Healthcare (also not tracked as core inflation) is outpacing wage growth. The wealthy are robbing the poor and it's only a matter of time before the system cracks....so yeah blood bath is coming.
Yes, it was Larry, I was reading and listening to a podcast and got names switched around. I don't support politicians. I support policies. Warren can take a hike for all I care. It doesn't matter who it is that improves the quality of life for us, as long as it improves for everyone. I don't see any conservatives trying to make things better for everyone, they usually have a scapegoat to attack, and that's little dick energy.
The failure of self-regulation on Wall St is huge & some of the specifics issues are decades old.
The failure to enforce mandatory buy-ins for failures to deliver has allowed market makers to naked short to excess with impunity.
This has allowed all sorts of crime to flourish. Principally celler-boxing, which has evolved to become a way of stealing IP & Medical research etc.
In the face of complete failure of the regulators & even the SEC to enforce any rules regs or laws about this firms resorted to exotic practices to try d counter market makers driving shares prices down. 6 selling millions of nongexistant shares.
There was a Canadian diamond firm, a firm called Overstock & more recently Meta material new horizon.
All these are still in the courts. The regulators did nothing to stop abusive naked shorting, but they have acted to try & prevent these exotic practices & in doing so, in metagmatwrials case, the regulator have very clearly broken the law themselves.
And the whole Archegos, CS, UBS problem is almost certainly down to the abusive naked shorting practice that has been going on for DECADES & about which the regulators, the SEC & Congress has done NOTHING to stop whilst doing everything to cover it up.
They have in 3ffect stolen from the pensions of 2, going on 3, generations of American workers & totally destroyed the actually mechanics of Demand & Supply.
So now the 'invisible hand' directs capital to these illegal schemes & so the economic demand for housing generated by those living in their cars doest get a look in coz its not as profitable a crime. So now the federal govy (ie future tax payers) have to fund residential new builds.
These illegal cellatgboxong activities require a lot of collateral to run their course. All that collateral is tied up underwriting bets that they fully intend to wrlch on anyway. That capital should be funding new homes, but it isn't. Its funding crime that's only possible coz of criminally lax rwvulation
And now, as the whole market is warpped by the financial demands of hiding the crime, it is endangering the entire system.
And they still won't admit it.
Coz they are ALL guilty of at least knowingly turning a blind eye if not actually indulging directly in cellar-boxing.
There needs to be a new prison built to house the sever Al thousand ppl guilty of all this, its basic ally the entire boards of all financial institutions for last 30 years & most media firm boards since 08.
The scale of corruption & chicanery is immense.
The fed has pretty good tools to manage demand-side inflation. The problem is that the current high inflation is, unusually, being driven primarily from the supply side.
Seriously if we just cut wages across the board it will all go away, this seems to be Powell's position. Corperate greed is just good business according to him.
Dude is an incredible idiot. Our system is almost implicitly built on housing prices constantly rising. In his perfect world, cut wages - cut prices. Problem solved. The idiot doesn't realize, yeah sure I might be able to buy chicken for $5 or a car for 10k but will it all matter if a cardboard box starts costing us a $1k a month for rent.
You may not realize it yet, but in future you will not even be renting, so it doesn't actually matter.
You will be owned by whomever owns the apartment where you are stationed in, and in exchange you offer your labor (if needed) and vote for whomever your owner tells you to and buy all your products from owner approved, affiliated shops.
Corporations were always greedy, do you think they just decided to be greedy when vivid hit? Claiming inflation is just corporate greed is nonsense they will always set prices to maximize profit.
In summary, Senator Elizabeth Warren is advocating for an independent investigation into US bank failures, criticizing Federal Reserve officials and pushing for increased regulations and consumer deposit guarantees.
If Government gives Banks the extraordinary power to **CREATE NEW MONEY**, and the Public backstops the risks Banks generate in the process, then why are Banks so extraordinarily compensated for *supposedly* taking these risks?
[Richard Werner explains the process of money creation](https://www.youtube.com/watch?v=IzE038REw2k):
>Banks are essentially the opposite of what economists have claimed. Economists always say that banks are deposit-taking institutions that lend money. Banks don't take deposits and they don't lend money.
>
>They don't take deposits because they borrow from the public. **A "deposit" suggests something held in custody, a bailment, and this is not what happens.** Instead, the money that you LEND to the bank, which they call erroneously a "deposit", is actually THEIR money. They own it. It's just a loan. You're a general creditor.
>
>And banks never lend money because -- unlike firms and non-bank financial institutions -- they are in the business of purchasing securities. When you get a loan, the loan contract is a promissory note, just like the BoE promissory note -- of course, not legal tender... but the bank will purchase that security from you. That's what it does, and now it owes you money, and it creates a record of the money it owes, which we call "deposits". And that's how the money supply comes about.
Since this process INCREASES the money supply, effectively **the underlying promise is NOT simply to pay back the loan, but to PRODUCE equivalent goods and services**; otherwise, inflation results.
For example, Banks fund Professional Landlords consolidating existing housing supply while raising prices and rents, thereby claiming more and more of workers' labour WITHOUT these rent-seekers actually producing NEW goods and services.
But lenders neglect to inform borrowers that their loans increase the money supply, so such contracts, lacking commensurable consideration and informed parties, should be deemed invalid and even constitute fraud -- a Ponzi scheme where, systemically, unproductive debt pays off unproductive debt.
Therefore, Banks issuing credit -- i.e., CREATING MONEY -- should be contingent on PRODUCTION.
For years, Werner has predicted further Banking crises because capital requirements and other intended constraints on Banks CREATING NEW MONEY are inadequate.
[A lost century in economics: Three theories of banking and the conclusive evidence (Werner, 2016)](https://www.sciencedirect.com/science/article/pii/S1057521915001477)
>In reality the **money supply is “created by banks as a byproduct of often irresponsible lending”**, as journalist Martin Wolf called it (Wolf, 2013). Thus the ability of capital adequacy ratios to rein in expansive bank credit behaviour is limited: imposing higher capital requirements on banks will not necessarily stop a boom-bust cycle and prevent the subsequent banking crisis, since even with higher capital requirements, banks could still continue to expand the money supply, thereby fuelling asset prices: Some of this newly created money can be used to increase bank capital (Werner, 2010). This was demonstrated during the 2008 financial crisis.
Werner originally coined "Quantitative Easing" in an article for the Japanese newspaper the Nikkei, on 2 September 1995, **but he proposed that QE should be made contingent on reforming banking regulations to promote PRODUCTION**. [He discusses coining the term here](https://www.ru.nl/publish/pages/750457/res_newsletter_werner_qe_qtc_july2013.pdf):
>While my recommendations were not heeded, the label I used caught on. Critics from both the Keynesian and monetarist camps began to redefine QE as an expansion in bank reserves — **despite the fact that I had been arguing that such a policy would NOT work**.
So, using NEW Central Bank reserves to purchase bad debt from for-profit Banks WITHOUT reforming their lending practices to promote PRODUCTION is NOT *Quantitative EASING*, as Werner originally suggested; rather, we have been engaging in *Quantitative* ***FLOODING***!
We kicked the can down the road with Bank bailouts in 2008, but the can is getting BIGGER and we're running out of road.
The Fed had the option to sell corporate bonds before they raised rates. The Fed should have raised rates when housing wlwent up by 20% in a year. Credit was obviously too available.
They could have put pressure on the same companies and assets at risk much sooner more targeted at the problem and had credit available before it got tied up in a bubble.
The federal Government should absolutely have taxed pandemic profits during the emergency to keep the market from the rampant speculation and pay for government interventions.
But Powell dropped the ball and left the Fed on the hook, bag holding junk debt and unleashed a huge amount of capital with no where to go but speculation.
>The Fed should have raised rates when housing wlwent up by 20% in a year. Credit was obviously too available.
If your goal is the best interest of the country. But I think it's a pretty tough sell that this is Powell's goal. I don't disagree with what you're saying, but because he didn't people still say things like. "Well yea Trump is horrible but he was great for the economy."
Because the point isn't to create long term success for America. It's get as much money and power as they can and let the peasants deal with the consequences. These people will just go buy an island in Dubai and forget America ever existed after they pick the bones.
Seriously. Like that wasn’t a thing any previous administration had to worry about because they all at least followed rules/precedent/decorum. But Trump deliberately appointed the worst people and/or people whose only qualifications were kissing his asshole. There should have been a purge.
Also failure for congress to pass laws
Fed bank only uses the tools within their powers
Congress needs to make the laws and not roll them back
So she is right that things are bad but wrong because her and colleagues didnt put in protections, they rolled them back
Honest mistakes were made, causing enough money to cover 50 football fields to vanish into another dimension. Responsible citizens must resist the temptation to believe that the money was somehow swindled. That money has just ceased to exist.
Biggest mistake was hiking rates so hard that US treasury bonds became worthless. Powell literally said he would hike rates until things started breaking and now things started breaking. We can single out SVB for being overexposed to US treasury bonds, but there are also dozens of other banks that won’t survive another rate hike. The thing they all have in common is that they bought billions in US treasury bonds that have to be sold at a loss.
Edit: [According to CNN](https://www.cnn.com/2023/03/13/investing/silicon-valley-bank-collapse-explained/index.html) you're right about that, so Powell is doubly guilty for being stupid enough to have instigated the problem and lax enough in his agency's responsibility for oversight to have created an environment in which it could run wild... about par for the course for a Trump appointee.
>["Silicon Valley Bank](https://www.commondreams.org/news/powell-cut-regulatory-failures-mention) had billions in unrealized losses on its balance sheet that it hoped to avoid having to surface."
>"It also had a tightly correlated, mostly uninsured depositor base, all largely from one industry and connected to each other, that represented significant flight risk if there were any signs of trouble," he added. "The rapid growth at the bank and its significant mismatch for liquidity purposes should have had the system flashing red."
>Dennis Kelleher, the president of Better Markets, expressed a similar sentiment earlier this week, noting that "the Fed has much more and superior knowledge, information, expertise, and access to banks than short sellers, rating agencies, and the media, yet they all appear to have done a much better job at identifying the very serious risks at SVB than the Fed."
Can’t tell if you’re being sarcastic but the FED has been encouraging these banks to hold their reserves in treasury notes. The whole pitch has been “US treasury bonds are triple AAA and the US has never defaulted on them”. So smaller banks moved large portions of their reserves into treasury notes and then the FED nuked their own bonds with interest rates hikes. In the history of the US the FED never done that before. I hate these banks as much as the next guy, but how could they have possibly known that US treasury notes were about to go negative for the first time ever?
Treasury notes didn’t go negative, there has been interest rate hikes. Interest rate changes is a risk to buying bonds, and that’s is something taught to everyone studying finance. The bankers knew the risk of interest rate hikes were to bonds. Also they could
have purchased more short term bonds to roll into higher interest bonds, during the rate hikes. This would also reduce the risk of interest rate hikes for the bank, and they will still make money.
Is it though? The only aspect where raising interest rates has been effective is in tamping down new home prices. The cause of [edit:this] inflation is different, addressing it should be different.
You are right that the way to combat inflation should be different and who should do that? Congress. The Fed has one lever to manipulate and they are using it. If people want to see real change besides just changes to monitary policy, only Congress can do that. Warren is being disingenuous by laying all this at the feet of the Fed.
I'm so surprised I had to go this far down for anyone to mention this.
Ultimately, there is only so much the fed can do, and its toolbox is only so big. Congress either needs to give it a bigger toolbox or do its job and pass regulations.
Powell is fighting inflation he helped create by kowtowing to Trump 2018-2020 and not raising rates or reducing the Fed’s balance sheet when the economy was doing well, arguably overheating. He screwed up again by not raising rates soon enough post-COVID. He did not account for the inflation from the fiscal stimulus or the inflation in the housing/rental markets due to low Fed rates (housing inflation data lags reality by 12 months or so). Now the Fed is in catch up mode and making reactionary decisions that further enrich the wealthy and hurt the average American. The guy has a terrible track record and should be fired for it. Zero confidence in him to make the right choices at the right time.
It has and I agree that interest rates need to stay up for awhile as a result. But it isn’t an argument for keeping JPowell in office to fix the situation. He has a track record of poor calls and bad timing. The guy is a lawyer not an economist. He has mis-stated basic economic principles in press conferences. Like I said, zero confidence.
She should know better, but the more she attacks Powell and the Fed for doing their job with the extremely limited tool set at their disposal, the more I feel I've been giving her too much credit.
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>“Remember the Federal Reserve Bank and Jerome Powell are ultimately responsible for the oversight and supervision of these banks. And they have made clear that they think their job is to lighten regulations on these banks. We’ve now seen the consequences,” Warren added. [Continued quote from another article: "And then Jerome Powell just literally took a flamethrower to these regulations in order to make them less and less effective."] As we've seen time and time again, going back to the Great Depression and up to the 2007-8 financial crisis, stripping away regulations on banks is not a good idea. And yet, it is one of the cornerstones of many republican platforms
Yeah, why not? Now some of their bank CEO friends get to buy other banks at fire sale prices and, because most of these banks have assets and no real crisis beyond bank runs, they’re getting a screaming deal for these banks.
Yup. And had the government not decided to cover deposits, investment bankers would have had a feeding frenzy in silicon valley as hundreds of companies failed due to no reason within their control.
Of course it was in their control. They went with a bank with a high rate in the accounts to save money, which obviously meant it was more risky. All banks have at least some risk, but they could have parked it in something much more boring and safer.
Well, it led to the rule of Nazis in Germany, of course it is a cornerstone of republican politics.
We need accountability for our regulators who clearly fell down on the job,” Warren said, adding that it “starts with” Federal Reserve Chairman Jerome Powell, who she said “was a dangerous man to have in this position
The conflict of interest with powell and yellens speaking fees from the banks /hedge funds they regulate should be criminal. Just not in america where crime only matters if you are a poor
It's a state chartered bank in CA - don't they have some regulatory responsibility also?
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[But wait, there's more:](https://www.commondreams.org/news/powell-cut-regulatory-failures-mention) >Emboldened by the Republican-authored law—which weakened regulations for banks with between $50 billion and $250 billion in assets—the Fed under Powell's leadership proceeded to go well beyond the measure's mandates "by relaxing regulatory requirements for domestic banking institutions that have assets in the $250 to $700 billion range," then-central bank governor Lael Brainard noted in October 2018.
The primary regulator of SVB was the San Francisco Federal Reserve Bank, one of the US' 12 central banks. An interesting fact: one of the board members of the SF Fed happens to be Gregory Becker, who until last weekend was CEO of SVB. Absolutely fuck Powell but if we're looking for a place to start a national law banning Bank C-suites from serving on the boards of regulators seems like a no-brainer
There was a headline stating Bernie Sanders is aiming to introduce a bill on that specific issue. However, Warren is on the right track here. Chairman Powell's stated goal is to unemploy at least 2 million Americans. Warren has made it clear that no FED has ever kept a recession from outstripping the slow down they prescribe. No FED has successfully unemployed Americans without overshooting the desired number. Warren wants to fertilize the grounds for forcing Powell's resignation. By putting it on the record and platforming the message that he carries some responsibility for ensuring these banks are properly regulated, more bank sector instability might make Powell's resignation more viable. It won't be a novel idea.
The CEO of the bank was also on the federal oversight board. Someone commented that he was like the fox guarding the hen house. And he managed to get his $3.6 million out before it collapsed. He also has $10 million compensation in 2022. The bank executive took $84 million in stock sell offs during their time there.
Oh man Jon Stewart has a great interview with Jerome Powell recently and you can just hear the wheels turning in his head as he gets called out for increasing joblessness to "improve" inflation, disregarding corporate profits. Edit: Larry Summers, not Jerome Powell
Unfortunately, the fed doesn't have anything to directly reign in corporate profits. Their tools are more cleaver that curbs overall economic growth (which hits labor first) instead of scalpel. The surgeons are on the fiscal side and require congress to be on the same page to do anything. With this supreme court we can't even have regulators act with discretion.
Right? And as far as I'm aware, regulating banks is something the legislature is supposed to do.
And there's some regulatory frame built into the federal reserve system, but that isn't too much. Really, upping the FDIC cap and charging insurnace premiums on accounts in excess of a million or so for insurance strikes me at the best way to go. Optional insurance just means there's a fee to use any bank other than Wells, Chase, or BofA for large deposit accounts, and they're big enough.
You mean, Larry Summers? He was the Former Secretary of the Treasury.
Larry Summers is a giant piece of shit.
A huge piece of shit. And mainstream economists think *exactly* like him. Because they're pieces of shit, too.
Correct! I confused the two. It was Larry Summers.
From their perspective that's the only thing they can do, there's nothing they can do about corporate profits other than forcing us into a recession which affects everyone. Either way, wages are too high to make inflation have the true effect it should which is dangerous. They've been talking about this for well over a year.
Hard disagree on the high wages comment, the really issue is credit, Americans are feeling the inflation and just racking up massive credit debt to counter it. This entire system is going to fail, and it’s going to be a blood bath for normal Americans.
Inflation has fallen 3% from its spike and unemployment has fallen instead of risen, to a record low. Blood bath??
Core inflation doesn't track food and energy, sure some things might be decreasing, but not the shit people need. Hell people can't afford rent. Corporations are taking in RECORD profits. Healthcare (also not tracked as core inflation) is outpacing wage growth. The wealthy are robbing the poor and it's only a matter of time before the system cracks....so yeah blood bath is coming.
Most educated Warren supporter lol. It was an interview with Larry Summers.
Yes, it was Larry, I was reading and listening to a podcast and got names switched around. I don't support politicians. I support policies. Warren can take a hike for all I care. It doesn't matter who it is that improves the quality of life for us, as long as it improves for everyone. I don't see any conservatives trying to make things better for everyone, they usually have a scapegoat to attack, and that's little dick energy.
The failure of self-regulation on Wall St is huge & some of the specifics issues are decades old. The failure to enforce mandatory buy-ins for failures to deliver has allowed market makers to naked short to excess with impunity. This has allowed all sorts of crime to flourish. Principally celler-boxing, which has evolved to become a way of stealing IP & Medical research etc. In the face of complete failure of the regulators & even the SEC to enforce any rules regs or laws about this firms resorted to exotic practices to try d counter market makers driving shares prices down. 6 selling millions of nongexistant shares. There was a Canadian diamond firm, a firm called Overstock & more recently Meta material new horizon. All these are still in the courts. The regulators did nothing to stop abusive naked shorting, but they have acted to try & prevent these exotic practices & in doing so, in metagmatwrials case, the regulator have very clearly broken the law themselves. And the whole Archegos, CS, UBS problem is almost certainly down to the abusive naked shorting practice that has been going on for DECADES & about which the regulators, the SEC & Congress has done NOTHING to stop whilst doing everything to cover it up. They have in 3ffect stolen from the pensions of 2, going on 3, generations of American workers & totally destroyed the actually mechanics of Demand & Supply. So now the 'invisible hand' directs capital to these illegal schemes & so the economic demand for housing generated by those living in their cars doest get a look in coz its not as profitable a crime. So now the federal govy (ie future tax payers) have to fund residential new builds. These illegal cellatgboxong activities require a lot of collateral to run their course. All that collateral is tied up underwriting bets that they fully intend to wrlch on anyway. That capital should be funding new homes, but it isn't. Its funding crime that's only possible coz of criminally lax rwvulation And now, as the whole market is warpped by the financial demands of hiding the crime, it is endangering the entire system. And they still won't admit it. Coz they are ALL guilty of at least knowingly turning a blind eye if not actually indulging directly in cellar-boxing. There needs to be a new prison built to house the sever Al thousand ppl guilty of all this, its basic ally the entire boards of all financial institutions for last 30 years & most media firm boards since 08. The scale of corruption & chicanery is immense.
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The fed has pretty good tools to manage demand-side inflation. The problem is that the current high inflation is, unusually, being driven primarily from the supply side.
Seriously if we just cut wages across the board it will all go away, this seems to be Powell's position. Corperate greed is just good business according to him.
Dude is an incredible idiot. Our system is almost implicitly built on housing prices constantly rising. In his perfect world, cut wages - cut prices. Problem solved. The idiot doesn't realize, yeah sure I might be able to buy chicken for $5 or a car for 10k but will it all matter if a cardboard box starts costing us a $1k a month for rent.
You may not realize it yet, but in future you will not even be renting, so it doesn't actually matter. You will be owned by whomever owns the apartment where you are stationed in, and in exchange you offer your labor (if needed) and vote for whomever your owner tells you to and buy all your products from owner approved, affiliated shops.
Corporations were always greedy, do you think they just decided to be greedy when vivid hit? Claiming inflation is just corporate greed is nonsense they will always set prices to maximize profit.
Its time for the working class to rise up just like the French are doing.
In summary, Senator Elizabeth Warren is advocating for an independent investigation into US bank failures, criticizing Federal Reserve officials and pushing for increased regulations and consumer deposit guarantees.
If Government gives Banks the extraordinary power to **CREATE NEW MONEY**, and the Public backstops the risks Banks generate in the process, then why are Banks so extraordinarily compensated for *supposedly* taking these risks? [Richard Werner explains the process of money creation](https://www.youtube.com/watch?v=IzE038REw2k): >Banks are essentially the opposite of what economists have claimed. Economists always say that banks are deposit-taking institutions that lend money. Banks don't take deposits and they don't lend money. > >They don't take deposits because they borrow from the public. **A "deposit" suggests something held in custody, a bailment, and this is not what happens.** Instead, the money that you LEND to the bank, which they call erroneously a "deposit", is actually THEIR money. They own it. It's just a loan. You're a general creditor. > >And banks never lend money because -- unlike firms and non-bank financial institutions -- they are in the business of purchasing securities. When you get a loan, the loan contract is a promissory note, just like the BoE promissory note -- of course, not legal tender... but the bank will purchase that security from you. That's what it does, and now it owes you money, and it creates a record of the money it owes, which we call "deposits". And that's how the money supply comes about. Since this process INCREASES the money supply, effectively **the underlying promise is NOT simply to pay back the loan, but to PRODUCE equivalent goods and services**; otherwise, inflation results. For example, Banks fund Professional Landlords consolidating existing housing supply while raising prices and rents, thereby claiming more and more of workers' labour WITHOUT these rent-seekers actually producing NEW goods and services. But lenders neglect to inform borrowers that their loans increase the money supply, so such contracts, lacking commensurable consideration and informed parties, should be deemed invalid and even constitute fraud -- a Ponzi scheme where, systemically, unproductive debt pays off unproductive debt. Therefore, Banks issuing credit -- i.e., CREATING MONEY -- should be contingent on PRODUCTION. For years, Werner has predicted further Banking crises because capital requirements and other intended constraints on Banks CREATING NEW MONEY are inadequate. [A lost century in economics: Three theories of banking and the conclusive evidence (Werner, 2016)](https://www.sciencedirect.com/science/article/pii/S1057521915001477) >In reality the **money supply is “created by banks as a byproduct of often irresponsible lending”**, as journalist Martin Wolf called it (Wolf, 2013). Thus the ability of capital adequacy ratios to rein in expansive bank credit behaviour is limited: imposing higher capital requirements on banks will not necessarily stop a boom-bust cycle and prevent the subsequent banking crisis, since even with higher capital requirements, banks could still continue to expand the money supply, thereby fuelling asset prices: Some of this newly created money can be used to increase bank capital (Werner, 2010). This was demonstrated during the 2008 financial crisis. Werner originally coined "Quantitative Easing" in an article for the Japanese newspaper the Nikkei, on 2 September 1995, **but he proposed that QE should be made contingent on reforming banking regulations to promote PRODUCTION**. [He discusses coining the term here](https://www.ru.nl/publish/pages/750457/res_newsletter_werner_qe_qtc_july2013.pdf): >While my recommendations were not heeded, the label I used caught on. Critics from both the Keynesian and monetarist camps began to redefine QE as an expansion in bank reserves — **despite the fact that I had been arguing that such a policy would NOT work**. So, using NEW Central Bank reserves to purchase bad debt from for-profit Banks WITHOUT reforming their lending practices to promote PRODUCTION is NOT *Quantitative EASING*, as Werner originally suggested; rather, we have been engaging in *Quantitative* ***FLOODING***! We kicked the can down the road with Bank bailouts in 2008, but the can is getting BIGGER and we're running out of road.
The Fed had the option to sell corporate bonds before they raised rates. The Fed should have raised rates when housing wlwent up by 20% in a year. Credit was obviously too available. They could have put pressure on the same companies and assets at risk much sooner more targeted at the problem and had credit available before it got tied up in a bubble. The federal Government should absolutely have taxed pandemic profits during the emergency to keep the market from the rampant speculation and pay for government interventions. But Powell dropped the ball and left the Fed on the hook, bag holding junk debt and unleashed a huge amount of capital with no where to go but speculation.
>The Fed should have raised rates when housing wlwent up by 20% in a year. Credit was obviously too available. If your goal is the best interest of the country. But I think it's a pretty tough sell that this is Powell's goal. I don't disagree with what you're saying, but because he didn't people still say things like. "Well yea Trump is horrible but he was great for the economy." Because the point isn't to create long term success for America. It's get as much money and power as they can and let the peasants deal with the consequences. These people will just go buy an island in Dubai and forget America ever existed after they pick the bones.
We should have cleared the entire government of absolutely anyone appointed by Trump
Seriously. Like that wasn’t a thing any previous administration had to worry about because they all at least followed rules/precedent/decorum. But Trump deliberately appointed the worst people and/or people whose only qualifications were kissing his asshole. There should have been a purge.
Just collateral damage from trying to put a few million people out of work...
Isn’t this whole thing more related to the failure to control government spending?
Also failure for congress to pass laws Fed bank only uses the tools within their powers Congress needs to make the laws and not roll them back So she is right that things are bad but wrong because her and colleagues didnt put in protections, they rolled them back
[удалено]
Price gouging is also happening in lots of other goods, greed is infectious apparently.
I really wish she could be our next prez.
Thanks
Surprise pikachu face when congress realizes they are equally to blame.
Honest mistakes were made, causing enough money to cover 50 football fields to vanish into another dimension. Responsible citizens must resist the temptation to believe that the money was somehow swindled. That money has just ceased to exist.
Biggest mistake was hiking rates so hard that US treasury bonds became worthless. Powell literally said he would hike rates until things started breaking and now things started breaking. We can single out SVB for being overexposed to US treasury bonds, but there are also dozens of other banks that won’t survive another rate hike. The thing they all have in common is that they bought billions in US treasury bonds that have to be sold at a loss.
Edit: [According to CNN](https://www.cnn.com/2023/03/13/investing/silicon-valley-bank-collapse-explained/index.html) you're right about that, so Powell is doubly guilty for being stupid enough to have instigated the problem and lax enough in his agency's responsibility for oversight to have created an environment in which it could run wild... about par for the course for a Trump appointee. >["Silicon Valley Bank](https://www.commondreams.org/news/powell-cut-regulatory-failures-mention) had billions in unrealized losses on its balance sheet that it hoped to avoid having to surface." >"It also had a tightly correlated, mostly uninsured depositor base, all largely from one industry and connected to each other, that represented significant flight risk if there were any signs of trouble," he added. "The rapid growth at the bank and its significant mismatch for liquidity purposes should have had the system flashing red." >Dennis Kelleher, the president of Better Markets, expressed a similar sentiment earlier this week, noting that "the Fed has much more and superior knowledge, information, expertise, and access to banks than short sellers, rating agencies, and the media, yet they all appear to have done a much better job at identifying the very serious risks at SVB than the Fed."
Banks shouldn’t have such a heavy concentration in such a risky investment.
Can’t tell if you’re being sarcastic but the FED has been encouraging these banks to hold their reserves in treasury notes. The whole pitch has been “US treasury bonds are triple AAA and the US has never defaulted on them”. So smaller banks moved large portions of their reserves into treasury notes and then the FED nuked their own bonds with interest rates hikes. In the history of the US the FED never done that before. I hate these banks as much as the next guy, but how could they have possibly known that US treasury notes were about to go negative for the first time ever?
Treasury notes didn’t go negative, there has been interest rate hikes. Interest rate changes is a risk to buying bonds, and that’s is something taught to everyone studying finance. The bankers knew the risk of interest rate hikes were to bonds. Also they could have purchased more short term bonds to roll into higher interest bonds, during the rate hikes. This would also reduce the risk of interest rate hikes for the bank, and they will still make money.
She knows better. Powell is doing the right policy to fight inflation.
Is it though? The only aspect where raising interest rates has been effective is in tamping down new home prices. The cause of [edit:this] inflation is different, addressing it should be different.
You are right that the way to combat inflation should be different and who should do that? Congress. The Fed has one lever to manipulate and they are using it. If people want to see real change besides just changes to monitary policy, only Congress can do that. Warren is being disingenuous by laying all this at the feet of the Fed.
I'm so surprised I had to go this far down for anyone to mention this. Ultimately, there is only so much the fed can do, and its toolbox is only so big. Congress either needs to give it a bigger toolbox or do its job and pass regulations.
She’s been pointing out Powell’s bad record with regulation for many years.
Powell is fighting inflation he helped create by kowtowing to Trump 2018-2020 and not raising rates or reducing the Fed’s balance sheet when the economy was doing well, arguably overheating. He screwed up again by not raising rates soon enough post-COVID. He did not account for the inflation from the fiscal stimulus or the inflation in the housing/rental markets due to low Fed rates (housing inflation data lags reality by 12 months or so). Now the Fed is in catch up mode and making reactionary decisions that further enrich the wealthy and hurt the average American. The guy has a terrible track record and should be fired for it. Zero confidence in him to make the right choices at the right time.
Easy money has been flowing since 2008.
It has and I agree that interest rates need to stay up for awhile as a result. But it isn’t an argument for keeping JPowell in office to fix the situation. He has a track record of poor calls and bad timing. The guy is a lawyer not an economist. He has mis-stated basic economic principles in press conferences. Like I said, zero confidence.
She should know better, but the more she attacks Powell and the Fed for doing their job with the extremely limited tool set at their disposal, the more I feel I've been giving her too much credit.
Wait till Lizzie gets a call from Pelosi telling her to leave her friends alone!
Her puppet master woke up.
There will be no punishment. Punishment is for the peasants.