Don’t Worry, Funny Money Will Go On

I see a lot of chit chat about a so-called “fiscal cliff”. Oh come on…even someone with a lukewarm IQ can figure this out. At the last minute, some silly deal will be ironed out and everyone will praise and bow down to our fearless leader and whatever some republican of the week. The media will inevitably fawn over the incredible bipartisan leadership exhibited by our slavemasters. I tend to ignore journalism memes; when I hear fiscal cliff, I want to throw up. We are way past the cliff and in the quicksand by now. The federal reserve and their puppet politicians control everything now. Not that I am conceding, mind you. I will fight until death. Things seem rather dire right now, but I refuse to live on my knees.

They are able to effectively control via fear. Too bad I have too much of that pesky Viking blood in me, eh?

The police state is ratcheting up. Alas, this is what the American populace seems to want, so who am I to argue? Drones, wiretapping, intimidation, fear, senseless wars and “operations”, high fructose corn syrup, aspartame, economic warfare, public schools…this will be your demise, although you might not realize it. I think most of you know subconsciously that it is occuring; I see it etched on people’s faces. For whatever reason, people have chosen to ignore it. Tomorrow’s history books will be written with an asterisk.

On the subject, I have been informed that my blog is verboten for the armed forces. This blog is blocked by the military. I don’t know why, but perhaps it is an honor. It is a bit disconcerting, but as I said it has been willed.

Personally, I am choosing to better myself and invest in family and preparations. This Christmas/Yule will be different. Gifts will be knowledge…science, books, and the like.

I’m too old to be arguing silly ideologies with the naysayers. I don’t see the point. I’ve been doing this information dissemination for 12 years now, I’m getting too tired. Argumentation on Twitter, Facebook, forums, etc. is not doing myself any favors; I have been using this time to further my knowledge on a wide array of subjects. I have no patience for ad hominem attacks, threats, parrot repeating, those that refuse to give a damn, the materialistic crowd, etc.
Seek love and knowledge. Let go of fears. Plant a garden. Educate family/friends. Prepare, prepare, prepare.

God luck and good speed.


It Is Getting Crazy Out There

Economy must be tanking, I keep getting bombarded by pre-Black Friday sales. I wonder if the minions are going to fall for it? I like to think of it as the mindless zombification American ritual. Not that Black Friday truly means anything, mind you. The stores will be open on Thursday! You can get in on the violence for a 3 dollar toaster game. Hell, why bother with Thanksgiving anyway? The family that stands in line for Chinese crap is the family that stays together, right? Yay!!!!!!

It is so skewed I don’t understand how people fall for it. Alas, it is a different world now. I am merely a relic from another time. Might as well go off into the dark night. You reap what you sow…at least the TSA will let ya take a turkey leg onto the planes.

*Gets into bunker to watch it in HD*

Mapping The Road Ahead

It’s a fine thing to do at the end of an incredibly busy week: sit down with a cuppa joe, a super-fast internet pipe, and review not only what happened over the past week, but where things seem to be headed in our run-up to the “summer of hell/2009” which, according to the predictive linguistics work at, is about as close to a slam-dunk as you’ll find off the basketball court.

In case you’re new to this site, the Big Picture goes something like this:

  • We’re in a collision of paradigms which will last something like 10-years.  As my friend Dr. Jack Lessinger notes “Unfortunately, the Consumer Economy is not a static reality. Everything changes. Over many decades, the relentless drive to boost consumption inevitably brought overconsumption and with it, dire consequences. ”  So, coming along, but taking its own sweet time about getting here, will be something he calls “responsible capitalism” but not the kind of highly socialized kind of solution that’s presently sloshing around between the big white buildings inside the beltway.

  • The US dollar is effectively bankrupt; rotted from the inside-out by excessive government spending since politicians have this genetic defect where they promise more than they can deliver, only to find that they can make-good on promises by destroying the purchasing power of the US dollar.  This is why since 1913 the purchasing power of the dollar is about 4% of what it once was.  But, since the American public hates math, it’s been an easy double-speak shuffle for offishuls (sic) at all levels to sell you the idea that what’s been going on is inflation.  This deliberate reframing of the financial problem into gibberish is exactly how the PowersThatBe (the banksters behind the throne and their lobbyist cohorts), depend on to keep you hornswaggled into a crooked system where you work your ass off for 40-years only to find you’ve been swindled out of your 401(k)’s purchasing power.  Sweet deal for them, huh?  Guess who ends up rich?  It’s not the person you see in the mirror, if that’s a hint.

  • Another way to screw you out of your life’s work has been to reframe the ‘stimulus’ such that it goes to meaningless places like saving derivative counterparties under the outlandish belief that this will prevent a second Great Depression, only many times worse.  It won’t, of course since if you listen to really rich, really bright guys like George Soros, they’ll remind you that the residential housing bubble collapse was only Round One and that Round Two which is coming along now will involve a 30% drop in commercial property values.

  • And since the money which should be used to fund new construction, consumer financing, and American self-sufficiency, and so forth is going to bankers and special interests, another story which will be making the rounds in a month or two, I figure, will be how farmers are cutting way back on their commitments to plant crop this year.  I was speaking to the president of a modestly-sized ag operation earlier this week and he said folks he’s talking with are finding just what he’s found, namely that banks may say he has a million dollar line of credit, but they are being very stingy about letting farmers actually draw against it this year.  What this means is that here’s something that’s almost a lead-pipe cinch to push food prices up this summer:  reduced credit for farmers (or severely restricted lending) coupled with high input costs, such that there will be less food this coming summer and fall.  Already, a good bit of Eastern Washington’s wheat is at reduced levels, and then there’s the fallout from the flooding up in North Dakota to contend with. And so the precursors for this November’s crisis are being set even now.

  • Government, all the while being blown about by the financial string-pullers, has to find some way to keep you and me under control, otherwise we wouldn’t be willing to give nearly 40% of everything we make (taxes and excess profits) to a bunch of bozos who hold themselves as somehow smarter than the rest of us.  Gotta reality check to consider here.  So, in order to keep everyone occupied – including countries like Afghanistan where Mr. Change is throwing even more troops in, on the grounds that Afghanistan-Pakistan is the most dangerous place in the world – we build a better and better killing machine.

  • But I’m here to propose this morning that Afghanistan is NOT the most dangerous place.  The most dangerous place in the world is the UK.  That’s right: England. You see, the PowersThatBe are getting ready for one of the biggest crackdowns on personal liberties ever under the guise of protecting the G20-money shufflers.  True, “London Protesters threaten Bankers, evoke Executions” but it’s a protest and protest is the stuff of which Freedom is cast.  So to keep the UK’s sheep in line, authorities have identified 200 children as potential terrorists.  OMG, bring back McCarthyism and HUAC, at least those made some kind of sense.  Having over a million US citizens on no-fly lists just doesn’t pass my smell test; perhaps it does yours?

  • Meantime, “Obama a sets Qaeda defeat as top goal in Afghanistan“.  Yes, there really are some Islamic extremists who would like to kill you and me because we’re infidels.  Still, thousands of troops, is that the most effective solution?  How about hit teams?  Armies are find for set/place battles against large forces and all, but how do you cut off the head of a beast?  The world clings to a Middle Ages concept that heads of movements are not top targets; nonsensical, but that’s why folks like Napoleon didn’t get ‘offed’ the first time out in a real battle.  This same silliness persists today; and as a result, we don’t go ab out things very efficiently, although admittedly the result is more employment, higher visibility of the decision-making process and a lot of social control.  But then again, that’s what wars are about, right?  Kill enough people and break enough things and you get an economic bump from warfare and another economic bump from rebuilding.

  • Then we have a Secretary of State who is pushing for a “stronger China role”.  I’m not sure what she’s thinking (if at all, on this) since 1) China is a huge buyer of US paper debt instruments and has the US by the proverbial goanies and 2) China makes about 1/2 of everything non-food sold in your local Big Box store.  So they have us by the right one, and by the left one, so to speak.  Yet this enlightened ‘leader’ says they need a stronger role?  How stoopid do the folks at the top think the people who work in this country are?  What we need is leadership that would a) increase domestic US production of goods we consume.  But that isn’t going to happen since the big bucks inside the District of Corruption flows from industry and special interest groups, right?  Then b) we need to have sound money so we don’t have to go hat in hand to China every couple of weeks to beg them to buy our quickly depreciating paper.

All of this stuff is really very simple and obvious if you just take a few moments of quiet contemplation to ask that one more upstream question.  Instead of breaking out of a bad mold and standing up to the lunacy of the past that has driven us into the presently developing socioeconomic corner, the ‘fast change’ artists are simply doing more of the same that got us into our barrel of pickles at every turn.

Sound government begins with sound thinking.  You know: The kind that the Framers embodied in the Constitution which these officials are supposed to protect and defend.  But instead of asking the right questions  like “How do we all work just 2-hours of day or less and live in a land of plenty with Liberty and Justice for all?” would be a great starter…And that’s all it should take: Automation is really that good and yet we’re all pawns in this silly paradigm reinforcement exercise….” we instead get a change in troop allocations, a change in naming of enemy combatants, and a change in the role of China.

I don’t know about you, but I have to join guys like George Soros and commodity legend Jim Rogers who are concerned, as am I, that this all ends badly.

So on that note, it’s Saturday morning and I’m going to go work on my garden, do my taxes, and anything else that comes to mind that enables me to live as a free American enjoying the fruits of liberty as long as they’re to be had.  Suggest you do the same.

Oh, one more thing:  The state of “Missouri retracts report linking militias, 3rd party candidates.”

A victory for freedom?  Yes, but only as long as the public fulfills its role and remains vigilant.

Have you called your folks in Washington about HR 875, HR 814 and SR 425 which would reduce agricultural freedom under the guise of food safety?  No?  See…another perfect example of people sitting on their asses deserve what they get from the corporate-government monoculture which I call (corpgov).

Oh, one more thing on top of that:  Since we are in a huge period of change (wait till mid May, if you think things are changing quickly now, LOL) the time monks may release a public ‘libretto of coming events’ just so you can have a little lead time to adjust to future events before they get here.  No point having a rickety time machine if we don’t share some of its outputs, right?  Not as much as I get into in Peoplenomics, or the full up HalfPastHuman reports, but an outline sufficient so a thoughtful person can get ahead of the curve a bit.

Drop by Monday morning.  I’ve gotten permission from Alan Land to post a couple of .MP3’s for you to download (free, of course).  One is called “Tent City” and the other is called “California IOU”  Know the scary part?  These were both recorded in 1983…see how circular time is?

Russian Scholar Says U.S. Will Collapse Next Year

*YA THINK????*

MOSCOW —  If you’re inclined to believe Igor Panarin, and the Kremlin wouldn’t mind if you did, then President Barack Obama will order martial law this year, the U.S. will split into six rump-states before 2011, and Russia and China will become the backbones of a new world order.

Panarin might be easy to ignore but for the fact that he is a dean at the Foreign Ministry’s school for future diplomats and a regular on Russia’s state-guided TV channels. And his predictions fit into the anti-American story line of the Kremlin leadership.

“There is a high probability that the collapse of the United States will occur by 2010,” Panarin told dozens of students, professors and diplomats Tuesday at the Diplomatic Academy — a lecture the ministry pointedly invited The Associated Press and other foreign media to attend.

The prediction from Panarin, a former spokesman for Russia’s Federal Space Agency and reportedly an ex-KGB analyst, meshes with the negative view of the U.S. that has been flowing from the Kremlin in recent years, in particular from Vladimir Putin.

Putin, the former president who is now prime minister, has likened the United States to Nazi Germany’s Third Reich and blames Washington for the global financial crisis that has pounded the Russian economy.

Panarin didn’t give many specifics on what underlies his analysis, mostly citing newspapers, magazines and other open sources.

He also noted he had been predicting the demise of the world’s wealthiest country for more than a decade now.

But he said the recent economic turmoil in the U.S. and other “social and cultural phenomena” led him to nail down a specific timeframe for “The End” — when the United States will break up into six autonomous regions and Alaska will revert to Russian control.

Panarin argued that Americans are in moral decline, saying their great psychological stress is evident from school shootings, the size of the prison population and the number of gay men.

Turning to economic woes, he cited the slide in major stock indexes, the decline in U.S. gross domestic product and Washington’s bailout of banking giant Citigroup as evidence that American dominance of global markets has collapsed.

“I was there recently and things are far from good,” he said. “What’s happened is the collapse of the American dream.”

Panarin insisted he didn’t wish for a U.S. collapse, but he predicted Russia and China would emerge from the economic turmoil stronger and said the two nations should work together, even to create a new currency to replace the U.S. dollar.

Asked for comment on how the Foreign Ministry views Panarin’s theories, a spokesman said all questions had to be submitted in writing and no answers were likely before Wednesday.

It wasn’t clear how persuasive the 20-minute lecture was. One instructor asked Panarin whether his predictions more accurately describe Russia, which is undergoing its worst economic crisis in a decade as well as a demographic collapse that has led some scholars to predict the country’s demise.

Panarin dismissed that idea: “The collapse of Russia will not occur.”

But Alexei Malashenko, a scholar-in-residence at the Carnegie Moscow Center who did not attend the lecture, sided with the skeptical instructor, saying Russia is the country that is on the verge of disintegration.

“I can’t imagine at all how the United States could ever fall apart,” Malashenko told the AP.,2933,504384,00.html

The Dow’s Bearing — 6,000 and Under

February was a chilly month for U.S. equities. And March is looking even worse. It looks like a recession is the only thing roaring this month.

On Monday, U.S. stocks plunged with the major indexes closing at their lowest levels in more than a decade as more government intervention in the financial sector was interpreted as
an ominous sign for shareholders of Citigroup.

General Electric, a major manufacturer and lender, continued its decline as the stock, once a stalwart for even the most conservative of portfolios, sold off to levels associated with distressed “fallen angels.”

The Dow Jones Industrial Average closed down 299.64 points, or 4.24% percent, to 6763.29, its lowest close since April 25, 1997, and the first close below 7,000 since May 1, 1997.  We feel this warrants another look at the DJIA chart.

The most dangerous chart pattern in a bear market is the down sloping triangle triangle. This pattern is seen in the Dow Jones Index and it sets a downside target near 5,600.  The rapid fall below 7,000 confirms this target objective.

This chart pattern includes a well defined support level near 7,800. Over the last five months the rally rebounds from support near 7,800 have developed a pattern of declining highs. The failure of the early 2009 January rally near 9,000 established a second calculation point for a new down sloping trend line. The first calculation point for the trend line was set by the rally peak near 9,600 in 2008 November.

A new downtrend line is drawn and this creates a down sloping triangle. In a bear market the strength of the pattern is increased. The first feature to measure with this pattern is the height of the triangle. The four day triangle base starts on 2008, October 7, with the drop from near 10,000 to 7,800. The triangle height is around 2,200 points.

Chart pattern analysis provides the most reliable analysis method in this type of market situation. Technical oscillators which measure sentiment in the market are stuck on extreme readings and provide little guidance about trend continuation.

Using chart pattern analysis, the downside target for the Dow Jones Index is near 5,600.  This target is verified against historical support levels for the Dow. Historically there is a support level near 7,500 but this has been decisively broken.

The long term historical support level is a narrow trading band between 5,500 and 5,600. In a  bear market it is the bottom of the trading band that is tested for support.

This combination of factors suggests there is a high probability the market will quickly fall towards support between 5,500 and 5,600. This is a fall of more than 50 percent from the peak of the Index in 2007, October at 14,198. This degree of fall is similar to the degree of fall in 1929 when the America market collapsed and developed the world depression.

The end of this triangle pattern develops near the end of 2009, April. There is a high probability the America market will develop a continuation of the downtrend with a slow move towards support near 5,600. The key feature will be the nature of any consolidation pattern that develops near 5,500 to 5,600.

Failure of genuine support, consolidation and rebound behavior near 5,500 to 5,600 will focus attention in the next support level between 3,700 and 4,000. These remain theoretical targets until the nature of consolidation activity near 5,500 and 5,600 is confirmed. After falls of this degree markets do not develop V-shaped recoveries. They lay down and rest in L-shaped trading consolidation band patterns. Typically these patterns prevail for between four to eight months and offer limited trading opportunities. They are accumulation patterns and investors watch the volume behavior associated with the rallies.

Some state lawmakers fighting federal stimulus

CONCORD, N.H. – For small-government die-hards, the $787 billion economic stimulus bill recently passed by Congress isn’t a life saver. It’s the last straw.

Lawmakers across the country are sponsoring resolutions — most of them only symbolic — asserting state sovereignty, in effect the right to ignore any federal law or policies they deem unconstitutional, including the stimulus bill, the No Child Left Behind Act and any new assault rifle ban.

In New Hampshire, the House is scheduled to vote on Republican state Rep. Daniel Itse’s resolution Wednesday. Supporters are planning a rally at the Statehouse before the vote.

“I think that the specter of some assaults on our liberty have become so real and immediate that there is a reaction,” Itse said.

Lawmakers in at least 15 states are sponsoring similar resolutions. They say they’re fighting back against decades of federal overreach, culminating in the stimulus package.

“This has been a progression from (the New Deal) days to today, with the only break being Ronald Reagan,” South Carolina state Rep. Michael Pitts said by e-mail. Pitts, a Republican, has a resolution pending in the South Carolina House. “The stimulus bill is simply propellant for the resistance.”

In January, 22 percent of those surveyed by the Pew Research Center disapproved of the stimulus. That number rose to 34 percent in February. The survey — which polled about 1,300 respondents — has a sampling margin of error of plus or minus 3 percentage points.

Two lawmakers say they have received hundreds of calls from constituents supporting their resolutions. Michigan state Rep. Paul Opsommer, a Republican, said about 250 people have called or e-mailed to say thank you, whereas most of his bills draw fewer than 10 messages.

Missouri Republican state Rep. Cynthia Davis, whose resolution is pending in the House, said she has received at least 200 supportive messages from constituents and residents in other states.

“I’m getting letters from all over the country,” Davis said. “It’s really a beautiful thing, watching the spirit of the American Revolution come back.”

Resolution sponsors cite the 10th Amendment, which says the federal government has no authority beyond the powers granted to it under the Constitution.

Several governors — mainly Republican — have threatened to reject some of the stimulus money, claiming it would raise taxes in their states. Some analysts see the revolt as partisan posturing.

But Opsommer, who thinks the stimulus has spurred many of the resolutions, said in an e-mail that the states’ rights movement transcends party politics.

“Some Democrats feel it is an attack on Obama until I explain I also introduced it last year,” said Opsommer, whose resolution is pending in the Michigan House. “This is about the rights of the states and the people, not anything to do with Republicans or Democrats.”

A Democrat in Kentucky, state Rep. John Will Stacy, is the prime sponsor of a sovereignty resolution in that state. He did not immediately return calls.

The Oklahoma House recently passed a resolution from Republican state Sen. Randy Brogdon. Most of the resolutions are nonbinding, but Brogdon’s would have the force of law if it passed the Senate.

Oklahoma’s Democratic governor and attorney general would likely refuse to enforce the resolution, Brogdon acknowledges.

Karl Kurtz, a policy analyst at the National Conference of State Legislatures, couldn’t say how many sovereignty resolutions Congress has received in prior years, but he suspects the current craze is no accident.

“In the case of the sovereignty resolutions it appears to be an organized campaign,” Kurtz said, adding that states’ rights activists may have influenced the sponsors.

New Hampshire’s Itse has ties to the Free State Project, which urges small government activists to move to New Hampshire. Many project members also belong to the New Hampshire Liberty Alliance, a states’ rights group listing Itse as its political director.

“Anybody who’s willing to stand up and make a statement like that is a special friend,” said project spokesman Calvin Pratt. “I just wish we had thought of it first.”

Some in New Hampshire wish no one had thought of it. Richard Hesse, professor emeritus of constitutional law at the Franklin Pierce Law Center in Concord, said Itse’s resolution could strip authority from state leaders, as well as from Congress and the president.

“When you think about this claim that if a state believes a federal law is unconstitutional it can just ignore it, then I presume if a county believed a state law was unconstitutional it could just ignore it,” Hesse said. “Really what’s implicit in this is an unwillingness to recognize a lawful authority.”

We need a GLOBAL banking system??

Remarks by FDIC Chairman Sheila Bair to the Institute of International Bankers Annual Washington Conference, Washington, DC
March 2, 2009

Good afternoon. I’m delighted to be here again for your annual meeting.

I would like to begin with a few comments about the challenges facing our banking industry and the actions we’re taking to preserve and strengthen it.

There is no question that this is one of the most difficult periods we have encountered during the FDIC’s 75 years of operation. I want to assure you that the FDIC will continue to work together with other federal agencies to respond to the challenges facing the nation’s financial system.

Our job is to protect insured depositors and preserve the stability of our banking system. Financial innovations have come and gone over the years. But federally-insured institutions will always play an indispensable role in our economy.

Under the current severe economic conditions, the FDIC’s deposit insurance guarantee is more valuable than ever. Well-managed banks that rely on deposit funding should be able to weather the storm. And they will be a key source of lending to help the economy recover.

While many sources of bank funding have dried up in the past six months, deposits have not. In fact deposits are growing. They are a reliable source of funding because depositors know that insured deposits are absolutely safe. No one has ever lost a penny on an insured deposit.

All of the government measures that have been put in place in recent months are designed to ensure that credit flows on sound terms to consumers and business customers. Maintaining a stable banking system and preserving the availability of credit are absolutely critical to getting the U.S. and other major economies back on track.

That said, I have a few comments to make about three specific issues: Where we stand on the Basel Two capital standards, cross-border resolutions, and nationalization.

Basel II: still a big deal

The intense public debate over Basel II seems like a thing of the distant past. And maybe that’s understandable with everything else going on in the world. But when we emerge from this crisis, a top priority must be crafting a sound capital framework that helps avoid a repeat of past problems.

So, where do we stand? I still have grave concerns about the advanced approach. The advanced approach assumes banks’ internal, quantitative risk estimates are reliable. It also assumes the loss correlations we measured during good times … which is the backbone of the whole approach … will hold up in the future.

To say the assumptions turned out to be wrong would be an understatement. They were way wrong in estimating risk. The Basel Committee is changing the rules in a number of areas. These will be improvements. But for most banks, they are unlikely to offset what we see as a capital-lowering bias that is essentially baked into the advanced approach.

A Moody’s report in December gives some recent evidence. It looked at Basel II implementation outside the U.S. And it said that almost all the banks using advanced methodologies reported a reduction in risk weighted assets, in many cases material reductions.

So if the advanced approach says banks need less capital at the height of a global banking crisis, imagine the financial leverage it would encourage during good times.

With results like those, and in prior studies…and with the dangers of excessive leverage so clearly demonstrated over the last 18 months … it would be imprudent to determine regulatory capital based solely on the advanced approach.

I strongly believe that global leverage capital requirements are sorely needed. And they should apply for all systemically important financial firms, regardless of charter.

These two measures would reduce cross-country and cross-sector capital arbitrage.

But more significantly, they would set a capital floor for the advanced approach, which would limit excessive leverage in the future.

Nationalization/need for cross-border process

There has been considerable debate over how to deal with troubled institutions that are systemically important. As you know, the FDIC, the banking regulators, and Treasury recently announced a stress testing and capital program to help ensure that our largest institutions are prepared to support the economy.

The stress testing process is designed to see if they have enough of a capital buffer to get through economic scenarios that are more adverse than what is currently anticipated. If not, then they can raise private capital or, if needed, access a capital funding facility managed by Treasury.

Many have asked: “What happens if a large bank can’t continue? Will you nationalize?” Nationalization seems to mean different things to different people.

Whatever you may think it means, I don’t see the U.S. government operating a large institution for an extended period.

In fact, based on where we stand today, I would be surprised if the FDIC had to step in as conservator or receiver of a large, systemically important institution. The regulators’ Joint Statement last week restated our commitment to preserve the viability of systemically important financial institutions. This will be done through capital injections, if needed, and the supervisory process.

If more direct intervention to take over a large financial group is needed, that will present significant challenges. The main hurdle is that there’s no clear process for resolving a large financial holding company with multiple affiliates. We have a process for dealing with large banks, but not financial conglomerates.

FDIC model

Many have pointed to the FDIC’s model of resolving failed banks as a possible solution. I believe the FDIC model is tried and true. I take great pride in the fact that bank closings have gone smoothly. And we’ve been able to return failed institutions to private hands, despite the poor market for distressed financial assets.

But clearly, there would be practical problems if we had to use our resolution process for a large, internationally active institution. First, we do not have authority to resolve financial holding companies. Our powers extend only to federally insured banks.

Second, there is a very real question of whether our current funding mechanism is adequate to deal with the failure of a very large institution. Again our power is limited. Our assessment authority only extends to insured banks. This is something we are trying to get fixed.

Cross-border issues

Another major problem, which has received less attention, is the difficulty in handing a cross-border failure. The key question is: What you do when more than one country is regulating a piece of the institution?

This is an area where the FDIC has been doing some considerable work for over a year. We’re co-chairing a Basel Committee working group on cross-border issues. The panel includes members from the G-10 nations, Argentina, and several off-shore countries. And we’re coordinating with the Financial Stability Forum, the International Monetary Fund and other international groups.

Let me share what we know so far.

Today, a crisis involving an international company is resolved by domestic laws, in separate countries. The problems that can arise are obvious.

The national legal processes are inconsistent and too slow. The more complex the institution, the more inadequate most national laws become. And as a result, countries have relied on ring fencing and protection of their ‘national’ banks. So without burden-sharing, you can’t stop asset ring-fencing.

Let me go over a few of the problems that this can cause.

After legal intervention, continuity of essential banking operations is virtually impossible under most national laws. The U.S. does have an advantage here, except with financial groups.

Most laws have virtually no provisions to deal specifically with cross-border banking crises. No country has adequate laws to resolve problems in international financial groups that operate through separate legal entities in different jurisdictions. Indeed, few countries even have the tools for resolving domestic financial groups.

Many of the standard ways for dealing with failed banks – such as our bridge bank – will probably not work across borders. Simply put: other countries have no duty to recognize a bridge bank or its actions under U.S. law. Cross-country differences in close-out netting, the unwinding of financial transactions, and the enforceability of secured parties’ rights to collateral may add to increased uncertainty. In this environment, ring-fencing – also known as every man for himself – may simply be the only rational response.

A few policy proposals

So, how should we deal with this reality? We’re working on proposals to address whether current laws should be changed, or whether there are better ways of responding to the reality of ring-fencing.

Possible areas include: What are the lessons of the current crisis? We’re now reviewing – with our U.S. and international colleagues – how the different laws and regulators have responded. Are there better ways to promote private solutions? We clearly need new laws for cross-border financial groups.

What are the key elements in an effective framework? Are there areas where we need a more harmonized international approach? For example, on certain key international linkages, such as the interbank market, clearing and settlement as well as access to collateral and asset transfers.

One fundamental issue remains: burden sharing. Ring fencing is a logical response in the absence of some common framework for sharing burdens. If we are unlikely to get agreement on burden sharing – then: What’s the best way to get more effective responses within the reality of ring fencing?

The bottom line is that our 21st century global economy needs a 21st century global banking system that is reliable, and makes economic sense.


Obviously, these are very challenging times for financial institutions. And it’s likely that they will remain under pressure for the next few quarters.

But I want to emphasize that most institutions remain in sound financial condition. And the long term outlook for FDIC-insured banks and thrifts is very good.

There will be more challenges ahead before recovery takes hold.

There are no quick fixes. And if you’re looking for a quick fix, you’re not going to get one. It’s going to take time and patience.

But we’re going to dig out of this.

Thank you.