The Fed Just Imposed Financial Austerity on the States

[99th_Monkey]

Yesterday, I posted about this too, here:
http://www.democraticunderground.com/10025516037
This article however delves deeper and goes into much more detailed analysis than the one I posted yesterday, so I'm putting it up.

The Fed Just Imposed Financial Austerity on the States
By Pam Martens & Russ Martens * September 4, 2014

The Federal Reserve Board of Governors, together with the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency – the top regulators of Wall Street’s largest banks – finalized liquidity rules yesterday that make absolutely no sense to anyone with a historical perspective on how Wall Street operates in a crisis.

The Federal regulators adopted a new rule that requires the country’s largest banks – those with $250 billion or more in total assets – to hold an increased level of newly defined “high quality liquid assets” (HQLA) in order to meet a potential run on the bank during a credit crisis. In addition to U.S. Treasury securities and other instruments backed by the full faith and credit of the U.S. government (agency debt), the regulators have included some dubious instruments while shunning others with a higher safety profile.

Bizarrely, the Fed and its regulatory siblings included investment grade corporate bonds, the majority of which do not trade on an exchange, and more stunningly, stocks in the Russell 1000, as meeting the definition of high quality liquid assets, while excluding all municipal bonds – even general obligation municipal bonds from states with a far higher credit standing and safety profile than BBB-rated corporate bonds.

This, rightfully, has state treasurers in an uproar. The five largest Wall Street banks control the majority of deposits in the country. By disqualifying municipal bonds from the category of liquid assets, the biggest banks are likely to trim back their holdings in munis which could raise the cost or limit the ability for states, counties, cities and school districts to issue muni bonds to build schools, roads, bridges and other infrastructure needs. This is a particularly strange position for a Fed that is worried about subpar economic growth.

http://wallstreetonparade.com/2014/09/the-fed-just-imposed-financial-austerity-on-the-states/

[TheNutcracker]

1. Perhaps to pay for the war that they say could last years????

[onethatcares]

4. I don't think they are

worried about paying for the war(s).

They are more interested in crushing the average citizen and in raking in more and more money

for themselves.

Our country tis of thee is truly screwed by the moneyed elites.

[bananas]

2. k&r nt

[Laelth]

3. k&r for exposure. n/t

-Laelth

[woo me with science]

5. CNN Headline: "NFL star turns himself in."

Another deliberate axe to the nation, that most Americans will never hear about or understand.

[99th_Monkey]

6. Boiling frogs comes to mind ~nt~

[woo me with science]

7. This is huge. It should be on every channel, at the top of every news site.

People need to understand what this means, and what it will bring.

If you asked 100 people on the street about it tomorrow, how many do you think would even know?

This nation has suffered a corporate coup. We no longer have a functioning democracy. and the media is owned by the criminals who now own the government.

[99th_Monkey]

11. I wish to Goddess that you were wrong in your assessment ..

.. but I know better.

[liberal_at_heart]

8. K&R.

This could be devastating to our schools who are already desperate for funding.

[leftstreet]

9. DURec

[daredtowork]

10. I'll confess I don't understand the ramifcations

One of the reasons things like this go by in silence is people are afraid they will look stupid if they say out loud they don't know what it means.

I have an advanced degree from a world class university: I wasn't a STEM major, but I would consider myself above average when it comes to extracting useful information from news. And I will be the first to admit that 99% of the time I don't understand the ramifications of anything the Fed does. I wish someone would break it down for me in street language on a regular basis because I realize that in the end of the day those decisions are shaping the world I live in.

My housemate has been trying to explain to me how quantitative easing is ultimately responsible for property speculation, which is ultimately responsible for rising rents: which has been devastating in areas where there is an enormous wealth gap - rich people meet the demand for those rents while poor people are displaced from housing and there is no safety net to catch them since we've been so busy dismantling welfare and just about the entire public services sector over the past couple of decades. So the Fed might have something to do with why my life sucks so much, but I can't even follow my housemate's argument about it.

Instead of trying to defund PBS, perhaps what we need is an additional PBS that focuses on news: sort of like a CNN that doesn't give a damn about ratings, but is tasked with helping people understand their civic context.

[woo me with science]

14. This is a good post.

Everything this country does, its policies and political decisions both foreign and domestic, is to a large extent based on finance and economics: our banks, our wealthy oligarchy, and their financial interests...yet education in this country almost completely avoids the topic.

We are taught every motive for our wars except the financial ones. Any awareness of the role of money in policy, and the real power structure in our country, is downplayed or omitted from what we teach our children. We are taught the three branches of government, but most adults don't have a clue of the quasi-governmental role of the Fed. Even basic economics is often not taught until college, and then as an elective.

No wonder we remain at the mercy of the one percent.

There is another ongoing thread on this topic that I think does a better job, at least within the discussions, of explaining what this particular assault will end up doing to American cities: http://www.democraticunderground.com/10025516037

[woo me with science]

12. kick

[LuvNewcastle]

13. K&R