Large commercial banks absorbing investment banks will be allowed to shore them up w/ your deposits

[Phoebe Loosinhouse]

according to this diary on Daily Kos which the poster says is a blatently illegal violation of Federal Reserve Act Section 23A.

http://www.dailykos.com/story/2008/9/16/54230/2116/741/600308

Paulson/Fed Gives O.K. To Banks To Steal Your Money! (For real!)
by bobswern
Tue Sep 16, 2008 at 02:42:32 AM PDT
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And, just in case you haven't put all the pieces of this treasure hunt together, the large banks (i.e.: JP Morgan Chase and Bank of America and others) now absorbing the large investment houses (i.e.: Merrill and Bear Stearns) are now going to be allowed to break the law--between now and January 30th--and "reallocate" normal, everyday, customer bank deposit funds for their own use to shore up the possible trillions of dollars in losses accrued by their new investment firm subsidiaries.

Then, on January 30th, 10 days after the next president takes office, it will all cease. And, if these large banks are left with negative balance sheets, due to shelling out hundreds of billions, or even trillions, of dollars in customers' (your) deposit funds to dig their new investment bank subsidiaries out of their holes, then these large banks will mosey on over to the FDIC and they'll be reimbursed by your taxpayer funds via that entity, instead.

As for myself, I was just musing today that I wondered if there would be a boomerang effect to the commercial banks benefit as people panic and withdraw from the stock market to purchase saftey in bank CD's etc. Which would be ironic, since it was these same commercial banks' plunge into sub-prime mortgages which got collateralized as securities that were sold into the market that provoked the panic . . .

Anyway, I know there are people a lot smarter on this board than me and I hope people can explain and unravel this further.

[RebelOne]

1. Yes, someone please explain this.

I just made a $10,000 deposit into my savings in Bank of America. I cashed in a 401K because I was losing money every quarter. In the past year I have lost about $4,000. So I moved it into my savings account, thinking that it would be safer there. I guess I'll just have to withdraw it and put it under my mattress.

[Phoebe Loosinhouse]

2. I don't think you personally have to be concerned. Be concerned as a taxpayer.

My take is that even though they say they aren't bailing out these investment banks, they will be, only through the FDIC which is funded by the taxpayers.

Your personal account is fine. It's just that they are allowing co-mingling of the funds between the commercial side and the investment side to shore up the investment as the author of the diary I posted said. This is what is illegal.

[Phoebe Loosinhouse]

4. By the way RebelOne - you said you moved it into your savings account

For heavens sakes, move it into an IRA CD account within 30 days of you cashing out from the 401K or you will take a hideous tax hit.

[Fuzz]

6. How old are you, if you don't mind me asking?

Might not be a good idea to withdraw it unless you are going to retire soon and need it. Going to have to claim it as income this year and pay taxes on it and if you have several years left, there is a chance you could gain some back.

lol, I'm an optimist.

[movonne]

9. Buy a safe and keep money there...make sure it is a good safe

that you can attach to wall..

[SoCalDem]

3. Probably not MY bank

Provident Bank....

they have direct phone lines to each branch
they know their customers
they KEEP and manage the mortgages/loans they make

[Fuzz]

7. Heh, my wife and I were just looking at other banks, ours is Wamu

Provident bank, but in NJ, don't think it's the same place, was on the list to check out.

[SoCalDem]

8. They may be part of the same group..

Look for small local banks..especially if they have been in business for a long time.. Asking older people in the community is a good place to start,,most people do not like to change banks and when they are older, they have a long history with a bank..

[supernova]

5. This is why for many years

after the 29 crash, banks were not allowed to own brokerages, and vice versa. There was a wall of separation between the two enterprises.

Gaak! It's all coming back!

And Phil Gramm should be tarred, feathered, and shellacked.