Below, you’ll find the Reasoning & Rationale to what we call a Bill-Request. Once certain milestones are met, as defined HERE, lawyers will be called upon to draft what will then become a Bill-Demand to Congress and the President.
Published in Dec 2015
On July 23 2014, the Securities Exchange Commission adopted amendments to the rules that govern money market mutual funds. “Structural and Operational Reform to Address Run Risks in Money Market Funds” is how the SEC called it, and it got us thinking about bank and brokerage accounts of Main Street, especially the accounts of small to medium business owners who have about 90 million Americans on payroll and thus the lives of 90 million people in their hands — what might happen to those Main Street accounts in the banking crisis we’ve predicted for the 2017/2018 timeframe. (Our logic for that prediction of a new banking can be found here, here, and here.) What would happen to the assets of small depositors and small investors, were banks and brokerages to collapse en masse?
On Feb 26 2016, the New York Stock Exchange and NASDAQ will put an end to Stop Loss and Good ‘Til Canceled orders. Why? Because there’s a frightening lack of liquidity in the market’ although the NYSE and NASDAQ won’t tell you that. Result — in a panic, the average investor can’t exit his or her investments until after a steep decline.
In the Run Risks document, the SEC referred to providing “new tools to money market fund boards of directors to directly address a run on a fund” …
The new tools – fees and gates – would give fund boards the ability to impose liquidity fees or to suspend redemptions temporarily, also known as “gate,” if a fund’s level of weekly liquid assets falls below a certain threshold.
Under Redemption Gates, the SEC wrote:
To impose a gate, the board of directors would find that imposing a gate is in the money market fund’s best interests. A money market fund that imposes a gate would be required to lift that gate within 10 business days… Money market funds would not be able to impose a gate for more than 10 business days in any 90-day period.
All of which sounded practical in theory. But theory and reality can have a way of diverging sharply in the thick of a super-seismic systemic event of a magnitude never before seen or foreseen, for which we are headed by 2017/2018.
It is alleged that members of the NSA-led “Five Eyes Alliance” — the U.S.A., the U.K., Canada, Australia, New Zealand — and we’ve heard also Germany, have in recent years set up a profusion of emergency measures to contain & control the balance sheets of banks, and of financial institutions in general, were a banking mega-crisis to occur.
Since the bailouts of 2008 made many a broker-dealer merge with much larger bank holding companies that were capitalized only on paper, and still are — see our Creative Accounting 101-F, or the Fiction writer’s guide to maximizing executive compensation, by minimizing the perceptibility of legacy assets and visibility of catastrophic losses, here, for an elaboration on that — it’s made us wonder a bunch of things for what might happen next, in 2017/2018, ten years after 2008:
- Does the official order to eliminate cash and turn all money electronic (detailed here) unfold then?
- What happens to securities held “in street name” above and beyond what the Securities Investor Protection Corp insures? And what happens to S.I.P.C. itself, if it is overwhelmed?
- Will there be bail-in’s and bail-out’s, or will only bail-out’s prevail, much as they did in 2008. But if the public-at-large rises up and revolts against the idea of bailouts all over again, and politicians relent and retreat for the sake of political survival, where will the bail-in option find threshold — at $250,000, $500,000, more, or less?
- Is it wise to take physical possession of your stocks and bonds and other covered securities, to secure them from such uncertainty? In other words, is your Apple or Google stock certificate safer, issued to your name, and sitting snug in your home, versus staying somewhere — that may go belly-up — in street name?
Small investors and depositors — and, yes, those include folks with accounts of $500,000 or $1 million, because there are millions of small business owners in the category who employ many millions of middle class and poor — must be assured the safety and security of their assets at the next systemic event, ahead of large creditors, mostly other banks, their seniority notwithstanding if it is established that those creditors were complicit in the accounting & securities fraud that unfailingly underlie modern-day financial crises.
You’ve just read the full description to the reasoning & rationale for this Bill-Request. Your vote in support of it, is appreciated.