News & Analysis
Regulators Build Too-Big-to-Fail Empire
Do Regulators Know Who the SIFIs Are? ... A little-noticed sentence in the 93-page regulation top U.S. regulators approved last week suggests officials could be well down the path to figuring out which firms pose a threat to the financial system. Under Dodd-Frank, regulators must pick out which financial firms — other than banks — are so big, complex, and interconnected that they warrant tougher oversight because their failure could rock the wider system. Last week, regulators comprising the so-called Financial Stability Oversight Council finalized the three-stage process they'll use to identify which hedge funds, insurers, private equity firms and other nonbanks deserve the designation. (Banks with at least $50 billion in assets automatically get slapped with tougher oversight.) Here's the key line: "Based on data currently available to the Council through existing public and regulatory sources, the Council has estimated that fewer than 50 nonbank financial companies meet the Stage 1 thresholds." – Wall Street Journal
Dominant Social Theme: These Too-Big-Fail corporations and financial firms must be supported by the government and by the people's taxes.
Free-Market Analysis: It used to be in the US that you were on your own, at least when it came to building a business. If it succeeded, great – if not, then ... too bad.
But not anymore. Now there are too-big-too-fail companies that are so designated by the US regulatory authorities. These are companies that must be supported by the US taxpayer because if they topple, the system as it is currently positioned will topple, too.
This is merely an expansion of the US ideology of empire, so it can't be too surprising. But nonetheless it is further unwelcome evidence that the US has in a sene passed the point of no return. Ther tipping point has been reached. The rulers have seized the initiative. The ruled are being despoiled.
The best thing that could happen now would be for the system to essentially disintegrate. It will anyway. Why prolong the agony?
We encourage the toppling ... metaphorically, not violently. It is not that we wish havoc for America or the West but we see a real crisis as the only way to move the West toward sanity again and away from the global governance seemingly sought by the elites.
One could argue that chaos is what the elites want – because out of chaos comes order ... a New World Order. But the elites, in our view, want chaos that is controlled on their terms.
These dynastic families and their enablers and associates apparently control central banking around the world and want to create global government. They use mercantilism – passing laws and regulations that aid their control – to ensure that events move in a certain direction. We've taken to calling this directed history.
The power elite has created the current financial system, in our view, and controls government and regulators as well. They do not want the current system to founder and fail.
But the current system is THEIR system, designed to maximize control and move the world toward global government. The too-big-to-fail approach is basically a dominant social theme.
The elites use these memes to frighten middle classes into giving up power and wealth to specially designed international facilities the elites control. But now they are taking it a step further. Having caused a rolling economic depression in the West, the elites now propound the theme that society as a whole must support its purposefully failing institutions.
The same toxic mix of regulators, central banks and financial firms that created the economic mess are now to conspire together to ensure that the worst of the failing institutions are to be propped up at any cost.
This is, in fact, a kind of communism. It is beyond fascism, even. The state is not merely merging its authority with private enterprise; it is basically taking over these entities in a regulatory way. There shall be a fundamental blurring between regulatory and private market lines.
Of course, one could argue that in the big picture, this is just what was intended. The USSR and the US were apparently purposeful different sides of the dialectic. The USSR was perhaps "taken down" and moved toward a "capitalist" model. Now it is perhaps the turn of the US to move toward a communist one.
The "synthesis" continues preparatory to a greater merger, or so "conspiratorial historians" might argue. What is certainly true is that the US regulatory structure with the consent of Congress is building a kind of communist infrastructure under the noses of the American people. Here's some more from the article:
There's a universe of fewer than 50 firms that will get scrutinized more closely in stage two to see if they deserve the dreaded "systemically important" label. The first stage sets out a variety of "quantitative thresholds" that will be used to filter out which firms go on to stage two, where regulators dig into firm specifics. ...
Of course "fewer than 50" is still pretty vague. But some observers believe that one little line in the rule means regulators may have informally started stage two well before the process was finalized. Regulators spent a total of 18 months creating the process, even though they made very few changes between an October draft and what they approved last week.
The firms wouldn't necessarily know if they'd passed on to stage two yet. Regulators rejected financial industry suggestions that they routinely notify all companies that enter stage two of the process; formal notice is only insured for firms that pass on to the third stage.
The rolling economic depression that is overtaking the West is surely the direct result of the artificial monetary distortions that central banks create every day. Monopoly central banking generates first booms and then busts. That's because those generating the paper money never know how much is too much.
But this monetary expansion is purposeful. It's been taking place for a century or more, and the system has expanded to 150 central banks. The idea that those behind the system don't understand its destructive potential is surely naive.
The system, with its booms and busts, constantly centralizes power ... first economic power and now legal power. The new regulations wil enshrine certain corporations into existence for perpetuity. But these are the very firms that SHOULD fail. They are part of a much larger financial bubble.
Central banking itself is a bubble, one that has gone "unpopped" for many decades. The too-big-to-fail firms are actually its distribution arm. The whole system needs to be purged, but instead it is being given a regulatory life-support.
Having created these distortions, the powers-that-be now propose to solve the problem by propping up failing entities with the full power of the state. This is supposed to be a "normal" evolution, given the larger state of affairs. We would argue that it is not. It is an elaboration of empire, and a purposeful one.
Unfortunately, the system has been cleverly designed to involve the average citizen in its midst via 401ks, stocks, options and other instruments and pension elements. This involvement makes individuals extremely concerned about the system as it is, and effectively damps a good deal of protest against what otherwise might be conceived as an increasingly unfair financial environment.
Conclusion: All this has been cleverly designed over time in our view. It is hardly a natural evolution. The object is not to salvage the system but to create elitist facilities divorced from the market's discipline. US citizens are watching, with varying degrees of passivity, as a formal corporate and regulatory elite is created, one with privileges beyond what any democratic society should be forced to endure.
Posted by Charlie on 04/11/12 08:09 PM
You're only on your own if you're not "Big". Collectivism.
Posted by Blair T. Longley on 04/11/12 04:40 PM
Due to the hypercomplication of an astronomically amplified situation, none of the old labels or terms to describe our situation work anymore. In that context, I like the work of Walter Burien and Clint Richards in the USA, which I describe as revealling an:
OUROBOROS OF INCORPORATED ROBBERY.
The main shareholders of the corporations have become government mandated organizations. Thus, that collective government now owns the majority of the corporations, that the government is regulating.
Thus, the Too Big To Fails become capable of only catastrophic failures, on an astronomical scale similar to what built them, namely, global electronic frauds, backed by atomic weapons. We need a profound scientific intellectual revolutions to stop using false fundamental dichotomies to understand this situation. Instead, we should start using more unitary mechanisms, from energy laws to general systems theories. Privatized fiat money-as-debt systems are crazy cults that became our state religions. We will never find any "truth" in such systems of legalized lies. The deeper realities are that the money and murder systems are inseparable. The debt controls depended on the death controls, while the death controls were being paid for by the debt controls.
Hence, again, our reality has become an OUROBOROS.
A theoretical way forward is a creative synthesis of ancient mysticism with post-modernizing science. That is necessary because political economy is inside human ecology. As we rush forwards towards some kinds of possible robot revolutions, even that old truism is faltering too!
I have been collecting many similar thoughts on the monetary system on this thread:
Click to view link
Skim backwards through the bold, coloured highlights of that, to glean that.
Posted by oldman67 on 04/11/12 02:27 PM
Since America has become a welfare state the majority will go along with whatever the government proposes. A nation of sheep will follower their Shepard.Those who have read Judge P. Napolitano's book, A NATION of SHEEP know what i am talking about.
Posted by budwood on 04/11/12 12:53 PM
Seems that there will be a lot of failures, and maybe just in time, too.
Posted by victorbarney on 04/11/12 12:23 PM
"Under Dodd-Frank, regulators must... " Say no more! Now that I read that the American population is made up from over 70% gatherer's(women by biology & blacks through biology and choice(?), blacks are 12% of our total population), MEANING PEOPLE WHO LOVE GETTING STUFF GIVEN THEM. Just saying...
Posted by rossbcan on 04/11/12 12:02 PM
DB: "but instead it is being given a regulatory life-support."
oh, BTW, have I ever mentioned REGULATION IS FUTILE:
Click to view link
The unseen hand (of collective free choice) is far bigger and mightier than THEM. THEY have already been "voted off the island" in the court of public opinion. Only inertia enabled by final consumption of remaining resources keep them from "paying the piper".
The rats fleeing the sinking ship of state are accellerating in numbers. They will argue "amnesty". I argue "apology NOT ACCEPTED" only REAL reparations and "an eye for an eye, a tooth for a tooth" will do.
Posted by rossbcan on 04/11/12 11:52 AM
DB: "We've taken to calling this directed history."
I call it "Environmental Control 101" (carrots and sticks), using methodology proven in link above.
Posted by rossbcan on 04/11/12 11:48 AM
..on a roll this week, DB
"It used to be in the US that you were on your own, at least when it came to building a business. If it succeeded, great - if not, then ... too bad."
... and, also...
It used to be in the US that you were on your own, at least when it came to being the government (public servants). If it succeeded, great - if not, then ... too bad.
The only thing that has changed is the incredible scope and magnitude of "too bad" that is implacably hurtling towards our self-decreed "rulers".
Only the fittest survive and, it is not THEIR choice whether or not THEY are evaluated as "fit", only whether or not THEY CHOOSE to be "fit":
Click to view link
Posted by Dilence Sogwood on 04/11/12 11:24 AM
We know TBTF causes moral hazard, but what does it mean for the little guy when things are going fine (not failing).
Much like the Fed, who is implicitly not going to fail, TBTF has free license to pay higher prices for risk assets. The little guy, in order to earn a return on his depreciating savings has to take a very high level of risk to retain purchasing power. The little guy retains the downside and gets hurt badly in times of downside volatility. Therefore the middle class is worse off.