Bank at Your Own Risk

Banking Can Be Risky

Banking is Not a Wise Choice and Risky Business!
Picture yourself in one of these scenarios. You go shopping and your credit card transaction is denied despite the fact you know you have money in your account. Or you go to an ATM machine and you are informed that your withdrawal request has been denied. Or you’re a public official such as a School Business Administrator, County Treasurer, Municipal Finance Manger, Pensions Fund Administrator, or anyone that has responsibility for protecting public tax payer funds. You’re informed that all accounts have been frozen until further notice. As you investigate why you can’t access money you know should be available, you find out that the bank has failed, and has been closed till further notice by the FDIC. You also discover that the Government will be confiscating part of your deposits in order to stabilize the bank. You believe that this can’t happen here because the FDIC protects your money. You may have placed your money in the bank because it has large vaults and is protected by the government. You may have placed public moneys into a bank because their collateralize and the government will back them therefore you think these funds are safe.

All of these assumptions are not based on fact. Perhaps you recall that in Cyprus depositor’s money was confiscated in order to stabilize the banks. Similar pans are already in place to do the same in the United States and other countries.

In a nutshell, the banks in Cyprus were over leveraged to the point that their liabilities exceeded their gross domestic product. Because of the global bailouts of the banks in 2008 was so politically unpopular a multinational investment banking and asset management firm also know as a global banking troika that consisted of the International Monetary Fund, The European Central Bank, and the European Union. Imposed a bail in program, in which bank customers will have some of their savings taken in order to stabilize the banks. The losses to some clients in Cyprus were as high as 60%. In order to protect their selves, the Cyprus Government closed the banks for 12 days and people had limited access to their money. Long line formed at the ATM machines.

The large global and Wall Street Banks, are the ones at the most risk because they’ve been gambling with depositor money on risky derivative bets, and other speculative investments devises. Which means that when, not if, these bets start going bad the banks will be on the hook for these deficient values.

According to the Bank for International Settlements, a World Central Bank, the value of these derivatives contracts is an astounding 700 Trillion dollars. That’s 700,000 Billion dollars! The entire World GDP (Gross Domestic Product) is only 70 Trillion dollars in comparison. There is not enough money on the planet to cover these bets.

What most people don’t understand is that once you give a bank your money, the money is legally no longer yours! Under the law depositors are considered unsecured creditors to the bank and are treated as such under any bankruptcy proceedings. This type of law has happened with the collapse of MF Global, and while MF Global was a Futures Trading Company and not a bank, the blueprint for confiscations was delivered here. The losses of customer funds were upheld by the legal system with the sentinel case. Another important fact is this, these speculative derivatives have super priority status in a bankruptcy proceeding, which means that any derivative contract holder gets paid first, before shareholders, creditors, and depositors like you.

If you’re a public official with fiduciary responsibility to protect public moneys, this news is critically important with far reaching implications about what your responsibility demands. If you can’t deposit public moneys into the large Wall Street Banks without being a proven risk to losing access to it to confiscation under existing laws what options are there? Well one option would be to create a public bank for your municipality like North Dakota did 94 years ago. Their public bank was completely unaffected by the Wall Street Bank collapses, and financial trials back in 2008 and in fact boasted one of their larges profits ever while other mighty financial institutions fell. The Bank of North Dakota which treats its funds as utilities rather that a speculative fund to gamble for profit has a simple purpose, to preserve and protect its assets while investing in local priorities, instead of non-local international corporations. It is completely independent of global banker greed and risky behaviors. Its money cannot be confiscated. Public officials need to be clear about this risk while the prospect of funds confiscation sounds startling, it is none the less true that the risk is not only there, its promised to take place if such bank failures occur again, and you’re probably aware that such failures are expected by many, if not most financial observers.

This is your moment, a time to step up to the plate, look around at the environment and the financial players pitted against you, and to act prudently in the interest of your community. The era of blind trust in the institutions of global finance is over. Public fiscal officers and citizens alike would be well served to learn more on how to create a local public bank and what it might look like to have a new financial engine that provides for community growth, funds security, and increased local investment. There is now an urgent choice to be made at every municipal level. Either leave your money in the hands of proven gamblers with the promise it will be confiscated when more bad deals go down, or take a bold innovative step to empower and safeguard community funds by adopting the proven public bank alternative. At the very least you should pull your money out of your bank before it’s too late!

Bank at Your Own Risk


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