“’You’ll own nothing and be happy’? David Webb has gone through the 50-year history of all the legal constructs that have been put in place to technically enable that to happen.” [Oct 2 interview titled “The Great Taking: Who Really Owns Your Assets?”]
The derivatives bubble has been estimated to exceed one quadrillion dollars (a quadrillion is 1,000 trillion). The entire GDP of the world is estimated at $105 trillion, or 10% of one quadrillion; and the collective wealth of the world is an estimated $360 trillion. Clearly, there is not enough collateral anywhere to satisfy all the derivative claims. The majority of derivatives now involve interest rate swaps, and interest rates have shot up. The bubble looks ready to pop.
Who were the intrepid counterparties signing up to take the other side of these risky derivative bets? Initially, it seems, they were banks –led by four mega-banks, JP Morgan Chase, Citibank, Goldman Sachs and Bank of America. But according to a 2023 book called The Great Taking by veteran hedge fund manager David Rogers Webb, counterparty risk on all of these bets is ultimately assumed by an entity called the Depository Trust & Clearing Corporation (DTCC), through its nominee Cede & Co. (See also Greg Morse, “Who Owns America? Cede & DTCC,” and A. Freed, “Who Really Owns Your Money? Part I, The DTCC”). Cede & Co. is now the owner of record of all of our stocks, bonds, digitized securities, mortgages, and more; and it is seriously under-capitalized, holding capital of only $3.5 billion, clearly not enough to satisfy all the potential derivative claims. Webb thinks this is intentional.
What happens if the DTCC goes bankrupt? Under The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, derivatives have “super-priority” in bankruptcy. (The BAPCPA actually protects the banks and derivative claimants rather than consumers; it was the same act that eliminated bankruptcy protection for students.) Derivative claimants don’t even need to go through the bankruptcy court but can simply nab the collateral from the bankrupt estate, leaving nothing for the other secured creditors (including state and local governments) or the banks’ unsecured creditors (including us, the depositors). And in this case the “bankrupt estate” – the holdings of the DTCC/Cede & Co. – includes all of our stocks, bonds, digitized securities, mortgages, and more.
Continue readingFiled under: Ellen Brown Articles/Commentary | Tagged: bail-in, BANKS BIG BANKS BIG TECH DERIVATIVES ECONOMY FED FINANCE MONEY MONEY SILICON VALLEY SVB THE FED, Dodd-Frank, DTC, DTCC, Ellen Brown, public banking | 61 Comments »
WEB OF DEBT BLOG 
Beating Wall Street at Its Own Game — The Bank of North Dakota Model
North Dakota is staunchly conservative, having voted Republican in every presidential election since Lyndon Johnson in 1964. So how is it that the state boasts the only state-owned bank in the nation? Has it secretly gone socialist?
No. The Bank of North Dakota (BND) operates on the same principles as any capitalist bank, except that its profits and benefits serve the North Dakota public rather than private investors and executives. The BND provides a unique, innovative model, in which public ownership is leveraged to enhance the workings of the private sector. It invests in and supports private enterprise — local businesses, agriculture, and economic development – the core activities of a capitalist system where private property and enterprise are central. Across the country, small businesses are now failing at increasingly high rates, but that’s not true in North Dakota, which was rated by Forbes Magazine the best state in which to start a business in 2024.
The BND was founded in 1919, when North Dakota farmers rose up against the powerful out-of-state banking-railroad-granary cartel that was unfairly foreclosing on their farms. They formed the Non-Partisan League, won an election, and founded the state’s own bank and granary, both of which are still active today.
The BND operates within the private financial market, working alongside private banks rather than replacing them. It provides loans and other banking services, primarily to other banks, local governments, and state agencies, which then lend to or invest in private sector enterprises. It operates with a profit motive, with profits either retained as capital to increase the bank’s loan capacity or returned to the state’s general fund, supporting public projects, education, and infrastructure.
According to the BND website, more than $1 billion had been transferred to the state’s general fund and special programs through 2018, most of it in the previous decade. That is a substantial sum for a state with a population that is only about one-fifteenth the size of Los Angeles County.
The BND actually beats private banks at their own game, generating a larger return on equity (ROE) for its public citizen-owners than even the largest Wall Street banks return to their private investors.
Continue reading →Filed under: Ellen Brown Articles/Commentary | Tagged: bail-in, Bank of North Dakota, bank runs, capitalism, derivatives, disaster relief, economics, economy, Ellen Brown, FINANCE, JPMorganChase, money, news, public banking | 4 Comments »