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G&G Associates Tax & Financial Consulting
e-Newsletter
G&G Associates Tax & Financial Consulting
e-Newsletter
FDIC Slams Biggest US Banks, Says Capital Reserves "Inadequate"
Hotep G&G Readers,
Hotep G&G Readers,
A few weeks ago, a
gentleman named Thomas Hoenig wrote some rather unflattering comments
about the US banking system in a little known publication called the Wall Street Journal.
In his remarks, Hoenig stated that “while the largest U.S. banks have increased capital since the [2008] crisis, their capital is still lower than the industry average and inadequate for bank resiliency.”
Think about what that means. A bank’s “capital” is essentially its rainy day reserve fund. Meaning ...
If there’s a giant
mess in the financial system and asset prices collapse (as they did in
2008), a bank with plentiful capital will be able to withstand the
crisis.
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Internal Sponsorship:
Want to Know How To Protect your Portfolio
If you get paid in dollars and hold the majority of your assets in U.S. stocks or bonds, your wealth is in significant danger (401K’s, TSPs, 403Bs, Mutual funds, etc).
To become a member of the G&G Investment Society (GGIS) newsletter subscription to learn how to take advantage of some of our suggestions so you can protect your wealth and portfolio against a fallen dollar, send an e-mail to GGIS@gngassoc.com and/or visit our website at www.gngassociates.net and click on the “Products & Services” link and we’ll get you signed up right away.
DON'T WAIT ANOTHER DAY!
- 1 year subscription - $149
- 2 year subscription - $269
- Lifetime subscription - $699 {50% off tax prep & 25% off consulting services for life}
*** Membership Guarantee *** If you don't make your money back from being a GGIS member by the end of your subscription...we'll refund 100% of your subscription fee back. That's how confident we are that this will be one of the best financial moves of your life.
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Banks with inadequate capital will fail. Hoenig is suggesting that many of the largest banks in the US fail in the latter category. More importantly,
Hoenig slammed the ridiculous accounting methods that banks use to
report their financial condition, something he said “too easily allows banks to conceal risk.”
So Hoenig is
telling us that banks have insufficient capital to be resilient in a
crisis and can too easily hide their risks. Crazy. So who exactly is
this whack job Thomas Hoenig? What sort of social deviant would possibly
question the sanctity and soundness of the US banking system?
Hoenig is the vice chairman of the FDIC, as well as former president of the Kansas City Federal Reserve Bank.
So, he’s not a whack-job. He’s the ultimate banking insider. I’ve been writing
about this for years, detailing how most US banks have, at a
minimum, questionable levels of capital, and they play all sorts of
accounting tricks to mask their financial condition.
But as I often say, "Liars can figure, but figures don't lie. The key is can you figure out if they are lying or not." In this case, don’t take my word for it. Listen to the banks themselves.
Major banks report their numbers every single quarter. And if you’re a
financial analysts like I am, you can tear apart bank balance sheets and see
for yourself how dangerously low their levels of liquidity are, and the
almost comical ways they’re conveniently hiding huge losses in their
bond portfolios.
Well, now you can listen to the #2 executive at the FDIC as well. One of Hoenig’s
major points is that bank accounting methods allow them to live in a
pretend world where their assets carry ZERO risk.
For example, prior
to the financial crisis, banks were allowed to assign a zero risk rating
to all their toxic subprime mortgages. It didn’t matter
that this stuff was worthless. The banks were able to carry all these
assets on their balance sheets at 100 cents on the dollar as if it were
cash.
It’s not much different today.
Now, instead of holding subprime mortgages and pretending that they’re risk-free, banks are holding subprime government bonds. They’ve loaned
trillions and trillions of dollars of YOUR MONEY to bankrupt
governments, in many cases at NEGATIVE interest rates where the bank is
almost guaranteed to lose money.
And yet they continue to categorize these assets as “risk free”.
This means they don’t need to have any contingency plans or keep any additional capital in reserve in case of default. This is an unbelievable level of deceit, and finally the FDIC is calling the BS card.
To hammer this
point, just hours before Hoenig published his editorial, the biggest
banks in the US requested a FIVE YEAR extension to comply with the
Volker Rule. The Volker Rule is
part of a new regulation that forces banks to sell certain risky assets
that have the potential to become toxic again.
This rule was born from the ashes of the 2008 financial crisis, and it was originally supposed to go into effect in 2014. So they requested a 1-year delay. Then another one. And another one. And now finally a 5-year extension through 2022.
That’s an EIGHT YEAR delay to sell off these high-risk assets that they still own. Why do they need an eight year delay?
Simple. Because there’s no market for these risky assets. No one else wants to buy them.
If the banks sell today, they’ll lose a fortune… reducing their capital levels even more. So instead of
selling, the banks just keep asking for an extension and pretending that
these risky assets are worth full value (i.e. what they paid).
Again, it’s another scam designed to make you think the banks are much safer than they actually are. Look, I’m not suggesting that your bank is going to collapse tomorrow. But the reality is that your bank is probably nowhere near as safe as you think it is.
And this matters. Most people spend more time arguing about what they’ll eat for
dinner tonight than thinking about the financial health of their bank. A bank is your financial partner. Don’t simply assume that it’s safe just because everyone else does.
Be sure. And if you can’t be, it certainly wouldn’t hurt to reduce your exposure to the bank. Buy a safe, withdraw some funds, and hold at least 3-6 month’s worth of living expenses in physical cash.
With interest rates at basically zero, there’s almost no downside in doing this.
As always…feel free to pass this information on to anyone you think is interested in increasing their tax & financial IQ.
If you need a one-on-one consultation to learn how to implement these investments or any other tax or financial strategy mentioned in these newsletters, feel free to contact my office to setup an appointment.
Good Investing!
Ankh Uja Snb (Life, Health & Strength)
Asar Maa Ra Gray
Tax & Financial Consultant
G&G Associates
757-271-6068 office
866-361-3872 toll free fax
www.gngassociates.net
Become a Fan of G&G Associates on Facebook.
“Investing is much like gambling. But, the difference is that with knowledge in investing you can at least increase your odds of winning.”
J. Carter
LEGAL NOTICE: This work is based on what I’ve learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here. It’s your money and your responsibility. Nothing herein should be considered personalized investment advice.
If you need a one-on-one consultation to learn how to implement these investments or any other tax or financial strategy mentioned in these newsletters, feel free to contact my office to setup an appointment.
Good Investing!
Ankh Uja Snb (Life, Health & Strength)
Asar Maa Ra Gray
Tax & Financial Consultant
G&G Associates
757-271-6068 office
866-361-3872 toll free fax
www.gngassociates.net
Become a Fan of G&G Associates on Facebook.
“Investing is much like gambling. But, the difference is that with knowledge in investing you can at least increase your odds of winning.”
J. Carter
LEGAL NOTICE: This work is based on what I’ve learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here. It’s your money and your responsibility. Nothing herein should be considered personalized investment advice.
