The continuing perversions and disfigurement of an entire nation’s financial system to accommodate insanely complex mega banks – the same ones who brought the country to the brink of financial collapse six years ago – takes center stage in Washington, D. C. again today.
Because Federal regulators do not want to have egg on their face if one of these global behemoths has to be rescued by taxpayers again, the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency are set to release new liquidity rules today. The rules will redefine the types of liquid assets these giant Wall Street banks must hold to meet the new Basel III Liquidity Coverage Rule set by the international banking body known as the Basel Committee on Banking Supervision, a group made up predominantly of global central banks.
The Federal regulators are expected to adopt rules that put a heavy reliance on banks holding short-term U. S. Treasury securities, one of the most liquid security classes around the world, in order to meet a bank run or credit crunch lasting 30 days.
The state treasurers’ panic over the rule is justified. According to press reports, the Federal regulators may exclude municipal bonds issued by states, counties, cities and school districts from the category ‘high quality liquid assets’ (HQLA) which could be easily liquidated should a mega bank experience a run on its assets. These municipal bonds fund critical projects like roads, schools, and bridges. Given the deteriorating infrastructure of the nation, these new rules may critically impact the economic interests of the U. S. while regulators show growing fealty to the wishes of foreign central banks.
This post was published at Wall Street On Parade By Pam Martens and Russ Marte.
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