How Did This Banking Failure Happen – A Few Pieces of Banking Background You Should Know About ~ March 15, 2023


By: Cynthia Rose

How did this banking failure happen? The “American Way” is capitalism…making money, almost always at the expense of others…no free lunch.

From my view, capitalism rests on a blend of commence stemming from the manipulation of insurance, lending, and finance regulated by…politics.

A significant firewall for keeping the processes of capitalism in check has been removed by those in the political arena, The Glass-Segall legislation (four provisions of the United States Banking Act of 1933 separating commercial and investment banking), and the Dodd-Frank Act of 2010.

Glass-Segall Legislation

The four clarifying actions denied to banks in Glass-Segall Legislation were:

  • dealing in non-governmental securities for customers
  • investing in non-investment grade securities for themselves
  • underwriting or distributing non-governmental securities
  • affiliating (or sharing employees) with companies involved in such activities

These banking limitations were repealed by the Gramm–Leach–Bliley Act, also known as the Financial Services Modernization Act of 1999.

By defining commercial banks as banks that take in deposits and make loans and investment banks as banks that underwrite and deal with securities the Glass–Steagall act explained the separation of banks by stating that commercial banks could not deal with securities and investment banks could not own commercial banks or have close connections with them. With the exception of commercial banks being allowed to underwrite government-issued bonds, commercial banks could only have 10 percent of their income come from securities.

A second piece of legislative action serving to further confuse the processes of capitalism was inacted in 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act.

Dodd–Frank, is a United States federal law that was enacted on July 21, 2010.[1] The law overhauled financial regulation in the aftermath of the Great Recession, and it made changes affecting all federal financial regulatory agencies and almost every part of the nation’s financial services industry. Dodd–Frank is generally regarded as one of the most significant laws enacted during the presidency of Barack Obama.[5] Studies have found the Dodd–Frank Act has improved financial stability and consumer protection,[6][7] although there has been debate regarding its economic effects.

Of the existing agencies, changes are proposed, ranging from new powers to the transfer of powers in an effort to enhance the regulatory system. The institutions affected by these changes include most of the regulatory agencies currently involved in monitoring the financial system (Federal Deposit Insurance Corporation (FDIC), U.S. Securities and Exchange Commission (SEC), Office of the Comptroller of the Currency (OCC), Federal Reserve (the “Fed”), the Securities Investor Protection Corporation (SIPC), etc.), and the final elimination of the Office of Thrift Supervision (further described in Title III—Transfer of Powers to the Comptroller, the FDIC, and the FED).

Associated Press reported that in response to the costs that the legislation places on banks, some banks have ended the practice of giving their customers free checking.[98] Small banks have been forced to end some businesses such as mortgages and car loans in response to the new regulations. The size of regulatory compliance teams has grown.[99] The Heritage Foundation, calling attention to the new ability of borrowers to sue lenders for misjudging their ability to repay a loan, predicted that smaller lenders would be forced to exit the mortgage market due to increased risk.

Private banks, responsible for solving their own “banking issues”have disappeared, swallowed by the privately owned Central Bank in America…the FED. Now YOU have a better idea of the soup of politically derived legislation which is based on corporate greed, and is in the process of falling apart today as debt due to the capital process of usury has indeed…consumed itself!


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