The American 5% RULE

The 5% Rule

Section 402 would increase banks' reliance on debt by weakening the 5% rule.

Adopted post-crisis, the 5% rule requires big banks to fund themselves with at least 5% common equity.

This limits their reliance on debt to 95%.

Not much of a constraint, is it?

I mean, would you want your salary and savings to pay for 5% of your weekly expenses
and your credit cards to pay for the rest?

In what world is that acceptable?

In the world of big banks, of course.

Section 402 would exclude all the money - and it's quite a lot - that banks "lend" to central banks
from this debt-to-equity ratio.

In pushing down the debt number this way, the equity part of the ratio also falls.

Sheila Bair, former chair of the Federal Deposit Insurance Corporation, says it could lead to banks having 30 % less capital in hand...

She adds that even though the bill intends to limit these capital reductions to "custodian" banks,
its definition of custodian bank is so broad that any big bank might qualify.

Another loophole for big banks to party with... Are you really surprised?

The U.S. will be treating its banks far better than other countries' banks if Section 402 gets approval in the House.

Only the U.K. is removing central bank deposits from its leverage calculations.

But it also increased its leverage ratio to tamp down capital reductions.

So the U.S. stands alone here.

Section 402 would also exclude from the debt-to-equity ratio all deposits in less-than-stable
countries like Turkey and Greece.

And it gets worse...

Dodd-Frank applies more stringent regulation and oversight to banks with assets greater than $50 billion.

This legislation would raise that threshold to $250 billion, a change that would affect 25 of the 38 biggest banks in the country.

So much for the lessons learned in 2008...

And so much for bitcoin being outdated and unnecessary.

Bitcoin in the Age of Debt Booms

World debt is reaching unsustainable levels.

Once again, the world finds itself in a state of denial
about what's happening in the precarious world of fiat money.

Bitcoin is NOT part of that world...

Peter Thiel says that bitcoin is like "bars of gold in a vault that never move," and as such,
it can act as a "hedge of sorts against the whole world falling apart."

Nothing I wish for, of course.

But even short of the world falling apart, bitcoin is a welcome and needed refuge for
hyper-inflation and bankrupt governments propping up bankrupt currencies.

This is not the case of some past-his-prime general fighting yesterday's war.

This war is here and now.

It's not going away.