Will Government Seize Your 401(k)?

ECONOMIST: GOVERNMENT PREPARING TO SEIZE 401(K) PENSIONS

Supreme Court ruling sets the stage for "economic totalitarianism"

by PAUL JOSEPH WATSON | MAY 25, 2015

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Economist Martin Armstrong warns that a Supreme Court ruling last week has set the stage for the federal government to begin seizing private pension funds.

According to Armstrong, the outcome of Tibble v. Edison, which found that employers have a duty to protect their workers’ 401(k) plans from mutual funds that perform poorly, will grease the skids for the feds to seize private funds and prosecute companies who manage mutual funds badly.

“Between the court ruling and the Obama administration’s push for stronger fiduciary rules,” the developments send a, “strong message that government can much easier seize the pension fund management industry of course to “protect the consumer,” writes Armstrong, warning that the ruling, “sets the stage to JUSTIFY government seizure of private pension funds to protect pensioners,” when the economy gets “messy”.

“This fits perfectly just in time for the Obama administration’s next assault as they prepare a landmark change of its own by issuing rules requiring that financial advisers put the interest of customers ahead of their own,” writes Armstrong. “This creates a very gray area wide enough to justify public seizure of pension funds under management.”

Following the 2008 financial collapse, reports emerged that the federal government was planning to seize the private 401(k) pensions of millions of Americans while enforcing an additional 5 per cent payroll tax as part of a new bailout program that would empower the Social Security Administration to redistribute pension funds “fairly” amongst citizens.

Armstrong warns that the development is part of a wider move towards “economic totalitarianism,” which is also characterized by efforts to eliminate physical cash altogether in the name of giving central banks more power.

Numerous prominent individuals have called for hard currency to be banned in recent months, including former Bank of England economist Jim Leaviss, who wrote a piece for the Telegraph which argued that, “Forcing everyone to spend only by electronic means from an account held at a government-run bank would give the authorities far better tools to deal with recessions and economic booms.”

Earlier this month, German Council Of Economic expert Peter Bofinger also said that imposing a cashless society would make it easier for central banks to enforce their economic policy.

As we have covered at length, commercial banks are beginning to impose more draconian controls on the withdrawal and depositing of cash, with the practice being treated as a suspicious activity even for relatively modest sums.

Armstrong, who correctly predicted the 1987 Black Monday crash as well as the 1998 Russian financial collapse, also warned last year that a coming financial collapse will cause widespread riots to erupt in America by 2016.

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Could Your Money Be At Risk In The Bank? Could We Experience A Cyprus Style Bail In?

Are You Prepared For A U.S. Bank Bail-In?

November 5, 2013 by Jeff Berwick 

FILE

If you have cash in a U.S. bank, you can expect to have the Federal government take it all the next time U.S. banks find themselves in trouble.

The days of the Federal government’s stealing money from taxpayers or borrowing it from the Federal Reserve to save troubled banks — as in it did in the 2008 crisis — may be over. Congress is considering imitating the theft in Cyprus and letting troubled banks “bail in” depositor money in order to make themselves solvent.

Jim Sinclair, chairman and CEO of Tanzania Royalty Exploration Corp., and whose family started Goldman Sachs, Salomon Brothers, Lehman Brothers, and others, has been warning of this for a while:

Bail-ins are coming to North America without any doubt, and will be remembered as the “Great Leveling,” of the “Great Flushing.” Not only can it happen here, but it will happen here… It stands on legal grounds by legal precedent both (sic) in the U.S., Canada and the UK.”

Financial expert Michael Snyder said: “When major banks fail, they are going to bail them out by grabbing the money that is in your bank accounts. This is going to absolutely shatter faith in the banking system and it is actually going to make it far more likely that we will see major bank failures all over the Western world.”

This news isn’t exactly new, but the story is still developing. The monetary system is much closer to collapse, and the bail-in is imminent. In fact, U.S. banks presented the Federal Reserve with a bail-in plan to pay for large banks’ restructuring in the event of a future crisis,The Wall Street Journal reports. The plan was presented to the Federal Reserve in an attempt to preempt tougher rules from the regulators.

The private meeting was reportedly attended by officials from Wells Fargo & Company, Bank of America Corp., Citigroup Inc. and several other banks. The bail-in mechanism would be designed to place a greater burden on creditors, as opposed to the taxpayers (theft victims), in the event of a bank’s collapse. In addition to the fleecing of depositors in Cyprus, the burden keeping a bank afloat was put on bondholders already this year when the U.K.’s Co-operative bank unveiled a rescue package that forced the bank’s bondholders to take a  £1.5 billion hit to plug the  £1.5 billion hole in the bank’s balance sheet.

The proposal presented to Federal Reserve officials would involve the largest financial services holding companies holding a certain amount of debt and equity, which would be used to prop up any failed bank subsidiary seized by regulators. But the regulators will likely stick to their own plan, which involves more aggressive measures, including capping bank size, breaking up institutions or forcing banks to take on more long-term debt.

In the end, however, it’s not just creditors who will be on the hook but depositors as well. Sinclair pointed out that banks legally own depositors’ funds as soon as the depositors hand those funds over to the banks. The money becomes the banks’, and the “depositors” actually become unsecured creditors holding promises to pay. Previously, the banks were obligated to pay back this loan on demand with cash. Under the new Federal Deposit Insurance Company – Bank of England (FDIC-BOE) plan revealed this year, however, these promises to pay become equity in the bank, which won’t be able to be used as payments for bills, which is why most people have money in the bank in the first place.

The point is that your money is not yours while it is “deposited” with a bank. And bail-ins are coming to shatter any illusion that it is for U.S. depositors. Notice that banks are already setting up deposits for seizure. Despite the excuses of the likes of JPMorgan, the banks are indeed clamping down on outgoing international wire transfers and now putting in limits for withdrawal. If you don’t get your money out now, possibly by end of this year or sooner, you may not be able ever to get it out. Once doors are closed, the Federal government might do a bank holiday and bail in to make the banks “solvent” again. At best, you may get some “bank equity” that is both illiquid and which will ultimately be worth a tiny fraction of the deposit it replaces.

And when the Fair and Accurate Credit Transactions Act (FACTA) comes into effect in July, it will be nearly impossible for an American to get a bank account outside the United States. (It already is, but it will be even worse.) Now is the time to get your assets in an offshore account and The Dollar Vigilante can help. Click here to learn more about how with TDV Offshore.

Will China Fall Apart When Their Banks Fail?

Simon Johnson: China's Banks on Road to Financial Disaster

Thursday, 31 Oct 2013 07:48 PM

By Michael Kling

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China's big banks, bent on global expansion and enabled by light regulation, are on the road to financial disaster much like the crisis experienced in the West, predicts Simon Johnson, MIT Sloan professor and former IMF chief economist, in an article for Project Syndicate.

Chinese leaders are enamored with the idea of building a worldwide banking sector.

"There is nothing wrong with this ambition, as long as it is handled with great caution," Johnson warns. "Unfortunately, it is now becoming clear that the hard lessons of recent financial crises have been lost on China."



Bankers, Johnson notes, are eternally crying for lower capital requirements. They want to be able to borrow more and to be able to hold less equity relative to debt in both good times and bad.

Many nations have learned the hard way about the risks of large banking sectors: expensive bailouts, damaged domestic credit, and wounded confidence that can depress the economy for years.

Johnson quotes former Bank of England Governor Mervyn King, who reportedly said, "Banks live globally and die locally." That means people don't think about where an international bank lends and where it obtains its equity during good times. But when times turn sour and panic ensues, people certainly care if it's an insured bank in the U.S. or an unregulated offshore subsidiary.

Ironically, the British are enabling the expansion of China's banks and their move to possible disaster, Johnson charges.

By offering to treat Chinese banks as branches subject to Chinese regulation rather than subsidiaries subject to British rules, the U.K. has loosened the regulatory screws and opened the door to China's banks. But it's a trap door, Johnson warns.

"By encouraging China to build global financial institutions with light regulation, the United Kingdom is not just inviting irresponsible behavior; it could help to pull an entire economy toward ultimately unproductive and even self-destructive activities."

Johnson questions if the U.K. will be able to handle a financial crisis when banks' assets again become huge relative to the country's GDP, which is quite likely.

"China is like Cinderella – finally allowed to attend the ball and given a chance to become a prominent player," he says. "But midnight could come very quickly, and financial crises do not have fairytale endings."

Other banking experts are also criticizing Britain's move to allow Chinese banks to open branches in the U.K.

"Do we really want banks that are going to operate on very low capital, because they are not going to put much capital into the branch, and then start spinning a big wheel here," Bob Lyddon, general secretary of IBOS Association, a London-based alliance of large international banks, told Reuters.

"Isn't that what we were meant to be getting away from?"



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