More Freedom for the Banks, More Risk for the Rest of Us

Written By Ryan Stancil

Posted December 12, 2014

As the year comes to a close, congress is working to get a budget bill passed that will continue funding the government so that it doesn’t go through another pointless shutdown like the one that happened about a year ago.

The trouble with this situation is that doing so will probably come at the expense of giving more power to banks like Goldman Sachs and JPMorgan Chase.

As part of the budget-related talks that would keep a shutdown from happening, it’s being reported that large Wall Street firms want provisions that would allow them to trade financial derivatives from subsidiaries that are backed by the FDIC. That’s currently not allowed thanks to the Dodd-Frank act. If the provisions are included in the version of the bill that passes the House and Senate, it would put taxpayers on the hook for any losses that banks incur when they gamble with derivatives. We would effectively be enabling the behavior of large financial firms whenever they want to take a chance on securities with prices that depend on other securities.

Put more simply, we’d be assuming some of the risk and none of the reward.

Enter Bloomberg

Of course, this is all well and good with the banking elite.

Just ask former mayor of New York and unapologetic champion of the financial industry Michael Bloomberg. As you might remember, some of his time as mayor was spent trying to get the sales of soft drinks beyond a certain size banned in the city. But now that he’s no longer mayor, he’s returned to the CEO position of Bloomberg L.P., his financial data and media company.

In speaking at the annual conference of the Securities Industry and Financial Markets Association recently, Bloomberg railed against “stupid laws” that were put in place to keep 2008’s financial crisis from happening again. He complained that the regulations kept big banks from making money and, by extension, that was hurting the economy and job creation.

He’s not in favor of needlessly large sodas for you and me, but he’s more than okay with letting banks do whatever they want.

Even though it was just talk, what he said matters more than you might think. It might have been an indication of what we have to look forward to as we head into 2015.

Even if the derivatives provisions get taken out of the budget that will ultimately pass, the Republican-controlled 114th Congress takes over on January 3rd. That will, in theory, make it easier for the banks to get what they want. I say in theory because the banking industry donates to both democrats and republicans, but the latter receives almost twice the amount of campaign contributions.

To say that 2015 will be an interesting year would be an understatement, I think.

2008 All Over Again?

You’ve seen us talk time and again about how things aren’t looking good for the global economy. With various Asian and European countries in or approaching recession, we could be following suit given the growing market bubble. This collapse, if it comes, could be sped up if the 114th congress tries to gut parts of current financial reform laws in the way it currently looks like it will.

You also know, then, that we feel the best way to protect yourself in the coming year is through investing in commodities like gold and silver. They’ve proven to be safe bets historically, and there’s no reason to believe the near future will be any different.

Uncertainty is sure to be a big theme in 2015, so it will be up to you to prepare for whatever is to come. It’s the only way to make sure you keep your head about you in a time where the deck is being increasingly stacked against you.

Keep your eyes open,

Ryan Stancil