Was there a video that went with that?
It begins with some working class folks getting thrown out of their homes that have been in the family for generations.
| What are Money Market Funds? Money Market Funds (MMFs) are financial corporations in the United States and Europe, rarely controlled and little subject to regulations as they act without banking licences. They are closely akin to shadow banking. Supposedly the MMFs act with prudence but the reality is very different. This is cause for great concern given the vast quantities of money they handle, and the sharp drop in their profitability since 2008. In the United States, they managed $2.7 trillion in 2012, a significant drop from the $3.8 trillion in 2008. As investment funds the MMFs collect capital from investors (banks, pension funds, etc.) and use it to make short-term, often day to day, loans to banks and businesses. During the 2000s MMF financing has become an essential short-term source of liquidities for banks. The biggest are Prime Money Market Fund, Created by JP Morgan, the biggest bank in the United States, is worth $115 billion. Wells Fargo the 4th largest bank in the United States has an MMF managing $24 billion. Goldman Sachs the 5th biggest bank controls an MMF worth $25 billion. US banks also operate MMFs in Europe; JP Morgan (€18 billion euros), BlackRock (€11.5 billion), Goldman Sachs (€10 billion), alongside European banks such as BNP Paribas (€7.4 billion), and Deutsche Bank (€11.3 billion). Some MMFs also operate in British pounds. Michel Barnier (European Commissioner for the Internal Market and Services) has announced that he would like regulations to be imposed on this activity, but this is most likely to remain nothing more than a statement of good intentions |2|. The Obama administration is also said to be considering new regulations, to avoid having to bail out a bankrupt MMF with public money. Moody’s rating agency has worked out that during the 2007-2009 period 62 MMFs had to be bailed out by the banks and pension funds that had created them, 36 in the US and 26 in Europe for a total cost of $12,1 billion. Between 1980 and 2007 146 MMFs had to be saved by their sponsors. Again according to Moody’s, 20 MMFs were bailed out during 2010-2011 |3|. This shows up to what point they are a menace to the financial system. |
| The big banks enjoy implicit subsidies The banks’ creditors know this as well. They are thus incited to lend to banks knowing there is, supposedly, no risk involved for themselves. They know full well that should one of these banks go belly-up they would escape the losses in so far as the States would take them on, in its quality of lender of last resort. This gilt edged situation permits banks to negotiate their borrowing at the lowest rates of interest (the interest rate being proportional to the risk involved). If the banks did not enjoy this guarantee from the State they would have to pay higher interest rate levels. The difference between these two rates of interest represents an implicit State subsidy to the banks. A rigorous study by the European Green party has worked out that the implicit State guarantees to the big banks for 2012 amounts to €233.9 billion |3|. This implicit guarantee has perverse consequences:
|
[h=3]The European Central Bank[/h] Created in 1998 on the model of the German Bundesbank and installed in Frankfurt-am-Main in Germany, the European Central Bank (ECB) is the European institution responsible for applying monetary policy in the eurozone |1| . The Treaty on European Union, commonly known as the Maastricht treaty (1992) created the ECB and defined its missions (art. 105):
The eurozone’s national central banks’ monetary competences have been transferred to the ECB. Proclaimed independent, the ECB is governed by bankers in pure banking logic. If European populations demanded other democratic monetary choices, the ECB can quite simply ignore them and continue with its dogmatisms favourable to big business and the wealthiest individuals. This so called independence is no more than a front leading us to believe that the ECB’s choices may not be questioned. In fact, it is the big banks and financial institutions, along with the European leaders that impose neoliberal politics on their peoples that have the ear of the ECB. Although labour market policies are not the competence of the ECB, it intervenes regularly to criticise labour rights, and promote the interests of big business. It must be mentioned that the ECB does not directly buy from the states the public bonds that they emit. The founders of the ECB chose to give the private sector the exclusive right to finance public borrowing. Since 2010 the ECB buys public bonds on the secondary market from the bankers who bought them on the primary market and have difficulties to unload those it no longer wants. This is another way the ECB finances the banks. If the ECB would buy public bonds on the primary market it could directly finance the states. The ECB only bolsters in this way the bonds having been issued by the countries that submit themselves to its brutal austerity policies. The Lisbon treaty and the ECB statutes prohibit the ECB, as indeed the national central banks, from lending directly to the states. They lend to the private banking sector who in their turn lend to the states at higher interest rates. Article 101 of the Maastricht treaty, reproduced as article 123 of the Lisbon treaty states: “Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.” This is one of the reasons why this treaty must be abrogated in favour of a truly democratic European Union. |
| [h=3]The Federal Reserve System of the United States[/h] The Federal Reserve System, or Fed, is the United States’ Central Bank. It is an independent structure with a private activity within the US government and has the responsibility for US monetary policy and thus a strong influence on the world’s financial markets. In the terms of US law, the mission of the Fed is to guarantee price stability and full employment and to ensure the stability of the financial system by taking the necessary measures to predict and attenuate financial crises and panics. To achieve this, the Fed has three important means: it controls interest-rates that influence consumption, investment and inflation; it controls the money supply which permits the stability of prices in times of crisis; and it supervises and regulates financial institutions. The Fed was created by the Federal Reserve Act of 1913 as a reaction to the growing instability of the North American financial system at the end of the nineteenth and beginning of the twentieth century. Until then the US did not have centralized control and regulation of its financial system. Each state had the charge of regulating and controlling the banks that were within its jurisdiction. The Fed was established to ensure the stability of the US financial system by becoming the lender of last resort and so to be able to supply resources to banks facing difficulties. The institutional structure of the Fed is made up of twelve regional banks overseen globally by a Board of Governors. These regional banks function as Joint Stock Companies possessing non negotiable and non transferable shares in the Federal Reserve System; the stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, six per cent per year. These shares permit the banks their participation in the elections of the regional counsellors of the Fed. The councils are made up of nine members: three are chosen by the banks and represent their interests; three more, representing industrial and commercial interests, are also chosen by the banks; the last three are chosen by the national Board of Governors. The Board of Governors is charged with overseeing the twelve regional Federal Reserve Banks and with helping implement the United States’ monetary policy. It has a maximum of seven members (currently five) who are nominated by the President of the United States and confirmed by the Senate for a fourteen-year term of office. One of the principal functions of the Board is to pilot the Federal Open Market Committee (FOMC), which fixes interest-rates and determines the country’s general monetary policy. There are two basic differences between the Fed and its European counter-part, the ECB. While the Fed’s mission is to simultaneously guarantee price stability and full employment, the ECB has for principal mission to maintain low and stable inflation levels within the Eurozone. The other difference is in the capacities to regulate and control their financial institutions. The Fed has the means to regulate and supervise all the financial institutions operating under the Federal Reserve System, while the ECB is dependent on the central banks of each of the Eurozone countries for the application of its regulations and control over its institutions. Finally, the European Commission has approved an extension of the ECB’s powers, as from autumn 2014, to responsibility for the direct control of the big banks that are subject to the European system. We shall see what we shall see. |
