Sep 28 2008
Bailout bill will destroy the banking system
Link to draft legislation text
Version hosted on my site in case the other one gets pulled
Be aware that this is not the final version of the bill.
On page 81…
SEC. 127. ACCELERATION OF EFFECTIVE DATE.
Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking ‘‘October 1, 2011’’ and inserting ‘‘October 1, 2008’’.
What does the Financial Services Regulatory Relief Act of 2006 say?
SEC. 202. INCREASED FLEXIBILITY FOR THE FEDERAL RESERVE BOARD TO ESTABLISH RESERVE REQUIREMENTS.
Section 19(b)(2)(A) of the Federal Reserve Act (12 U.S.C. 461(b)(2)(A)) is amended—
(1) in clause (i), by striking ‘‘the ratio of 3 per centum’’ and inserting ‘‘a ratio of not greater than 3 percent (and which may be zero)’’; and
(2) in clause (ii), by striking ‘‘and not less than 8 per centum,’’ and inserting ‘‘(and which may be zero),’’.
SEC. 203. EFFECTIVE DATE.
The amendments made by this title shall take effect October 1, 2011.
What does Section 19(b)(2)(A) of the Federal Reserve Act say?
2. Reserve requirements.
A. Each depository institution shall maintain reserves against its transaction accounts as the Board may prescribe by regulation solely for the purpose of implementing monetary policy–
i. in the ratio of 3 per centum for that portion of its total transaction accounts of $25,000,000 or less, subject to subparagraph (C); and
ii. in the ratio of 12 per centum, or in such other ratio as the Board may prescribe not greater than 14 per centum and not less than 8 per centum, for that portion of its total transaction accounts in excess of $25,000,000, subject to subparagraph (C).
What the Financial Services Regulatory Relief Act of 2006 does is allow the Federal Reserve to set reserve requirements for banks at 0%. If nothing is done, the Financial Services Regulatory Relief Act of 2006 will go into effect on October 1, 2011. The bailout bill changes the date to October 1, 2008.
In case you have trouble understanding what I just said, THE RESERVE RATIO IS GOING TO BE CHANGED TO 0%! THE BANKS WILL BY LAW NOT BE REQUIRED TO POST RESERVES. THERE IS NO MONEY IN THE BANK!
And do you know what the scary thing is about the Financial Services Regulatory Relief Act of 2006? Guess who voted against it? NO ONE. How did this piece of crap get passed?
This is currently being discussed at tickerforum.org.