First they came for our tax dollars. When governments declared “no
more bailouts,” they came for our deposits. When there was a public
outcry against that, the FSB came up with a “buffer” of securities to be
sacrificed before deposits in a bankruptcy. In
the latest rendition of its bail-in scheme,
TBTF banks are required to keep a buffer equal to 16-20% of their
risk-weighted assets in the form of equity or bonds convertible to
equity in the event of insolvency.
Called “contingent capital bonds”, “bail-inable bonds” or “bail-in
bonds,” these securities say in the fine print that the bondholders
agree contractually (rather than being forced statutorily) that if
certain conditions occur (notably the bank’s insolvency), the lender’s
money will be turned into bank capital.
However, even 20% of risk-weighted assets may not be enough to prop
up a megabank in a major derivatives collapse. And we the people are
still the target market for these bonds, this time through our pension
funds.
In a policy brief from the Peterson Institute for International Economics titled “
Why Bail-In Securities Are Fool’s Gold”, Avinash Persaud warns, “
A key danger is that taxpayers would be saved by pushing pensioners under the bus.”
It wouldn’t be the first time. As Matt Taibbi noted in a September 2013 article titled “
Looting the Pension Funds,”
“public pension funds were some of the most frequently targeted suckers
upon whom Wall Street dumped its fraud-riddled mortgage-backed
securities in the pre-crash years.”
***Read full article here***
