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[Music] you [Music] picture yourself in one of these scenarios you go shopping and your credit card transaction is denied despite the fact that you know you have money in your account or you go to an ATM machine and you're informed that your withdrawal request has been denied or you're a public official such as a school business administrator County Treasurer municipal finance manager pension fund administrator or anyone who has responsibility for protecting public taxpayer funds you're informed that all accounts have been frozen until further notice as you investigate why you can't access money you know should be available you find out that the bank has failed and has been closed until further notice by the FDIC you also discover that the government will be confiscating part of your deposits in order to stabilize the bank you believe that this can't happen here because the FDIC protects your money you may have placed your money into one of the big banks because it has large vaults and is protected by the government you may have placed public monies into a large bank because they're collateralized and the government will back them therefore you think these funds are safe all of these assumptions are not based on the facts perhaps you recall that in Cyprus depositors money was confiscated in order to stabilize the banks similar plans are already in place to do the same in the US and other countries in a nutshell the banks in Cyprus were over leveraged to the point that their liabilities exceeded their gross domestic product because the global bailouts of large banks in 2008 were so politically unpopular a global banking troika of the International Monetary Fund the European Central Bank and the European Union imposed a bail in in which bank customers would have have some of their savings seized in order to stabilize the banks the losses to some clients were as high as 60 percent Cyprus was the test run that's where the European Union kind of let the cat out of the bag what they plan to do on a bigger scale but depositors took a real haircut interestingly though of course the big boys got out in the days before they went to after the positives money you know a small time saver a hundred fifty million billion dollars I forget the number left Cyprus banks because the insiders knew what was coming and the insiders will know what's coming when the next US Bank burns down they'll get out and they leave the modeling path depositors and maybe city governments holding the bag in order to protect themselves the Cyprus government closed the bank's 12 days and people had limited access to their money long lines formed at the ATM machine the fact is that the confiscations and Cyprus were not a one-time event the eventualities had already been planned in advance and there are plans in place for confiscations depositor accounts in New Zealand the European Union Canada England and the United States and we passed dodd-frank legislation and people think well that's it for bailouts no no that's not it actually it's just going to be a bail in in order to maintain liquidity in failed banks the European Union and the reserve have a policy of bailing in which means you seize depositors deposits those could be mom-and-pop of their $202,000 it could be a city's deposits on deposit it could be bondholders that's what happened in Cyprus that so what's happening right now with the cooperative bank in London England and that's what the Federal Deposit Insurance Corporation and the Bank of England John agreed to do here in the United States the large global and Wall Street banks are the ones at most risk because they've been gambling with depositor money on risky derivative bets and other speculative investment devices which means that when not if these bets start going bad the banks will be on the hook for their deficient value according to the Bank for International Settlements which is essentially a central bank for the world's central banks the notional value of these derivative contracts is an astounding 700 trillion dollars think seven hundred thousand billion dollars entire world's GDP is only seventy trillion dollars there's not enough money on the planet to cover these bets what most people don't understand is that once you give a bank your money the money is legally no longer yours under the law depositors are considered unsecured creditors to the bank and are treated as such under any bankruptcy proceeding this type of loss happened with the collapse of MF Global and while MF Global was a futures trading company and not a bank the blueprint for confiscations was delivered here the losses of customer funds were upheld by the legal system with the Sentinel case another important fact is this these speculative derivatives have super priority status in a bankruptcy proceeding which means that any derivative contract holder gets paid first before shareholders creditors and depositors like you it could well be that local government deposits are at risk in event of the bail in of one of the major banks on Wall Street when they next fail those are unsecured deposits now also it likes to say they've been collateralized but the derivatives holdings of the major banks is several times the world's gross domestic product there is enough money in the world to cover major losses in that market so if they start to go down first the counterparties to derivatives get covered that's the new law they get their money first you get your money you you an individual depositor or you a city if there's any left what you might get instead is equity in the bank so instead of having four hundred million of dollars to eat your city's payroll you may have two hundred billion dollars and two hundred million in new stock in the bank with you in which you just become a shareholder but try meeting a payroll in stock in a failed bag if you think that the FDIC will still come riding to the rescue consider these facts this chart will look at three figures the FDIC insurance fund balance the total deposits and US banks and the total derivatives exposure of the big banks the FDIC has approximately twenty five billion in its fund to cover losses the total deposits in US banks totals nine thousand two hundred eighty three billion the US banks derivatives total is 297 thousand five hundred and fourteen billion the FDIC could only cover 0.25 percent of all deposits and the FDIC could only cover 0.08 percent of the derivatives looking at the FDIC Bank of England joint paper summary the text clearly says that in the u.s. they will use the powers granted under the dodd-frank Wall Street Reform Act and losses will be assigned to shareholders and unsecured creditors remember that as a depositor in a bank under the law you are an unsecured creditor moving further on down in this document the text clearly says that the strategy for a failed global systemically important financial institution will be to assign losses to shareholders and unsecured creditors going further down the same document you will see that the text clearly says that a resolution strategy for a failed globally systemically important financial institution will be to assign the losses to shareholders and unsecured creditors remember that you are now looking at an official government document and the plans for confiscation if you are a public official with fiduciary responsibilities to protect public monies this news is critically important with far-reaching implications about what your responsibility demands if you can't deposit public monies into the large Wall Street banks without being at proven risk of losing access to it to confiscation under existing law what options are there well one option would be to create a public bank for your municipality like North Dakota did 94 years ago their public bank was completely unaffected by the wall street bank collapses and financial trials back in 2008 and in fact boasted one of their largest profits ever while mighty global financial institutions fell the Bank of North Dakota which treats its public funds as utility rather than a speculative fund to gamble for profits as a simple purpose to preserve and protect its assets while investing in local priorities instead of non-local international corporations it is completely independent of global banker greed and risky behaviors its money cannot be confiscated we're making the argument that the biggest banks on Wall Street really are safe that they've got so much exposure in derivatives and who knows what else they're in danger of going down and taking appositives with them we think money is much safer closer to home it's also more productively used all the money Philadelphia has on deposit let's say Wells Fargo that money's not being put to work in Philadelphia let's put the money locally where it can be put to use in Philadelphia public officials need to be clear about this risk while the prospect of fund confiscation sounds startling it is nonetheless true that the risk is not only there it is promised to take place if such bank failures occur once again and you're probably aware that such failures are expected by many if not most financial observers this is your moment a time to step up to the plate look around at the environment and the financial players pitted against you and to act prudently in the interests of your community the era of blind trust in the institutions of global finance is over public fiscal officers and citizens alike would be well-served to learn more about how to create a local public bank and what it might look like to have a new financial engine that provides for community growth fund security and increased local investment there is now an urgent choice to be made at every municipal level either leave your public money in the hands of proven gamblers with a promise that it will be confiscated when more bad deals go down or take a bold innovative step to empower and safeguard community funds by adopting the proven public bank alternative so consider yourself warned money is not safe in the big banks the MF Global losses the Cyprus confiscations the legal precedence of the sentinel case the FDIC Bank of England joint paper the plan for confiscations in Canada New Zealand in the European Union should all be sending red flags personal accounts municipal money County money University money deposited in the big banks is all at risk the plans for confiscation have been developed they have been approved and they are awaiting the next crisis [Music]