Continuing from the e-mail from attorney Al Hodges:
=====
Wall Street investment banks finally stopped
securitising AFBS sub-prime loans when one investment bank received a
letter dated 15th May 2003, addressed to the Federal Bureau of
Investigation (FBI) and the SEC asking: ‘Who is protecting these (AFBS)
investors?’
Notwithstanding this state of affairs, the Securities and Exchange Commission
did not launch an investigation into the behaviour of ABFS until 2004,
when ABFS asked for SEC approval to enable it to make another public
offering (26). In this, as in so many other instances, the US Securities and Exchange Commission simply failed to enforce its own regulations.
We have summarised these regulations in our
reports since 2006, in case this fact had escaped the SEC’s notice. It
hasn’t escaped the notice of the financial community generally, so we
are entitled to ask why the Securities and Exchange Commission appears to have been an exception.
The SEC regulations of specific relevance to
these issues that NEED TO BE ENFORCED include the following [see also
the usual Annex at the end of this report].
These details have been published here for at
least 18++ months, so as to emphasis the chronic necessity of
substituting the Rule of Law for the Law of the Jungle:
•NASD Rule 3120, et al.
•NASD Rule 2330, et al
•NASD Conduct Rules 2110 and 3040
•NASD Conduct Rules 2110 and IM-2110-1
•NASD Conduct Rules 2110 and SEC Rule 15c3-1
•NASD Conduct Rules 2110 and 3110
•SEC Rules 17a-3 and 17a-4
•NASD Conduct Rules 2110 and Procedural Rule 8210
•NASD Conduct Rules 2110 and 2330 and IM-2330
•NASD Conduct Rules 2110 and IM-2110-5
•NASD Systems and Programme Rules 6950 through 6957
•NASD Rule 2330, et al
•NASD Conduct Rules 2110 and 3040
•NASD Conduct Rules 2110 and IM-2110-1
•NASD Conduct Rules 2110 and SEC Rule 15c3-1
•NASD Conduct Rules 2110 and 3110
•SEC Rules 17a-3 and 17a-4
•NASD Conduct Rules 2110 and Procedural Rule 8210
•NASD Conduct Rules 2110 and 2330 and IM-2330
•NASD Conduct Rules 2110 and IM-2110-5
•NASD Systems and Programme Rules 6950 through 6957
(2) Federal Trade Commission: This Government structure has authority to investigate fraudulent transactions in all markets.
According to a plea bargain agreement announced
on 8th April 2008, a former Board Member at the New York Mercantile
Exchange pleaded guilty to two felony counts relating to illegal natural
gas trading. Mr Steven Karvellas, aged 48, made trades and then waited
to watch how they turned out before assigning the trades either to his
own account or to his client’s account – an abuse referred to as
‘trading ahead of the customer’, which is a violation of the SEC’s Fair
Dealing With Customer rules. Karvellas was a floor Exchange Board Member
of the publicly traded Nymex Holdings, Inc., and indeed headed up its
compliance review committee when the illegal trades took place (27).
Under the supervision of the Commodity Futures
Trading Commission (CFTC), floor brokers such as Mr Karvellas can
operate both as broker for customers and trade for own account
operations. This practice is referred to as the ‘dual trader’ mode, with
the floor broker under an obligation to act at all times in the
customer’s best interest, a responsibility that entails an obligation
upon the broker to seek the best possible prices for the customer 28 .
Ironically (perhaps not, since we are of course
dealing with the familiar double-mindedness here), in a letter addressed
in 2002 to Nymex Holdings members as part of his campaign for
re-election to the Board, Mr Karvellas opined that ‘the shocking
collapse of Enron indicates that our Exchange does wear a white hat in
the financial world. We illustrate how markets should operate, honestly
and with openness and transparency that gains the public’s trust’ (29).
In January 2008, a Grand Jury subpoenaed a
five-year-old trading ticket related to this investigation and to Mr
Steven Karvellas, who pleaded guilty to tampering with physical evidence
by ordering a subordinate to destroy the subpoenaed trading ticket
(30).
Nymex, which has been or is currently being acquired by the Chicago Mercantile
Exchange (CME, Inc.), and other floor exchanges, have been financially
hurt by the emergence of electronic trading, and have attempted to
reduce costs and to speed up the 'open-outcry' process [see Glossary]
(31).
But floor trading remains vulnerable to manipulation: for instance, in 2005, 15 traders at the New York Stock Exchange
(NYSE) were indicted on charges of cheating investors. Although many of
these traders actually won their criminal cases, the Exchange realised
that it had to ‘do something’, and upgraded its surveillance systems at a
cost of about $20 million (32).
These examples, which could be replicated here
ad nauseam, illustrate the absolute necessity for a regulatory régime
that is underpinned by enforcement, which must be implemented without
fear or favour at all times – so that everyone participating in the
financial markets is aware of the severe consequences of any breach of
the rules and regulations.
Talk of operating on the basis of relatavist
‘principles’ is not only irresponsible and unprofessional: it encourages
the misplaced belief among the easily swayed and the corrupt, that the
‘way forward’ need not include enforcement as conceived in the 1930s, so
that everyone can feel comfortable and at ease – a recipe for the proliferation of fraudulent finance on an open-ended basis.
Moreover it is crystal clear that the
dishonesty, hesitation and the sheer confusion surrounding the ‘Paulson’
proposals have severely exacerbated a fragile situation and the crisis
of confidence which the criminal incompetents in charge of US financial
affairs have never intended, on the basis of the massive evidence of
their ongoing corruption, should be addressed in an orderly fashion,
since their agenda has all along diverged from the public interest.
Almost as though it had suddenly woken up from a
long slumber, the SEC was reported to have launched a probe on 13th
July 2008 into the manipulation of stock prices through the spreading of
false rumours, focusing on compliance controls which are supposed to be
applied by traders and investment houses. This initiative appeared to
mimic a similar attempt by the UK Financial Services Authority FSA) in
London, to crack down on rumour-mongering and short-selling in the UK
market following the plunge in the shares of HBOS (Halifax Bank of
Scotland) last March.
The FSA was unsuccessful in its search,
suggesting that the SEC’s response represents a belated cosmetic attempt
to be seen to be ‘doing something’, since the SEC must certainly be
aware of the FSA’s failed investigation. However nothing that the US
regulator does now, with the benefit of any hindsight and with the
fraudulent prospects implied by the Treasury’s proposals hanging over
its head, can make up for its past failure to enforce its own
regulations – as a consequence of which fraudulent securities
operations/scams have assumed colossal and, as we have been observing,
catastrophic proportions, in recent years.
The SEC's failure and dereliction of duty is no
reason for abandoning the enforcement approach in favour of a contrived,
weak ‘principles-based’ approach. On the contrary, what remains
essential is proper and rigorous enforcement of appropriate regulations.
(B) Mr Cottrell insists that the following structure and disciplines should be created and imposed:
Office of Inspector General for Financial Markets Compliance (OFMC):
A new regulatory entity with the function described by its title should be established by Statute, who would be required to report directly to the Chairman and ranking Member(s) of the following US Congressional Committees, who would be considered to be their superiors (Bosses):
A new regulatory entity with the function described by its title should be established by Statute, who would be required to report directly to the Chairman and ranking Member(s) of the following US Congressional Committees, who would be considered to be their superiors (Bosses):
•The US Senate Financial Services Committee.
•The US House of Representatives’ Financial Services Committee.
All management and field personnel employed by
the Office of the Inspector General for Financial Markets would need to
be fully trained and qualified compliance officers. Specifically:
•They must be field-tested and recognised as
licensed compliance officers, and they must all be licensed under the
following régimes:
(1) Financial Industry Regulatory Authority
(created in July 2007 through consolidation of the NASD (National
Association of Securities Dealers) and the NYSE (the New York Stock
Exchange) member regulation régimes [see also: Glossary]) with respect
to the following examinations:
•Series 24 [General Securities Principal];
•Series 27 [Financial and Operations Principal];
•Series 4 [Registered Options Principal];
•Series 51 [Municipal Fund Securities Principal]; and:
•Series 53 [Municipal Securities Principal].
•Series 27 [Financial and Operations Principal];
•Series 4 [Registered Options Principal];
•Series 51 [Municipal Fund Securities Principal]; and:
•Series 53 [Municipal Securities Principal].
(2) They must be licensed members of NYSE Member firms.
(3) They must be licensed as US Treasury compliance officers.
Nothing short of the deployment of management
and field personnel qualified to these demanding industry standards will
suffice. Because this is so, it is self-evident that the half-baked,
confused and deliberately fragmentary proposals put forward by the
President’s Working Group, which are intended to OBFUSCATE the situation
and to lodge total power in the hands of the Presidency by default,
with no checks and balances at all, represent a fraudulent prospectus,
which should be consigned to oblivion forthwith. NO FURTHER
CONSIDERATION SHOULD BE GIVEN TO THEM.
(C ) Michael Cottrell further demands
(recommends is much too weak a word here) that The Glass-Steagall Act of
1933 must be re-enacted in order to re-establish once and for all the
very stringent regulatory requirements enshrined in the 1933 and 1934
Securities Acts.
In the same context, and in parallel, the
divisive Gramm-Leach-Bliley Act – written by lobbyists for the banking
sector – must be repealed.
(D) Regulation of Credit and Debt Derivatives:
An essential further reform will be the development of overdue new securities regulations specifically focused on the creation, use and risk limitation of structured instrument vehicles (credit and debt derivatives). These new regulations would be enforced by the Securities and Exchange Commission (and the Federal Trade Commission, as appropriate), and of course subject to compliance oversight by the trained personnel of the newly established Office of the Inspector General for Financial Markets Compliance [see above].
An essential further reform will be the development of overdue new securities regulations specifically focused on the creation, use and risk limitation of structured instrument vehicles (credit and debt derivatives). These new regulations would be enforced by the Securities and Exchange Commission (and the Federal Trade Commission, as appropriate), and of course subject to compliance oversight by the trained personnel of the newly established Office of the Inspector General for Financial Markets Compliance [see above].
(E) Finally, the revitalised regulatory regime
for all US financial markets will be seen to be entirely rules-based,
with all ‘legacy’ ‘principles-based’ thinking and language expunged from
the system, which must be backed up by rigorous enforcement applied
impartially and across the board.
SEC, FTA AND OFMC management and field personnel
would be well remunerated, but at the same time subject to specified
and appropriately severe sanctions in cases of official corruption
within these structures. One reason why the regulations have not been
properly enforced, or applied at all, in recent years is that the
existing agencies, and/or certain personnel within them, have been
corrupted. Fish rot from the head.
CONCLUSION
This far simpler regulatory régime requires a minimum of new legislation, building upon existing regulatory structures and experience, with the introduction of precisely ONE new US agency (the OFMC), compared with SEVEN new burdensome, confusing, bureaucratic, intentionally overlapping, obfuscatory agencies as proposed by the Working Group on Financial Markets (33).
This far simpler regulatory régime requires a minimum of new legislation, building upon existing regulatory structures and experience, with the introduction of precisely ONE new US agency (the OFMC), compared with SEVEN new burdensome, confusing, bureaucratic, intentionally overlapping, obfuscatory agencies as proposed by the Working Group on Financial Markets (33).
Therefore, these straightforward reforms,
instead of being spurious and deliberately opaque and spread out over an
indeterminate timeframe, exacerbated by the carrying out of vague
‘studies’ as specified in the ‘Paulson’ proposals, could be implemented
within a very limited timeframe at an early stage of the next
Presidency. Establishing ONE new agency instead of SEVEN should, of
itself, provide a powerful incentive for adopting Mr Cottrell’s
straightforward proposals and for rejecting the hugely expensive and
mischievous dog’s dinner put forward by the Working Group.
Such an initiative would do more to restore
confidence in the battered US financial markets than innumerable further
confused announcements by the ‘Paulson’ Treasury and other
intermeddlers, and would place the incoming Administration on a sound
financial market footing, without which everything it touches will
disintegrate as has happened under the criminalised Bush II Presidency.
In short, these are straightforward, practical
reforms which can be legislated for and implemented quickly. They can
also be publicised with advantage ahead of their implementation, so that
the US and world financial markets are made appropriately aware of the
smack of firm, sound and decisive governance, with all that this
approach will imply for the restoration of confidence in the battered
financial markets in the United States and worldwide. (34).
Notes and References:
1. Howard Abadinsky, ‘Organized Crime’, 6th Edition, Belmont,
Wadsworth Thompson learning, 2000, pages 49-58
Wadsworth Thompson learning, 2000, pages 49-58
2. Gary Giroux, Ph. D., ‘A Short History of Accounting and Business’, available at: http://acct.tamu.edu/giroux/financial.html (Internet), page 1.
3. Giroux, op. cit., page 1.
4. Giroux, op. cit., page 2.
5. Michael C. Cottrell, M.S., ‘Elite Power &
Capital Markets’ thesis submitted in partial fulfillment of the
requirements for Master of Science, Mercyhurst College, 2001, page 33.
6. Cottrell, op. cit., page 33.
7. Cottrell, op. cit., page 33.
8. John H Hollands, Acting Director, Investment
Company Division, Securities and Exchange Commission (SEC), ‘Government
Regulation of The Distribution of Investment Company Shares’, dated 8th
October 1941, page 2.
9. Hollands, op. cit., page 2.
10. Hollands, op. cit., page 2.
11. Hollands, op. cit., page 2.
12. Hollands, op. cit., page 2.
13. Hollands, op. cit., page 2.
14. ‘Treasury’s Summary of Regulatory Proposal’, The New York Times Company, 29th March 2008, available at: http://www.nytimes.com (Internet).
15. Kara Scannell and Michael R Crittenden, ‘Treasury’s Blueprint: the View from Washington’,
The Wall Street Journal, 31st March 2008, Section A, page 15.
The Wall Street Journal, 31st March 2008, Section A, page 15.
16. Jesse Westbrook, ‘SEC Overhaul Bid by Bush
Condemned by SEC Chairman (Update 1)’, New York, Bloomberg, L.P., 8th
April 2008, available at: http://www.bloomberg.com (Internet), page 1.
17. Westbrook, op. cit.,, page 1.
18. Westbrook, op. cit., page 2.
19. Westbrook, op. cit., page 2.
20. Westbrook, op. cit., page 1.
21. Steve Strecklow, ‘Subprime Lender’s Failure Sparks Lawsuit Against Wall Street Banks’,
The Wall Street Journal, 9th April 2008, Section A, page 1.
The Wall Street Journal, 9th April 2008, Section A, page 1.
22. Strecklow, op. cit., page A1.
23. Strecklow, op. cit., page A14.
24. Strecklow, op. cit., page A14.
25. Strecklow, op. cit., page A14.
26. Strecklow, op. cit., page A14.
27. Aaron Lucchetti and Gregory Meyer, ‘Dual Traders Under Fire’, The Wall Street Journal,
9th April 2008, Section C, page 1.
9th April 2008, Section C, page 1.
28. Lucchetti and Meyer, op. cit., page C18.
29. Lucchetti and Meyer, op. cit., page C1.
30. Lucchetti and Meyer, op. cit., page C18.
31. Lucchetti and Meyer, op. cit., page C18.
32. Lucchetti and Meyer, op. cit., page C18.
33. The seven new agencies recommended by the
President’s Working Group on Financial Markets, which of course
obfuscate the regulatory environment out to infinity, with intent, are:
Mortgage Origination Commission; Market Stability Regulator; Prudential
Financial Regulatory Agency; Government-Sponsored Enterprises Regulator;
Conduct of Business Regulatory Agency; Federal Insurance Guarantee
Corporation; and: Corporate Finance Regulator.
34. The one dimension of Mr Cottrell's practical
reforms that will require an appropriate lead-time concerns the
recruitment of the necessary trained and licensed management and field
compliance personnel for the new Office of the Inspector General for
Financial Markets Compliance (OFMC).
In addition to the need to remunerate such
expert personnel sufficiently well not least in order to minimise the
temptation to succumb to bribery (which has bedeviled enforcement of
late), financial compensation must reflect the expertise of recruited
staff and the exceptional importance of their responsibilities. At the
same time, it will not be necessary to recruit a large compliance staff.
A tight ship is recommended, given that a modest staff can be motivated
to higher levels of achievement, especially since the recommended ethos
would be one of sober determination to stamp out market abuses and
corruption generally. Despite the ravages inflicted by the permissive
financial market environment in recent years, it is believed that the
pool of such qualified experts who are keen to enforce the Rule of Law
in the United States remains of sizeable proportions.
GLOSSARY OF U.S. FINANCIAL MARKET DEFINITIONS
References only entries specifically germane to
the market issues purportedly addressed by the President’s Working Group
on Financial Markets, and relevant to Mr Cottrell’s alternative
proposal:
•Annunzio-Wylie Anti-Money Laundering Act of 1992:
This legislation enlarged the definition of ‘financial transaction’, and made money-transmitting, without reporting, a crime. Source: Howard Abadinsky, ‘Organized Crime’, 6th Edition, Belmont: Wadsworth/ Thompson Learning, Inc., 2000, page 411.
This legislation enlarged the definition of ‘financial transaction’, and made money-transmitting, without reporting, a crime. Source: Howard Abadinsky, ‘Organized Crime’, 6th Edition, Belmont: Wadsworth/ Thompson Learning, Inc., 2000, page 411.
•Anti-Drug Abuse Act of 1988:
This law detailed undercover operations involving money-laundering. Source: John Madinger and Sydney A. Zalopany, ‘Money Laundering: A Guide for Criminal Investigators’, New York: CRC Press, LLC, 1999, page 43.
This law detailed undercover operations involving money-laundering. Source: John Madinger and Sydney A. Zalopany, ‘Money Laundering: A Guide for Criminal Investigators’, New York: CRC Press, LLC, 1999, page 43.
•Anti-Trust Laws:
US Federal legislation designed to prevent monopolies, cartelisation and restraint of trade. Landmark statutes include:
(1): Sherman Anti-Trust Act of 1890, which prohibited actions or contracts tending to create a monopoly and initiated an era of trust-busting;
(2): Clayton Anti-Trust Act of 1914, passed as an amendment to the Sherman Act, which dealt with local price discrimination, interlocking directorates, holding company activities and restraint of trade; and:
(3): Federal Trade Commission Act of 1914, which created the Federal Trade Commission (FTC), with the power to conduct investigations and the power to issue orders preventing unfair practices in interstate commerce. Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Ed., Happauge: Barron’s Educational Series, 2006, s.v. ‘Antitrust Laws’.
US Federal legislation designed to prevent monopolies, cartelisation and restraint of trade. Landmark statutes include:
(1): Sherman Anti-Trust Act of 1890, which prohibited actions or contracts tending to create a monopoly and initiated an era of trust-busting;
(2): Clayton Anti-Trust Act of 1914, passed as an amendment to the Sherman Act, which dealt with local price discrimination, interlocking directorates, holding company activities and restraint of trade; and:
(3): Federal Trade Commission Act of 1914, which created the Federal Trade Commission (FTC), with the power to conduct investigations and the power to issue orders preventing unfair practices in interstate commerce. Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Ed., Happauge: Barron’s Educational Series, 2006, s.v. ‘Antitrust Laws’.
•Bailout Bill:
See Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).
See Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).
•Bank Holding Company Act of 1956:
This act brought, for the first time, holding companies under the banking regulations, and provided that the holding company was subject to the same regulation and examinations as member banks. A Holding Company is a company that exercises control over another via voting shares. Organisation as a holding company allows a banking firm to engage in other non-deposit taking activities, such as discount brokerage operations, securities underwriting, and general public or industrial leasing.
Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 84; Fitch, Dictionary of Banking Terms, page 225. See: Financial Holding Company.
This act brought, for the first time, holding companies under the banking regulations, and provided that the holding company was subject to the same regulation and examinations as member banks. A Holding Company is a company that exercises control over another via voting shares. Organisation as a holding company allows a banking firm to engage in other non-deposit taking activities, such as discount brokerage operations, securities underwriting, and general public or industrial leasing.
Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 84; Fitch, Dictionary of Banking Terms, page 225. See: Financial Holding Company.
•Bank Holding Company Act Amendments of 1970:
This legislation expanded the Bank Holding Company Act of 1956 by legislating for a new Holding Company that controls only one bank, and limiting the permissible activities of these entities to those ‘closely related to banking’. The effect of these amendments was to permit one-bank holding companies, such as Bank of New York Company, Inc., to become conglomerates with subsidiaries in non-banking fields without regulation. Sources: Mr Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, op. cit., thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, Mercyhurst College, Erie, PA, on 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 87; Thomas A. Eder, Thompson Desktop Financial Directory, Volume 3, Skokie: Thompson Financial Publishing, Inc., 1993, page 252. See: Financial Holding Company.
This legislation expanded the Bank Holding Company Act of 1956 by legislating for a new Holding Company that controls only one bank, and limiting the permissible activities of these entities to those ‘closely related to banking’. The effect of these amendments was to permit one-bank holding companies, such as Bank of New York Company, Inc., to become conglomerates with subsidiaries in non-banking fields without regulation. Sources: Mr Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, op. cit., thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, Mercyhurst College, Erie, PA, on 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 87; Thomas A. Eder, Thompson Desktop Financial Directory, Volume 3, Skokie: Thompson Financial Publishing, Inc., 1993, page 252. See: Financial Holding Company.
•Banking Act of 1935:
This legislation implemented changes to the Federal Reserve Board, prohibiting any banker from serving on the Board of Directors, or being an officer or employee, of more than two institutions. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 89. See: Financial Holding Company.
This legislation implemented changes to the Federal Reserve Board, prohibiting any banker from serving on the Board of Directors, or being an officer or employee, of more than two institutions. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 89. See: Financial Holding Company.
•Bank Secrecy Act of 1970:
This legislation, the formal title of which is the Currency and Foreign Transactions Reporting Act of 1970, extended to the Secretary of the US Treasury great flexibility in respect of official definitions of ‘monetary instruments’, which could now all of a sudden include ‘coins and currency of a foreign country, travelers’ checks, bearer negotiable instruments, bearer investment securities, stock on which title is passed on delivery’. The ostensible intention of this law was to deter criminal activity in order to assist criminal investigations by requiring all financial institutions to report large cash transactions and the transportation of such instruments initially exceeding $5,000, (now, amounts that in excess of $10,000). Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; See also Munn, ‘Encyclopedia of Banking and Finance’, p.109; John Madinger, Sydney A. Zalopany, ‘Money Laundering: A Guide for Criminal Investigators’, New York, CRC Press, LLC, 1999, page 43.
This legislation, the formal title of which is the Currency and Foreign Transactions Reporting Act of 1970, extended to the Secretary of the US Treasury great flexibility in respect of official definitions of ‘monetary instruments’, which could now all of a sudden include ‘coins and currency of a foreign country, travelers’ checks, bearer negotiable instruments, bearer investment securities, stock on which title is passed on delivery’. The ostensible intention of this law was to deter criminal activity in order to assist criminal investigations by requiring all financial institutions to report large cash transactions and the transportation of such instruments initially exceeding $5,000, (now, amounts that in excess of $10,000). Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; See also Munn, ‘Encyclopedia of Banking and Finance’, p.109; John Madinger, Sydney A. Zalopany, ‘Money Laundering: A Guide for Criminal Investigators’, New York, CRC Press, LLC, 1999, page 43.
•Basel-II:
The Bank for International Settlements (BIS), located in Basel, Switzerland, has established and provides the Secretariat for the Basel Committee on Banking Supervision, which consists of senior representatives of bank supervisory authorities and central banks from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. Basel-II is the comprehensive updated and agreed version of ‘International Convergence of Capital Management and Capital Standards’ revising the 1988, 1996 and 2005 texts to secure an international standard on revisions to supervisory regulations governing the capital adequacy of internationally active banks. Source. and for further information: Basel Committee on Banking Supervision, ‘International Convergence of Capital Measurement and Capital Standards’, Basel, Press & Communications, 2004, available at: http://www.bis.org (Internet).
The Bank for International Settlements (BIS), located in Basel, Switzerland, has established and provides the Secretariat for the Basel Committee on Banking Supervision, which consists of senior representatives of bank supervisory authorities and central banks from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. Basel-II is the comprehensive updated and agreed version of ‘International Convergence of Capital Management and Capital Standards’ revising the 1988, 1996 and 2005 texts to secure an international standard on revisions to supervisory regulations governing the capital adequacy of internationally active banks. Source. and for further information: Basel Committee on Banking Supervision, ‘International Convergence of Capital Measurement and Capital Standards’, Basel, Press & Communications, 2004, available at: http://www.bis.org (Internet).
•Bucket Shop:
An illegal brokerage firm which accepts orders from customers but does not execute them right away, as Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) regulations require. Bucket shop brokers confirm the price that the customer asked for, but in fact make the trade at a time considered to be advantageous to the broker, whose profit is the difference between the two prices. Sometimes bucket shops neglect to fill the customer’s order and just pocket the money. Main source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Bucket Shop’.
An illegal brokerage firm which accepts orders from customers but does not execute them right away, as Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) regulations require. Bucket shop brokers confirm the price that the customer asked for, but in fact make the trade at a time considered to be advantageous to the broker, whose profit is the difference between the two prices. Sometimes bucket shops neglect to fill the customer’s order and just pocket the money. Main source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Bucket Shop’.
•Clayton Anti-Trust Act of 1914:
This law was passed in order to increase competition in business, by restricting the corporate activity of acquiring other competing corporations or the practice of interlocking directorships. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; additionally: Jack C Plano and Milton Greenberg, ‘The American Political Dictionary’, 4th Edition, Hinsdale, The Dryden Press, 1976, page 328. See: Anti-Trust Laws.
This law was passed in order to increase competition in business, by restricting the corporate activity of acquiring other competing corporations or the practice of interlocking directorships. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; additionally: Jack C Plano and Milton Greenberg, ‘The American Political Dictionary’, 4th Edition, Hinsdale, The Dryden Press, 1976, page 328. See: Anti-Trust Laws.
•Clear:
(a): In banking: Collection of funds on which a cheque (check) is drawn, and payment of these funds to the holder of the check.
(b): In the securities sector: Comparison of the details of a transaction between brokers prior to settlement; final exchange of securities for cash on delivery. Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Clear’.
(a): In banking: Collection of funds on which a cheque (check) is drawn, and payment of these funds to the holder of the check.
(b): In the securities sector: Comparison of the details of a transaction between brokers prior to settlement; final exchange of securities for cash on delivery. Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Clear’.
•Commodity Futures Trading Commission (CTFC):
An independent agency created by Congress in 1974 which is responsible for regulating the US commodity futures and options markets. The CFTC is responsible for ensuring the integrity of the commodity futures and options markets everywhere, and for protecting market participants against manipulation, abusive trade practices, and fraudulent operations. Primary source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘CFTC’.
An independent agency created by Congress in 1974 which is responsible for regulating the US commodity futures and options markets. The CFTC is responsible for ensuring the integrity of the commodity futures and options markets everywhere, and for protecting market participants against manipulation, abusive trade practices, and fraudulent operations. Primary source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘CFTC’.
•Commodity Futures Contract:
A Futures Contract that is tied to the price movements of a particular commodity. This arrangement enables contract buyers to purchase a specific amount of a listed commodity at a specified price on a particular date in the future. The price of the contract in question is determined using the ‘open outcry’ system on the floor of a US commodity exchange such as the Chicago Board of Trade or the Commodity Exchange in New York. Commodity Futures Contracts are typically based upon (a) meats (cattle and pork bellies); (b) grains (corn, oats, soybeans and wheat); (c) key metals (gold, silver and platinum); and energy products (heating oil, natural gas, and crude oil). Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Commodity Futures Contract’.
A Futures Contract that is tied to the price movements of a particular commodity. This arrangement enables contract buyers to purchase a specific amount of a listed commodity at a specified price on a particular date in the future. The price of the contract in question is determined using the ‘open outcry’ system on the floor of a US commodity exchange such as the Chicago Board of Trade or the Commodity Exchange in New York. Commodity Futures Contracts are typically based upon (a) meats (cattle and pork bellies); (b) grains (corn, oats, soybeans and wheat); (c) key metals (gold, silver and platinum); and energy products (heating oil, natural gas, and crude oil). Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Commodity Futures Contract’.
•Commercial Bank:
A State or National Bank owned by stockholders that accepts demand deposits, makes commercial and industrial loans, and performs other banking services for the public. The phrase Full Service Bank covers banks that, as is the case with many commercial banks, supply trust services, foreign exchange, trade financing and international banking services. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Ed., Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Comm. Bank’.
A State or National Bank owned by stockholders that accepts demand deposits, makes commercial and industrial loans, and performs other banking services for the public. The phrase Full Service Bank covers banks that, as is the case with many commercial banks, supply trust services, foreign exchange, trade financing and international banking services. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Ed., Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Comm. Bank’.
•Compliance Department:
A department typically established by brokers and all US organised stock exchanges to oversee market activity and make sure that trading and other activities comply (in the United States) with Securities and Exchange Commission (SEC) and specific Exchange regulations. A company that does not adhere to the rules can be delisted. And a trader or brokerage firm that violates the rules can be barred from trading. Main source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Compliance Department’.
A department typically established by brokers and all US organised stock exchanges to oversee market activity and make sure that trading and other activities comply (in the United States) with Securities and Exchange Commission (SEC) and specific Exchange regulations. A company that does not adhere to the rules can be delisted. And a trader or brokerage firm that violates the rules can be barred from trading. Main source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Compliance Department’.
•Compliance Examination:
Periodic bank examination by a Federal regulatory agency to ensure compliance with consumer protection regulations, such as the Community Reinvestment Act, the Equal Credit Opportunity Act and the Truth in Lending Act. Financial institutions are required by law to issue reports at regular intervals – for example, an annual statement of their mortgage lending in the lender’s market area. Compliance examinations are intended to uncover any hidden violations of consumer protection regulations so that remedial action can be taken. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Ed., Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Compliance Examination’.
Periodic bank examination by a Federal regulatory agency to ensure compliance with consumer protection regulations, such as the Community Reinvestment Act, the Equal Credit Opportunity Act and the Truth in Lending Act. Financial institutions are required by law to issue reports at regular intervals – for example, an annual statement of their mortgage lending in the lender’s market area. Compliance examinations are intended to uncover any hidden violations of consumer protection regulations so that remedial action can be taken. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Ed., Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Compliance Examination’.
•Consumer Credit Protection Act of 1968: See: Truth in Lending Act.
•Criminalism: A new word invented by the Editor
of this service, meaning the perpetration and exploitation of organised
criminal operations in the interests of political strategy and/or one or
more secret agendas; noun, ‘criminalist’, an operative or other cadre
who engages in criminalist activities and assumes that he is protected
and can therefore continue such activities beyond and above the reach of
the Rule of Law. The Editor first used this word in the context of
Soviet criminal operations, as exposed in Soviet Analyst, and has since
extended it to cover the American variant.
•Currency and Foreign Transactions Reporting Act of 1970: See: Bank Secrecy Act.
•Debenture:
A certificate or bond acknowledging a debt on which fixed interest is being paid. Source: Oxford Senior Dictionary, Oxford University Press, 1984.
A certificate or bond acknowledging a debt on which fixed interest is being paid. Source: Oxford Senior Dictionary, Oxford University Press, 1984.
•Depository Institutional Deregulation and Monetary Control Act of 1980:
This law gave the Federal Reserve Board tighter control over monetary policy. It also required the Fed to assign examiners to examine foreign operations of State member banks, and prohibited the Fed from rejecting any application from a one-bank holding company on the basis of a stock loan, unless that applicant’s financial arrangements were deemed to be unsatisfactory. The applications were to be judged on a case-by-case basis. The Act further proclaimed that collateral was no longer required to support Federal Reserve notes held in the vaults of the Federal Reserve banks, and that the kinds of eligible collateral for Federal Reserve notes were expanded to include those of foreign governments and/or agency or any other 'asset' purchasable by Federal Reserve Banks. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, pages 252 and 253.
This law gave the Federal Reserve Board tighter control over monetary policy. It also required the Fed to assign examiners to examine foreign operations of State member banks, and prohibited the Fed from rejecting any application from a one-bank holding company on the basis of a stock loan, unless that applicant’s financial arrangements were deemed to be unsatisfactory. The applications were to be judged on a case-by-case basis. The Act further proclaimed that collateral was no longer required to support Federal Reserve notes held in the vaults of the Federal Reserve banks, and that the kinds of eligible collateral for Federal Reserve notes were expanded to include those of foreign governments and/or agency or any other 'asset' purchasable by Federal Reserve Banks. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, pages 252 and 253.
•Derivative Instrument (Derivative):
A contract the value of which is determined from publicly traded securities, interest rates, currency exchange rates, or market indices. Derivative Contracts are often ostensibly used for the purpose of ‘protecting’ assets against changes in value. Types of derivatives include the following:
A contract the value of which is determined from publicly traded securities, interest rates, currency exchange rates, or market indices. Derivative Contracts are often ostensibly used for the purpose of ‘protecting’ assets against changes in value. Types of derivatives include the following:
(1): Over-the-counter derivative 'products',
such as currency swaps and interest rate swaps, which are privately
negotiated bilateral agreements, transacted OFF the organised US
exchanges. In the currency markets, forward delivery contracts allow
traders to lock in current prices when buying and selling baskets of
currencies for future delivery.
(2): Derivative securities: Bond-like securities
created when pools of loans and mortgages are packaged and sold to
investors. In the hands of knowledgeable users, derivative contracts
have many applications in the floating interest environment, such as
managing currency and interest rate risk, or locking financing costs in
by swapping floating rate debt for fixed-rate debt.
Derivatives gained public notoriety in the 1990s
when a number of corporations and municipalities embarked upon the use
of derivatives for speculative purposes (known as ‘taking a view on the
market’), and suffered large losses when interest rates moved against
them. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd
Edition, Happauge: Barron’s Educational Series, Inc., 1997, c.v.
‘Derivative’.
•Disclosure:
Release by listed companies of all information, both positive and negative, that might bear on an investment decision, as required by the Securities and Exchange Commission (SEC) and the stock exchanges. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Compliance Examination’.
Release by listed companies of all information, both positive and negative, that might bear on an investment decision, as required by the Securities and Exchange Commission (SEC) and the stock exchanges. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Compliance Examination’.
•Edge Act:
Passed in December 1919, the Edge Act, under the heading ‘Banking Corporations Authorized to Do Foreign Banking Business’, permitted the establishment of foreign banking corporations that aided in the financing of foreign trade. This allowed US banks to establish branches in foreign countries to accommodate American corporations engaged in foreign trade transactions. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, his thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science (M.S.), The Administration of Justice Department, Mercyhurst College, 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 289.
Passed in December 1919, the Edge Act, under the heading ‘Banking Corporations Authorized to Do Foreign Banking Business’, permitted the establishment of foreign banking corporations that aided in the financing of foreign trade. This allowed US banks to establish branches in foreign countries to accommodate American corporations engaged in foreign trade transactions. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, his thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science (M.S.), The Administration of Justice Department, Mercyhurst College, 13th February 2002; Munn, ‘Encyclopedia of Banking and Finance’, page 289.
•Equal Credit Opportunity Act of 1974:
Monitored by the Federal Trade Commission (FTA), this legislation seeks to ensure that all US consumers are given an equal chance to obtain credit. The Act prohibits discrimination in the granting of credit on the basis of race, colour, religion, national origin, sex, marital status, age, receipt of income from any public assistance scheme, and good faith exercise of any rights under consumer protection legislation. The US Department of Justice may file a lawsuit under the Act where a pattern or practice of discrimination appears to exist. For further information, see: http://www.usdoj.gov/crt/housing/housing_ecoa.htm (Internet).
Monitored by the Federal Trade Commission (FTA), this legislation seeks to ensure that all US consumers are given an equal chance to obtain credit. The Act prohibits discrimination in the granting of credit on the basis of race, colour, religion, national origin, sex, marital status, age, receipt of income from any public assistance scheme, and good faith exercise of any rights under consumer protection legislation. The US Department of Justice may file a lawsuit under the Act where a pattern or practice of discrimination appears to exist. For further information, see: http://www.usdoj.gov/crt/housing/housing_ecoa.htm (Internet).
•Emergency Banking Relief Act:
Passed on 9th March 1933, this Act was triggered following the national liquidity crisis that followed the stock market crash of 29th October 1929 and the extended ‘bank holiday’ of the 4th-12th March 1933. The bank holiday closed all banks nation-wide for one week by order of President Franklin D Roosevelt, to control the wave of banking failures and to restore confidence in the United States’ battered banking system. This legislation permitted banks to issue new stock, with the new stock exempt from subjecting the holder to be liable for the bank’s previously issued stock. The Act also authorised the issuance of US Federal Reserve Bank notes that were redeemable in lawful money in the United States, as 100% obligations of the Federal Government. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, at Mercyhurst College, Erie, PA, 13th February 2002; Moore, 'The Federal Reserve System', pages 81-82; Fitch, ‘Dictionary of Banking Terms’, pages 46 and 83.
Passed on 9th March 1933, this Act was triggered following the national liquidity crisis that followed the stock market crash of 29th October 1929 and the extended ‘bank holiday’ of the 4th-12th March 1933. The bank holiday closed all banks nation-wide for one week by order of President Franklin D Roosevelt, to control the wave of banking failures and to restore confidence in the United States’ battered banking system. This legislation permitted banks to issue new stock, with the new stock exempt from subjecting the holder to be liable for the bank’s previously issued stock. The Act also authorised the issuance of US Federal Reserve Bank notes that were redeemable in lawful money in the United States, as 100% obligations of the Federal Government. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, at Mercyhurst College, Erie, PA, 13th February 2002; Moore, 'The Federal Reserve System', pages 81-82; Fitch, ‘Dictionary of Banking Terms’, pages 46 and 83.
•Enronisation: A new word coined by the Editor
of this service, meaning ‘hollowing out’. Verb: ‘to enronise’; noun:
'enronist', a financial criminal who 'hollows out' a targeted entity.
The essence of the destruction of Enron was that executives and
directors formed private partnerships and stole or diverted financial
assets or proceeds from the corporation into offshore bank accounts of
the partnerships. These diverted monies were then systematically
leveraged and hypothecated into high-yield investment and other programs
which wound up being far more profitable than Enron itself. Such
illegitimate financial arrangements proliferated, so that the original
enterprise, Enron, was ‘hollowed out’, while the illicit partnerships
prospered, with 100% of the proceeds being held undeclared and untaxed
offshore. 'Enronisation' strategies are applied not only to companies,
but also to whole countries (e.g., Ireland, Zimbabwe, Iceland, probably
also Spain (forthcoming)).
•Federal Reserve Act of 1913:
The purpose of this legislation, according to the precise language of the Act, was ‘to provide for the establishment of US Federal Reserve Banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States and for other purposes’. The Act established two basic structures:
(1): A central body known as the Federal Reserve Board; and:
(2): Not more than 12 Reserve banks located throughout the country. The Federal Reserve Board is comprised of seven members appointed by the President of the United States and confirmed by the US Senate for 14-year terms. Sources: Mr Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, his thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, Mercyhurst College, Erie, PA, on 13th February 2002 Carl H. Moore, The Federal Reserve System, Jefferson: McFarland & Company, Inc., 1990, page 7; Fitch, Dictionary of Banking Terms, page 46.
The purpose of this legislation, according to the precise language of the Act, was ‘to provide for the establishment of US Federal Reserve Banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States and for other purposes’. The Act established two basic structures:
(1): A central body known as the Federal Reserve Board; and:
(2): Not more than 12 Reserve banks located throughout the country. The Federal Reserve Board is comprised of seven members appointed by the President of the United States and confirmed by the US Senate for 14-year terms. Sources: Mr Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, his thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science, Administration of Justice Department, Mercyhurst College, Erie, PA, on 13th February 2002 Carl H. Moore, The Federal Reserve System, Jefferson: McFarland & Company, Inc., 1990, page 7; Fitch, Dictionary of Banking Terms, page 46.
•Federal Trade Commission Act of 1914:
This legislation established the Federal Trade Commission as the ‘watchdog of competition’, and as a comprehensive regulatory authority empowered to protect the consumer against ‘unfair methods of competition’. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, the thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science (M.S.), for The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; See also: Munn, ‘Encyclopedia of Banking and Finance’, page 383. See: Anti-Trust Laws.
This legislation established the Federal Trade Commission as the ‘watchdog of competition’, and as a comprehensive regulatory authority empowered to protect the consumer against ‘unfair methods of competition’. Sources: Michael C. Cottrell, B.A., M.S., ‘Elite Power & Capital Markets’, the thesis submitted in partial fulfillment of the requirements for the Degree of Master of Science (M.S.), for The Administration of Justice Department, Mercyhurst College, Erie, PA, 13th February 2002; See also: Munn, ‘Encyclopedia of Banking and Finance’, page 383. See: Anti-Trust Laws.
•Financial Future:
A Futures Contract based upon (relating to) a financial instrument. Such contracts usually move under the influence of interest rates: as interest rates rise, contracts fall in value; as rates decline, contracts gain in value. Examples include: Treasury Bills, Treasury Notes, GNMA Pass-Throughs, foreign currencies, and Certificates of Deposit (CDs). Main source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Ed., Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Financial Future’.
A Futures Contract based upon (relating to) a financial instrument. Such contracts usually move under the influence of interest rates: as interest rates rise, contracts fall in value; as rates decline, contracts gain in value. Examples include: Treasury Bills, Treasury Notes, GNMA Pass-Throughs, foreign currencies, and Certificates of Deposit (CDs). Main source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Ed., Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Financial Future’.
•Financial Guarantee:
A non-cancellable indemnity bond guaranteeing the timely payment of principal and interest due on securities by the maturity date. If the issuer defaults, the insurer will pay out a fixed sum of money to holders of the securities. Financial guarantees are further written by banks which are allowed to operate in the insurance business by the Garn-St Germain Act of 1982, which prohibited banks from entering the insurance business. Insurance companies selling bond insurance must be monoline underwriters, a status which precludes their direct ownership by property and casualty insurance corporations. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Financial Guarantee’
A non-cancellable indemnity bond guaranteeing the timely payment of principal and interest due on securities by the maturity date. If the issuer defaults, the insurer will pay out a fixed sum of money to holders of the securities. Financial guarantees are further written by banks which are allowed to operate in the insurance business by the Garn-St Germain Act of 1982, which prohibited banks from entering the insurance business. Insurance companies selling bond insurance must be monoline underwriters, a status which precludes their direct ownership by property and casualty insurance corporations. Source: Thomas P. Fitch, ‘Dictionary of Banking Terms’, 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997, c.v. ‘Financial Guarantee’
•Financial Holding Company: The Bank Holding
Company Act of 1956 prohibited any affiliations between banks and
insurance companies (referred to as ‘firewall restrictions’). A Bank
Holding Company qualifies as a Financial Holding Company if:
(1): Its banking subsidiaries are ‘well capitalised’ and ‘well managed’; and:
(2): It files with the Federal Reserve Board a certification to such effect and a declaration that it elects to become a Financial Holding Company.
(1): Its banking subsidiaries are ‘well capitalised’ and ‘well managed’; and:
(2): It files with the Federal Reserve Board a certification to such effect and a declaration that it elects to become a Financial Holding Company.
Securities firms and insurance companies must
undergo a two-stage process: first, they must qualify as Bank Holding
companies under the 1956 Act; and secondly they must then qualify as
Financial Holding Companies. Source: John Downes and Jordan Elliot
Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition,
Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Financial
Holding Company’.
•Financial Industry Regulatory Authority
(FINRA): FINRA was brought into existence in July 2007 through
consolidation of the National Association of Securities Dealers (NASD)
and NYSE Member Regulation. It is the largest US non-governmental
regulator and covers all securities firms doing business in the United
States. FINRA oversees nearly 5,000 brokerage firms, about 172,000
branch offices and more than 676,000 registered securities
representatives. Source: Financial Regulatory Authority, corporate
information ‘About FINRA’: copyright 2008 FINRA; this document is
available from: http://www.finra.org (Internet).
•Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA):
Enacted on 9th August 1989, this legislation addressed the crisis affecting the Savings and Loan Associations (‘thrifts’) after the sector had been ‘enronised’ by the criminalist kleptocracy headed by George H. W. Bush Sr. Also known as the Bailout Bill, this legislation revamped the regulatory, insurance and financing structures, establishing the Office of Thrift Supervision. It created:
Enacted on 9th August 1989, this legislation addressed the crisis affecting the Savings and Loan Associations (‘thrifts’) after the sector had been ‘enronised’ by the criminalist kleptocracy headed by George H. W. Bush Sr. Also known as the Bailout Bill, this legislation revamped the regulatory, insurance and financing structures, establishing the Office of Thrift Supervision. It created:
(1): The Resolution Trust Corporation (RTC)
which, operating under the management of the Federal Deposit Insurance
Corporation (FDIC), was charged with closing or merging institutions
which had become insolvent and would be becoming insolvent in the
future;
(2): The Resolution Funding Corporation (a.k.a.
REFCORP), which was charged with borrowing from private capital markets
to fund the RTC’s operations to manage the remaining assets and
liabilities that had been taken over/assumed by the Federal Savings and
Loan Insurance Corporation (FSLIC), a Government-Sponsored Enterprise
(GSE), prior to 1989;
(3): The Savings Association Insurance Fund
(SAIF), which was to replace the FSLIC as the insurer of ‘thrift’
deposits and would henceforth be administered by the FDIC separately
from its bank deposit insurance programme, which then became the Bank
Insurance Fund (BIF); and:
(4): The Federal Housing Finance Board (FHFB), which was charged with overseeing the Federal Home Loan Banks.
•The Resolution Trust Corporation was authorised
to accept additional insolvent institutions up to June 1995, after
which date responsibilities for the handling of newly failed
institutions was shifted to SAIF. This typically convoluted mishmash of
arrangements successfully (up to a point) masked and obfuscated the
reality, which was that the Savings and Loans Associations (S & Ls)
had been systematically scammed and ‘enronised’ by the organised
kleptocracy, this being the model for the kleptocracy’s subsequent
systematic attacks on the US financial bedrock.
•The overall strategy here was to allow the
scandal to escalate to the point where Congressional action became
mandatory, whereupon Congress was pressurised to establish institutions
that the insiders could then exploit – in this case, to buy up vast
portfolios of land and assets for cents on the US dollar, which were
then used as collateral for borrowings that were in turn leveraged and
hypothecated into high-yield trading programmes for the benefit of the
corrupt insider community.
Source for technical information (not the commentary):
John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIERRA)’.
John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. ‘Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIERRA)’.
•Financial Institutions Regulatory Act of 1978
prohibits management interlocks by banks operating in the same
Metropolitan Statistical Area (MSA). However it exempts the smaller
banks, and permits interlocks of up to 49% of a bank’s management
officers. See also entry: Interlocking Directorates. Source: Thomas P.
Fitch, ‘Dictionary of Banking Terms’, 3rd Edition, Happauge: Barron’s
Educational Series, Inc., 1997, c.v. ‘Interlocking Directorates’.
•Financial Operations Officer, of a Securities
firm: The financial Operations Officer of a securities firm is equally
responsible with the Registered Principal [see Principal, of a
Securities firm], for the firm’s financial reports to the SEC and the
NASD, for the accurate record-keeping of the firm’s Net Capital Account,
and for all trades and customer accounts and correspondence,
advertising, and sale literature issued by the company. The Financial
Operations Officer must also pass the Series 27 (Financial and
Operations Principal) as well as the Series 7 (General Securities
Representative) Examinations conducted by the NASD; and must further
pass written procedures and oral interview prior to assuming this
position with the firm. Source: Michael C. Cottrell, B.A., M.S., ‘Elite
Power & Capital Markets’, the thesis he submitted in partial
fulfillment of the requirements for the Degree of Master of Science, The
Administration of Justice Department, Mercyhurst College, Erie, PA, on
13th February 2002; NASD, ‘National Association of Securities Dealers,
Inc.: Manual’, April 1998, page 3171; NASD, 'NASD Compliance Check
List'.
•Financial Services Modernization Act (FSMA) of
1999, also known as the Gramm-Leach-Bliley Act: This Act repealed parts
of the Glass-Steagall Act of 1933 and the Bank Holding Company Act of
1956. It permits commercial banks, merchant banks, securities firms and
insurers to affiliate through the structure called the Financial Holding
Company. Under the Act, Nationally (Federally) Chartered Banks are
permitted to engage in most financial activities through Direct
Subsidiaries. The FSMA permitted Financial Holding Companies to:
1: Lend;
2: Exchange;
3: Transfer;
4: Invest for others;
5: Safeguard money or securities (custodial services);
6: Engage in insurance activities, including insuring and acting as principal, agent, or broker for all types of insurance (including health), and providing financial advice (including the provision of financial advice to investment companies);
7: Issue or sell instruments representing interests in pools of assets that are permissible for a bank to hold indirectly;
8: Underwrite, deal in, or make a market in securities with no limitation as to revenue;
9: Engage in activities outside the United States;
10: Be seized of the following (text is verbatim here): ‘The Federal Reserve Board has determined to be usual in connection with the transaction of banking or other financial operations abroad’.
Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. under: ‘Financial Services Modernization Act’.
1: Lend;
2: Exchange;
3: Transfer;
4: Invest for others;
5: Safeguard money or securities (custodial services);
6: Engage in insurance activities, including insuring and acting as principal, agent, or broker for all types of insurance (including health), and providing financial advice (including the provision of financial advice to investment companies);
7: Issue or sell instruments representing interests in pools of assets that are permissible for a bank to hold indirectly;
8: Underwrite, deal in, or make a market in securities with no limitation as to revenue;
9: Engage in activities outside the United States;
10: Be seized of the following (text is verbatim here): ‘The Federal Reserve Board has determined to be usual in connection with the transaction of banking or other financial operations abroad’.
Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v. under: ‘Financial Services Modernization Act’.
•FinCEN [Financial Crimes Enforcement Network]
is a bureau of the US Treasury which collects and analyses information
about financial transactions in order to combat money laundering, the
financing of terrorism, and other financial crimes and fraudulent
finance. In line with the double-mindedness which characterises the
kakocracy, almost all the senior criminalist figures identified in our
reports have themselves been engaged in financing terrorism on a
colossal scale.
Created in 1990, FinCEN seeks to realise the
potential of critical information-sharing among law enforcement agencies
and its other partners in the regulatory and financial communities.
While the Financial Crimes Enforcement Network’s task is to safeguard
the US financial system from abuses associated with financial crime,
including the financing of terrorism, money laundering and other illicit
activities, it does nothing the curb the excesses of the criminalists
holding high office, who assume that the privileges and power of their
offices, together with their prolific use of the ‘Black Arts’ of bribery
and blackmail, protect them from the consequences of their actions.
While, therefore, FinCEN’s publicity presupposes
that it thinks it is doing a good job, the record inter alia of our
reports suggests the reverse. FinCEN was established by order of the
Treasury Secretary (Treasury Order Numbered 105-08) on 25th April 1990.
In May 1994, its responsibilities were broadened to include regulatory
responsibilities, and the US Treasury’s Office of Financial Enforcement
(OFE) was merged with FinCEN in October 1994. On 26th September 2002,
after the passage of Title III of the USA Patriot Act, Treasury Order
Numbered 180-01 [1] made FinCEN an official bureau within the Department
of the Treasury.
Under Section 314(a) of the USA Patriot Act of
2001, Federal law enforcement agencies, through FinCEN, are empowered to
reach out to more than 45,000 points of contact at over 27,000
financial institutions to locate bank accounts and transactions by
persons that may be involved in terrorist financing and/or money
laundering. This cooperative partnership between the financial community
and law enforcement allows disparate items of information to be
identified, centralised, and rapidly evaluated. FinCEN has its
headquarters in Vienna, VA. See: www.fincen.gov [Internet].
•Full Disclosure: Public information
requirements established by the Securities Act of 1933, the Securities
Act of 1934, and the major US stock exchanges. Source: John Downes and
Jordan Elliot Goodman, see their ‘Dictionary of Finance and Investment
Terms’, 7th Edition, Happauge: Barron’s Educational Series, Inc., 2006,
s.v. ‘Full Disclosure’.
•Garn-St Germain Depository Institutions Act of
1982: This Federal law was enacted in 1982, and authorised banks and
savings institutions to offer a new type of account, known as the Money
Market Deposit Account, which is a transaction account with no interest
rate ceiling, to compete more effectively with money market mutual
funds. The legislation also gave the Savings and Loan Associations the
authority to extend commercial loans; and it gave Federal regulatory
agencies the authority to approve, for the first time, interstate
acquisitions of failed institutions and also savings institutions. Thus,
the Act effectively created the environment for the subsequent
enronisation of the Savings and Loan Associations, providing inter alia
that:
(1): Savings and Loan Associations were
authorised to extend commercial, corporate, business or agricultural
loans up to 10% of assets after 1st January 1984;
(2): The deposit interest differential, allowing
Savings and Loans and Savings Banks to offer rates on interest-bearing
deposit accounts that were 0.25 of 1% higher than commercial banks, was
lifted, as of January 1984;
(3): The Act authorised a new capital assistance
program, the Net Worth Certificate Program, under which the US Federal
Savings and Loan Insurance Corporation and the Federal Deposit Insurance
Corporation would be able to purchase novel capital instruments called
Net Worth Certificates from savings institutions with net
worth-to-assets ratios of under 3%, and would subsequently redeem the
certificates as they regained financial health;
(4): The Act permitted Savings and Loan
Associations to offer checking accounts (demand deposit accounts) to
individuals and business checking accounts to customers who had other
accounts;
(5): Savings and Loans were authorised to
increase their consumer lending from 20% to 30% of assets, and to expand
their dealer lending and floor-plan loan financing;
(6): The Act raised the ceiling on direct
investments by savings institutions in nonresidential real estate from
20% to 40% of assets, and also allowed investment of 10% of assets in
education loans for any educational purpose, and up to 100% of assets in
state and municipal bonds;
(7): The Act pre-empted State restrictions on
enforcement by lenders of due-on-sale clauses in most mortgages for a
three-year period ending on 15th October 1985, and further authorised
State chartered lenders to offer the same kind of alternative mortgage
deals that nationally chartered financial institutions were allowed to
offer (opening the door to what became the ‘sub-prime’ crisis;
(8): The Act authorised the Comptroller of the
Currency to charter Bankers’ Banks, or depository institutions owned by
other banks;
(9): It made State chartered industrial banks eligible for Federal deposit insurance; and:
(10): It raised the legal lending limit for National Banks from 10% to 15% of their capital and surplus.
Source: Thomas P. Fitch, ‘Dictionary of Banking
Terms’, 3rd Edition, Happauge: Barron’s Educational Series, Inc., 1997,
c.v. ‘Garn-St. Germain Depository Institutions Act’. See also: Financial
Guarantee; Savings and Loan Deregulation.
•Glass-Steagall Act of 1933:
Legislation passed by Congress which:
Legislation passed by Congress which:
(1): Authorised deposit insurance;
(2): Prohibited commercial banks from owning full-service brokerages (Securities Houses of Broker/Dealers);
(3): Prohibited banks from undertaking
investment banking activities, for instance underwriting corporate
securities or municipal revenue bonds;
(4): Was framed to insulate bank depositors from
the risk involved when a bank deals in securities, in order to prevent
banks from collapsing.
The Glass-Steagall Act was disabled by the
Financial Services Modernization Act (a.k.a. the Gramm-Leach-Bliley Act,
a.k.a. the Financial Services Modernisation Act). Source: John Downes
and Jordan Elliot Goodman, ‘Dictionary of Finance and Investment Terms’,
7th Edition, Happauge: Barron’s Educational Series, Inc., 2006, s.v.
‘Glass-Steagall Act’.
•Gramm-Leach-Bliley Act of 1999:
See: Financial Services Modernization Act; Glass-Steagall Act of 1933.
See: Financial Services Modernization Act; Glass-Steagall Act of 1933.
•Guarantee: This entails the acceptance of
responsibility for payment of a debt or for performance of some
obligation if the person (entity) primarily liable fails to perform. The
guarantor acquires a Contingent liability – namely, a potential
liability that is not going to be recognised in accounts until the
outcome becomes probable in the opinion of the company’s accountant.
Source: John Downes and Jordan Elliot Goodman, ‘Dictionary of Finance
and Investment Terms’, 7th Edition, Happauge: Barron’s Educational
Series, Inc., 2006, s.v. ‘Guarantee’.
•Guaranteed Bond: A Bond that is characterised
by the fact that the principal and interest are guaranteed by a firm
other than the issuer. Both guaranteed stock and guaranteed bonds
become, in effect, debenture (unsecured) bonds of the guarantor. Source:
John Downes and Jordan Elliot Goodman, see: ‘Dictionary of Finance and
Investment Terms’, 7th Edition, Happauge: Barron’s Educational Series,
Inc., 2006, s.v. ‘Guaranteed Bond’.
•High-Yield Investment Program:
A sophisticated scam perpetrated in many instances by corrupt elements of US intelligence and associates, masterminded inter alia by the arch-criminalist George H. W. Bush Sr. and his corrupt co-conspirator, Dr Alan Greenspan, the former Chairman of the Federal Reserve Board. Due to overuse of this term by the corrupt operators, it has become more or less synonymous with the generic term ‘fraudulent finance’, and with Ponzi and Pyramid Schemes (known as ‘pyramid-selling schemes’ in Britain). Experts are divided as to whether most High-Yield Investment Programs are Ponzi schemes, or not. Our own investigations suggest that colossal sums of stolen and duplicated funds (as explained in the Wantagate reports) were also used in these schemes, with stolen money being employed as purported back-up for promised and actual initial payouts. However these were never intended to occur beyond the first and perhaps the second layers, as the fraudulent finance techniques were used to entice retail investors into parting permanently with their funds, often after signing illegal Non-Disclosure Agreements.
A sophisticated scam perpetrated in many instances by corrupt elements of US intelligence and associates, masterminded inter alia by the arch-criminalist George H. W. Bush Sr. and his corrupt co-conspirator, Dr Alan Greenspan, the former Chairman of the Federal Reserve Board. Due to overuse of this term by the corrupt operators, it has become more or less synonymous with the generic term ‘fraudulent finance’, and with Ponzi and Pyramid Schemes (known as ‘pyramid-selling schemes’ in Britain). Experts are divided as to whether most High-Yield Investment Programs are Ponzi schemes, or not. Our own investigations suggest that colossal sums of stolen and duplicated funds (as explained in the Wantagate reports) were also used in these schemes, with stolen money being employed as purported back-up for promised and actual initial payouts. However these were never intended to occur beyond the first and perhaps the second layers, as the fraudulent finance techniques were used to entice retail investors into parting permanently with their funds, often after signing illegal Non-Disclosure Agreements.
[end of part 2, part 3 in a reply to this post]
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