Malay journalists leader lays out elaborate theory on another community, no guesses which

By Lee Shi-Ian

Forging alliances with Malay opposition parties and using the democratic parliamentary process has been the cornerstone for the DAP's slow but inexorable rise to power in Malaysia, said Dr Alias Mohamed.
Alias, who is the president of the National Association of Malay Journalists and Writers of Malaysia and the Kelantan Malay Journalists Association, wrote in Utusan Malaysia that Malay leaders were worried that years of compromising with the Chinese would eventually lead to the loss of Malay authority and influence.
"The smooth strategy employed by Chinese leaders, despite their numbers being less than 30 per cent of the nation's 29 million population, culminated in a golden opportunity when they allied with Parti Keadilan Rakyat and PAS in the 2008 general election," Alias said.
The Chinese leaders had learnt from their past mistakes in 1969 when their blatant attempt to wrest powers from the Malay community failed. Alias claimed that during the reign of Prime Minister Tunku Abdul Rahman, he was pressured several times into giving concessions and exemptions to the Chinese, including the allocation of additional seats.
"After 1969, the Chinese realised that only through the democratic process could their political ambitions become reality. The same problem plagued the next three Prime Ministers after Tunku, who were pressured to give the Chinese community universities and recognising their language," Alias said.
"The Chinese hope that the opportunity to rule will emerge once the democratic door has been opened for them to seize the chance. Whether it is through demographic changes, opportunities through weaknesses in the democratic system or through allying themselves with Malay and non-Malay political parties," Alias said.
"The Chinese are very well aware that they will not be able to control the country in a short space of time, especially without the support of Malay opposition parties such as PAS and PKR. DAP secretary-general Lim Guan Eng himself admitted before the election that he would be happy if they won 100 of the 222 parliamentary seats up for contest."
Lim, who is also the Penang Chief Minister, is alleged to have said he hoped that there would be chaos within Umno and BN which would point towards a change in the composition of parliamentary seats in the august House.
In this context, DAP calculated that they would rise to power through two methods, one, in the short term, the party hopes that power falls into their hands as chaos in Parliament would encourage BN MPs or other parties to jump ship and join DAP.
Second, in the long term, they hope that there will be a major change in the population demographic due to oversights from the Malay leaders in the ruling party who will continue to press for developments both urban and rural, hence, it will encourage the migration of Chinese communities to these areas.
In the 2008 general polls, with the cooperation of PAS and PKR and exploiting the dissatisfaction of urban voters with BN, DAP conquered Penang and for a short while, Perak. With the same modus operandi, DAP merged with PKR and PAS to rule Selangor.
DAP also won parliamentary seats in the Federal Territory as well. Excluding Perak, in the 13th general polls, they repeated their success from 2008 by winning in Penang, Selangor and Federal Territory where Chinese voters were the dominant force.
On the surface, the Malay votes shifted from PAS to Barisan Nasional. Although PAS returned to control Kelantan and almost snatched Terengganu, but its influence seems to be declining and in the May 5 polls, they sacrificed Kedah to BN.
Alias said the role played by Chinese-language newspapers and magazines in spreading their influence, such as language, culture and the interests of the community in the economy and politics, could not be denied.
In line with their race, whose numbers are increasing, besides the economic interests and political voice, which is getting louder, the Chinese community continues to plan and exploit the various channels of power and democratic instruments to strengthen and consolidate everything they have accumulated since 1957.
The journey began with citizenship issues in 1948 and 1957 which, in truth, had been smoothened by Umno and the Malay royalty. Step by step, the Chinese community began laying the foundation in the economy of Malaya/Malaysia until their numbers became 29 per cent of the total population. Now, their newest objective and agenda is focused on politics in Malaysia.
"The Chinese were intelligent enough to realise in the 1940s and 1950s that the democratic system founded by the Malay rulers in Malaysia in those years would one day be the ideal platform for their race to progress and actively participate in politics," Alias said.
"In truth, political Chinese organisations had planted their roots a long time ago in Malaya. The secret societies played an important role in giving birth to Chinese leaders who were conservative and cooperated closely with the British."
MCA, which was formed in 1949, then shifted their attention to the issue of citizenship. They realised that their party was not the only lobbyist, as Chinese leaders such as Tun Tan Cheng Lock was strongly supported by certain British administrators.
Although the Communist Party of Malaysia (CPM) and the Kuomintang were already in existence, but the traces of legacy left by China and Taiwan were rejected by conservative Chinese here who vowed to acknowledge Malaya as their country. The CPM was viewed as a party who was based on the community ideology which was built on the concept of violence and cruelty.
To function democratically in a conservative Malay country which had been based on British administration principles, the Chinese were initially content to use the MCA channel to achieve their objectives which were much bigger.
However, after achieving their citizenship and dominant economic might, the Chinese began to consider whatever was being given to them by the Malays was insufficient. Just like the Chinese community in other countries where they were the dominant population, the truth is they wanted to decide their own destinies.
So they began to reject the Malays who were controlling them, fighting the New Economic Policy, the Federal Constitution, the Islamic religion and Malay rulers. Their position as the dominant race in the country's economy is the main impetus that drives their political ambitions to control Malaysia.
In the 1960s, due to political tactics planted and played by then-Singapore prime minister Lee Kuan Yew, a group of Chinese in Malaysia left the mainstream MCA to form the Democratic Action Party (DAP) and inherited the same political ideologies from Lee's People's Action Party (PAP).
They also realised that their strengths depended on the urban city areas. Because of that, they used the propaganda of Malaysian Malaysia to spread the doctrine of equality among the public even though Malaysia had been founded on the basis of native history and political system and a different racial composition compared with Singapore.
Former prime minister Tun Dr Mahathir Mohamad explains Kuan Yew's arguments and ideologies at length in his famous book, The Malay Dilemma, and also in his latest book, the Doctor in the House. The slogan of the Chinese community has attracted and won over the sentiments of their supporters. -July 6, 2013.

Toronto Reviews Bid to Become Yuan Currency Trading Hub

Canada’s banks are considering a plan to make Toronto the first North American trading hub for China’s yuan, joining a global race for a share of trading in the currency of the world’s second-largest economy.
Some of Canada’s largest banks, insurance companies and pension funds met with government representatives and the Bank of Canada in Toronto on June 21 to discuss establishing a yuan trading hub, according to the Toronto Financial Services Alliance, an industry group that set up the meeting. Representatives of Chinese banks also attended the meeting, the group said, declining to name them.
“There’s been expressions of interest from some companies,” said Janet Ecker, president of the finance group, who attended the meeting. “We’ve seen what’s happened in London and Singapore and Hong Kong.”
The moves to set up a trading hub in Canada come as an organization representing Frankfurt’s financial industry predicts the European Central Bank is nearing a deal with China that will help the German financial center become a European yuan trading hub.
The Bank of England signed a similar but smaller agreement last month, joining other recent additions like Australia, Turkey, Brazil and South Korea as China pushes for greater use of its currency outside the mainland. To have a trading hub, a country’s central bank must have an agreement with China’s central bank to swap its currency for yuan.

German Plan

“By moving early, if in fact it happens, the Canadian financial sector has an opportunity to punch above its weight in currency trading,” said Finn Poschmann, an economist at the C.D. Howe Institute, a Toronto-based think-tank. “It’s a terrific opportunity for that reason, given the scale of trade between North America and China, and the financial flows that necessarily follow.”
The ECB may obtain an agreement with the People’s Bank of China that would allow it to exchange euros for up to 800 billion yuan ($130 billion) which it could then lend to companies, according to Frankfurt Main Finance, a lobby group. Former Bank of England Governor Mervyn King signed a three-year swap agreement with his Chinese counterpart Zhou Xiaochuan last month that will make 200 billion yuan available.
The agreements provide companies with a safety net that aims to give them more confidence in doing business with their Chinese partners.

Bankers Group

“The U.S. has a far more complicated relationship with China,” said Adrian Miller, the head of fixed-income strategy at GMP Securities LLC, by phone from New York. “Canada has a natural resource bias, which plays into Canada’s game plan as well. So it’s an easier sell to go forward with that. That’s why I think you’re seeing it go there first instead of the U.S.”
A representative of Ontario’s Minister of Finance attended the meeting as an observer, Scott Blodgett, a spokesman, said in an e-mail. Canada’s federal finance department does not comment on individual meetings, spokeswoman Stephanie Rubec said in an e-mail.
“At this point, our members are assessing the proposition, but we have no other information,” said Maura Drew-Lytle, spokeswoman for the Canadian Bankers Association, which represents the country’s banking industry.
The Bank of Canada doesn’t comment on private meetings, Alexandre Deslongchamps, a spokesman, said in an e-mail.
Spokesmen for Canada’s five-biggest banks, Royal Bank of Canada (RY), Toronto-Dominion Bank, Bank of Nova Scotia (BNS), Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce, declined to comment.

Nexen Sale

Fabrice de Dongo, a spokesman HSBC Holding Plc.’s Canadian unit, did not immediately respond to a request for comment.
Canada’s five largest banks, HSBC, Industrial and Commercial Bank of China and the Bank of China attended the meeting, the Shanghai Daily reported June 27, citing an unidentified banking industry person aware of the matter.
Canada’s trade deficit with China reached C$31.4 billion ($30 billion) in 2012, according to Statistics Canada. Prime Minister Stephen Harper has declared it a national priority to expand energy exports to Asia as it tries to reduce its alliance on U.S. markets.
Harper’s government last year approved Cnooc Ltd. (883)’s $15.1 billion takeover of Calgary-based energy producer Nexen Inc. (NXY) At the same time, the government said it would approve further acquisitions of businesses in Canada’s oil sands by government-backed companies only under “exceptional circumstances.”

Chinese Population

The TFSA’s Ecker cites growing trade with China as one reason Toronto, and Canada, would make a good yuan hub, along with the country’s large Chinese population.
There were 1.5 million people of Chinese ancestry in Canada as of 2011, or 4 percent of the population, according to Statistics Canada. Toronto is home to 40 percent of the country’s Chinese population. By 2031 there will be 2.7 million individuals of Chinese origin in Canada, or 6.4 percent of the population, according to Statistics Canada projections from 2006.
“Interest has been expressed by people within the industry and we’ve seen other centers move into this space quite assertively,” Ecker said in an interview. “We’ve certainly been told that some companies are saying, oh, let’s take a look.”

Dominant Economy

China’s Zhou pledged on June 28 to expand cross-border use of the yuan and encourage multinational companies to include the currency in their asset portfolios. China will allow direct trading between the yuan and foreign currencies and push forward on convertibility without giving up control of capital flows, Zhou said.
Switzerland is also seeking to be an offshore yuan-trading center, according to the Swiss Bankers Association, while Banque de France Governor Christian Noyer said in October that Paris has “all the conditions to become the renminbi offshore center of the euro zone.” He was referring to another term for the Chinese currency.
“If you think China is going to be a dominant economy and there are going to be a lot of financial transactions in (yuan) you want the ability to trade it,” said Nicholas Lardy, an expert on the Chinese economy at the Peterson Institute for International Economics, by phone from Washington. “Everyone’s thinking, the train’s leaving the station, I better get on it. Even if it’s not big right away, everyone thinks there’s a first-mover advantage.”

Trading on Thin Air

Trading on Thin Air explains the methods used by the financial oligarchy in the past to extract the wealth of the nation and shows how the same strategy is being used today to subvert a movement for conservation and sustainability and harness it in order to create the next big bubble.

Keiser Report: Art of Debt Juggling - The Bond Apocalypse Is Upon Us

This Is Terrible: Only 47% of Adults Have Full-Time Job!

The release of the June Jobs’ Report Friday was something of a relief for the markets. The Labor Department reported that the economy gained 195,000 jobs in June, which beat economists’ expectations. The Department also reported that the economy gained 70,000 more jobs in April and May than it originally estimated. The report, however, also provides clear evidence that the the nation is splitting into two; only 47% of Americans have a full-time job and those who don’t are finding it increasingly out of reach. 
Of the 144 million Americans employed last month, only 116 million were working full-time. Friday’s report showed that 58.7% of the civilian adult population of 245 million was working last month. Only 47% of Americans, however, had a full-time job.
http://www.breitbart.com/Big-Government/2013/07/05/only-47-americans-have-full-time-job
Unemployment rate:
http://www.shadowstats.com/imgs/sgs-emp.gif?hl=ad&t=1373030154

Peter Schiff – June Jobs Report — Once again, the Devil is in the Details!

Peter Schiff - "What About Money Causes Economic Crises?"

Fire chief: 2 dead in SF crash found outside jet

SAN FRANCISCO -- An Asiana Airlines flight packed with more than 300 people slammed onto the runway while landing at San Francisco airport Saturday and caught fire, forcing many to escape by sliding down the emergency inflatable slides and into a trail of metal debris as flames tore through the plane.
At least two people who were found outside the wreckage died in the crash, while another 182 people were taken to hospitals, many with minor injuries, authorities said. Forty-nine people were reported to be in critical condition, San Francisco International Airport spokesman Doug Yakel said.
As the plane approached the runway from the waters of San Francisco Bay around noon, travelers in the terminals and others eyewitnesses could see that the aircraft was swaying unusually from side to side and that at one point the tail seemed to hit the ground before breaking off.
Kate Belding, who was jogging a few miles away, said she thought: "Oh my God. That plane is crashing."
By the time the flames were out, much of the top of the Boeing 777's fuselage had burned away. The tail section was gone, with pieces of it scattered across the beginning of the runway. One engine appeared to have broken away. Emergency responders could be seen walking inside the burned-out wreckage.
News of the crash spread quickly on Twitter and the Internet in this wired city, with eyewitnesses tweeting their stories, posting images of the plumes of smoke rising above the bay and uploading video of passengers fleeing the burning plane.
"It just looked really bad," Belding said. "I've seen the pictures of it since then, and it's amazing anyone walked out of that plane."
The investigation has been turned over to the FBI and terrorism has been ruled out, San Francisco Fire Chief Joanne Hayes-White said. Federal aviation and transportation investigators were heading to the scene. Asiana, Boeing and the engine manufacturer, Pratt & Whitney, pledged to work with them.
Vedpal Singh, who was sitting in the middle of the aircraft and survived the crash with his family, said there was no forewarning from the pilot or any crew members before the plane touched down hard and he heard a loud sound.
"We knew something was horrible wrong," said Singh, who suffered a fractured collarbone and had his arm was in a sling.
"It's miraculous we survived," he said.
A visibly shaken Singh said the plane went silent before people tried to get out anyway they could. His 15-year-old son said luggage tumbled from the overhead bins The entire incident lasted about 10 seconds.
Another passenger, Benjamin Levy, 39, said it looked to him that the plane was flying too low and too close to the bay as it approached the runway. Levy, who was sitting in an emergency exit row, said he felt the pilot try to lift the jet up before it crashed, and thinks the maneuver might have saved some lives.
"Everybody was screaming. I was trying to usher them out," he recalled of the first seconds after the landing. "I said, 'Stay calm, stop screaming, help each other out, don't push.'"
Hayes-White said she did not know the ages or genders of the people who died, but said they were found on "the exterior" of the plane. She said the 307 passengers and crew members had been aboard had been accounted for following several hours of confusion during which authorities said they were unsure of the whereabouts of more than 60 people who, as it turned out, had been evacuated to a different area of the airport.

Lowy reported from Washington, D.C. Associated Press writers Jason Dearen and Sudhin Thanawala in San Francisco, Scott Mayerowitz in New York and Pauline Arrillaga in Phoenix contributed to this report.

Full Story1 | 2 | Next »

BLOOMBERG NEWS IS REPORTING DERIVATIVES COLLUSION… Traders May Need From $2 Trillion To $4 Trillion In Extra Collateral To Meet The New Requirements… Margin Calls Coming On US Too-Big-To-Fail Banks

The more press it gets the more higher probability of panic

EU Accuses 13 Banks of Hampering CDS Competition
Thirteen of the world’s biggest investment banks were accused by the European Union of colluding to curb competition in the $10 trillion credit derivatives industry.
The EU sent a complaint, or statement of objections, to 13 banks, data provider Markit Group Ltd. and the International Swaps & Derivatives Association over allegations they sought “to prevent exchanges from entering the credit derivatives business between 2006 and 2009,” the European Commission said.
The probe is one of several by the Brussels-based commission into the financial industry, including whether banks colluded to manipulate U.K. and European benchmark interest rates.Joaquin Almunia, the EU antitrust chief, said he’s seeking to settle the probes into Libor and Euribor with some of the same banks in the CDS case by the end of the year.
The EU in April 2011 opened a probe into whether banks colluded by giving market information to Markit, a data provider majority-owned by Wall Street’s largest banks. Earlier this year, the EU extended its investigation to include ISDA, having found indications that it “may have been involved in a coordinated effort of investment banks to delay or prevent exchanges” from entering the credit swaps business.
The banks in the CDS probe are Goldman Sachs Group Inc.,JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK), Morgan Stanley,Barclays Plc (BARC), Bank of America Corp. (BAC), HSBC Holdings Plc (HSBA), Royal Bank of Scotland Group Plc (RBS), BNP Paribas SA (BNP) and UBS AG (UBSN), the commission said. Bear Stearns, which is now a unit of JPMorgan, was also named by the EU authority.

‘Desperate’ Banks

“I’m sure banks are desperate to keep these products from going on exchange and keep as much of the pie to themselves as they can, that sort of stands to reason,” said Robert Kendrick, a credit analyst at Legal & General in London. “As an investor in banks, I’d be surprised if it makes a huge difference. As an investor in CDS more generally, I’d like to see more transparency.”
http://www.bloomberg.com/news/2013-07-01/eu-accuses-13-investment-banks-of-hampering-cds-competition.html

A Shortage of Bonds to Back Derivatives Bets

Starting next year, new rules will force banks, hedge funds, and other traders to back up more of their bets in the $648 trillion derivatives market by posting collateral. While the rules are designed to prevent another financial meltdown, a shortage of Treasury bonds and other top-rated debt to use as collateral may undermine the effort to make the system safer.

Derivatives allow buyers to bet on the direction of currencies, interest rates, and markets, insure against defaults on bonds, or lock in a price on commodities. The new rules are rooted in the 2010 Dodd-Frank Act, passed in reaction to the near-collapse of the financial system in 2008, which was caused in part because derivatives contracts weren’t backed by enough collateral. American International Group needed a $182.3 billion bailout from the U.S. government after it failed to make good on derivatives trades with some of the world’s largest banks. In response, Congress required that most privately negotiated derivatives transactions, known as over-the-counter trades, go through clearinghouses.
Clearinghouses, run by firms such as Chicago-based CME Group and London-based LCH.Clearnet Group, make traders provide collateral, including government bonds, that can be seized and easily converted into cash to cover defaults. Traders may need from $2 trillion to $4 trillion in extra collateral to meet the new requirements, according to Timothy Keaney, chief executive officer of BNY Mellon Asset Servicing.
http://mobile.businessweek.com/articles/2012-09-20/a-shortage-of-bonds-to-back-derivatives-bets

Margin Calls Coming On US Too-Big-To-Fail Banks
Fed approves step one in a three step plan
Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organisations. Consistent with the international Basel framework, the rule includes a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent and a common equity tier 1 capital conservation buffer of 2.5 percent of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets from four percent to six percent and includes a minimum leverage ratio of four percent for all banking organisations. In addition, for the largest, most internationally-active banking organisations, the final rule includes a new minimum supplementary leverage ratio that takes into account off-balance sheet exposures. (See the press release here)
I know you are thinking: Wow, this is the most interesting thing I have seen in years :-) but alas it is – because it is in fact a major margin call on the US holding banks.
Note how this adoption is only the first set of a series of new rules. Let me introduce you to: Daniel Tarullo, The Federal Reserve Governor in charge of regulation after the implementation of the Dodd-Frank law in 2010. (As a consequence of Dodd-Frank, the Fed got a permanent regulatory governor.)
I had nothing else to do so I read his latest speeches which are surprisingly clear (considering that he’s a policy guy).
Governor Daniel K. Tarullo At the Peterson Institute for International Economics, Washington, D.C.
May 3, 2013 Evaluating Progress in Regulatory Reforms to Promote Financial Stability
The speech considers the “additional charges” which are coming and today’s Basel III was only item number one:

First, the basic prudential framework for banking organisations is being considerably strengthened, both internationally and domestically. Central to this effort are the Basel III changes to capital standards, which create a new requirement for a minimum common equity capital ratio. This new standard requires substantial increases in both the quality and quantity of the loss-absorbing capital that allows a firm to remain a viable financial intermediary. Basel III also established for the first time an international minimum leverage ratio which, unlike the traditional US leverage requirement, takes account of off-balance-sheet items.



Second, a series of reforms have been targeted at the larger financial firms that are more likely to be of systemic importance. When fully implemented, these measures will have formed a distinct regulatory and supervisory structure on top of generally applicable prudential regulations and supervisory requirements. The governing principle for this new set of rules is that larger institutions should be subject to more exacting regulatory and supervisory requirements, which should become progressively stricter as the systemic importance of a firm increases.

This principle has been codified in Section 165 of the Dodd-Frank Act, which requires special regulations applicable with increasing stringency to large banking organizations. Under this authority, the Federal Reserve will impose capital surcharges on the eight large US banking organizations identified in the Basel Committee agreement for additional capital requirements on banking organisations of global systemic importance. The size of surcharge will vary depending on the relative systemic importance of the bank. Other rules to be applied under Section 165—including counterparty credit risk limits, stress testing, and the quantitative short-term liquidity requirements included in the internationally-negotiated Liquidity Coverage Ratio (LCR)—will apply only to large institutions, in some cases with stricter standards for firms of greatest systemic importance.

An important, related reform in Dodd-Frank was the creation of orderly liquidation authority, under which the Federal Deposit Insurance Corporation can impose losses on a failed systemic institution’s shareholders and creditors and replace its management, while avoiding runs and preserving the operations of the sound, functioning parts of the firm. This authority gives the government a real alternative to the Hobson’s choice of bailout or disorderly bankruptcy that authorities faced in 2008. Similar resolution mechanisms are under development in other countries, and international consultations are underway to plan for cooperative efforts to resolve multinational financial firms.

A third set of reforms has been aimed at strengthening financial markets generally, without regard to the status of relevant market actors as regulated or systemically important. The greatest focus, as mandated under Titles VII and VIII of Dodd-Frank, has been on making derivatives markets safer through requiring central clearing for derivatives that can be standardised and creating margin requirements for derivatives that continue to be written and traded outside of central clearing facilities. The relevant US agencies are working with their international counterparts to produce an international arrangement that will harmonise these requirements so as to promote both global financial stability and competitive parity. In addition, eight financial market utilities engaged in important payment, clearing, and settlement activities have been designated by the Financial Stability Oversight Council as systemically important and, thus, will now be subject to enhanced supervision.

A margin call is coming…
http://www.zerohedge.com/news/2013-07-05/margin-calls-coming-us-too-big-fail-banks

Collusion is an agreement between two or more parties, sometimes illegal and therefore secretive, to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair advantage. It is an agreement among firms or individuals to divide a market, set prices, limit production or limit opportunities.[1] It can involve “wage fixing, kickbacks, or misrepresenting the independence of the relationship between the colluding parties”.[2] In legal terms, all acts affected by collusion are considered void
https://en.wikipedia.org/wiki/Collusion
The European Commission said on Monday it suspected that 13 top investment banks including Barclays, Deutsche Bank and Goldman Sachs, colluded over derivatives trading in breach of EU antitrust rules.
A preliminary investigation showed that banks colluded to exclude exchanges from the over-the-counter market because they feared involvement by the exchanges “would have reduced their revenues from acting as intermediaries,” the Commission said.
The banks instead allegedly continued over-the-counter trading in the massive credit default swaps (CDS) market between 2006 and 2009 — an opaque business that was seen as contributing to the global financial crisis, the Commission said in a statement.
The EU’s Competition Commissioner Joaquin Almunia said the banks would now have the chance to respond to the accusations, and that if the charges were confirmed once the investigation was completed they could face fines.
“If it is confirmed that banks collectively blocked exchanges from the derivatives market, the Commission could decide to impose sanctions,” Almunia said at a press briefing.
“Exchange trading of credit derivatives improves market transparency and stability,” he said, adding that collusion between the banks to prevent this type of trading would be “a serious breach of our competition rules”.
http://www.bangkokpost.com/news/world/357814/eu-accuses-13-banks-of-derivatives-collusion
Banks accused by EU of stifling derivatives competition
Barclays and HSBC are among the 13 banks suspected by European Union regulators of using anti-competitive practices to stop rivals from offering alternative ways to trade highly profitable products such as credit default swaps, a form of insurance us…
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10152548/Banks-accused-by-EU-of-stifling-derivatives-competition.html
ONE THOUSAND TRILLION IS A QUADRILLION
https://en.wikipedia.org/wiki/Quadrillion
article from september 2012
NOT ENOUGH BONDS TO BACK DERIVATIVES BETS
Starting next year, new rules will force banks, hedge funds, and other traders to back up more of their bets in the $648 trillion derivatives market by posting collateral. While the rules are designed to prevent another financial meltdown, a shortage of Treasury bonds and other top-rated debt to use as collateral may undermine the effort to make the system safer.
http://www.businessweek.com/articles/2012-09-20/a-shortage-of-bonds-to-back-derivatives-bets


http://investmentwatchblog.com/1-5-quadrllion-dollar-shitstorm-eu-accuses-13-banks-of-derivatives-collusion-citigoldman-sachsbarclayshsbcjp-morgan-rbs-all-of-them/
Uncle

S & P – Demand, [Bernanke], Cannot Be Sustained As Is.

by Michael Noonan
If central planners were put in charge of managing the Mohave Desert, out West, it would
eventually run out of sand.  When central planners manage anything, they distort natural
market forces, and that ultimately creates an exaggerated effect in the opposite direction.
At some point, and now sooner rather than later, the Fed’s [Bernanke] interference with
the stock market is going to make the 2008 crash  seem like a minor correction.
There is one thing, and one thing only, driving the stock market, and that is debt.  It is not
new capital.  It is not new investment in plants and machinery, the “old fashion” way of
creating a sustained bull market.  It is borrowed money, and the cost of cheap money is
going to become dear.  When that happens, the [overly] leverage factor is going to destroy
everyone who is leveraged.  This “party” to the upside will end, and when it does, those
who chose to believe in the lies will suffer dire financial consequences.
Friday’s “positive” jobs “growth” is a lie, plain and simple.  More and more Americans
are leaving the work force, [not by choice], joining those who have already left, but are
considered “invisible” by the Bureau of Lies and Statistics.  More and more Americans
receive some form of welfare from the Federal teat…Food stamps, an example of the
government’s latest “growth industry.”  Full-time jobs are disappearing; part-time jobs
ascending, mostly all minimum wage, offering no health care.   “Thank you, Obamacare.”
The government, on every level, is financial dead weight.  Every cent spent by government
comes from the public, and now, more so than ever, from deficit spending.  Guess who is
responsible for all deficit spending?  Read the 14th Amendment.  With almost zero rates
of interest, Congress has zero reason to exercise fiscal “responsibility.”  They do not care.
Why mention all this?  The charts are distorted, based on lies, just like those of gold and
silver, where the COMEX has been used as a sledge-hammer against rising precious metal
prices, the antithesis of fiat creation.  The government hates anything that exposes its lies.
Federal Reserve Notes are not dollars, not by law, and even according to their issuer, the
Federal Reserve itself.  Federal Reserve Notes, [FRN], are debt instruments.
Here is a shocker for everyone:  Debt cannot be money, yet almost everyone treats it as
though it were money, believing in the lie.  When presented with the truth, it is not
believed because it goes against the lie, which is believed as true.  Do not take our  word
for it.  DYODD.  [Do your own due diligence].  Cognitive dissonance reigns.
We see the lies in the charts, and that is why the above lesson in reality was provided.
Mention has been previously made that volume has been greater on declines, an indication
of increasing seller activity.  The addition of the dark channel lines show the weekly chart
to be stronger than expected.  The last swing high reached the upper supply channel, and
the  swing low of two weeks ago stayed well above the lower demand channel line, and also
above recent lows from March and April, all appearances of underlying strength.

The amount of time and price for the last swing lows are labeled.  The current decline was
similar in point value to the middle swing correction, but the decline accelerated in just
half the time, an indication that sellers moved the market down with greater ease.
Price has rallied to the upper supply line of the down channel, seen in more detail on the
daily chart.  We get to see the how of price approaching a potential resistance area on both
time frames when the market opens on Monday, [Sunday evening].

The LL and first LH are used to create the down channel.  A line connects the high and the
LH, extended lower into the future, the dashed portion, and a parallel line is drawn from
the LL, extended into the future, also represented by the dash spaced portion.  A new LL
was formed at an oversold condition, and now price is retesting the upper channel.
The dashed horizontal line off the wide-range bar down, in mid-June, usually offers some
resistance, just not in this case.  The ease of upward movement from the correction low of
Thursday and continuing in Friday’s rally would suggest a higher price on Monday.

An intra day inspection of the wide-range bar from 19 June, on this 90 minute chart, tells
us price accelerated lower starting at 1638, and it can act as resistance on a retest, if price
does go higher on Monday.  The high of the entire bar is labeled at 1646, just below the
1650 area swing high, and it, too, can be a potential resistance.
The volume on the left hand side of the chart, as price was declining, is about twice the
volume on the right hand side, as price rallied.  There has been ample evidence of this out
of line supply v demand activity in the past.  This happens to show the disparity quite
clearly.  It is why this commentary began with the editorial caveat.  No market can ignore
the basic laws of nature without eventually succumbing to natural order.
The lesser volume “demand” side comes from the Fed, injecting unlimited fiat into the
market, overwhelming the natural inclination to sell.  The forces of supply and demand
remain distorted.  Central planners can keep it that way longer than rational opposing
forces can remain solvent, so sellers simply stay out of the way.  They will have their day.
Monday’s activity can be telling for the immediate term as price goes into the obvious
resistance areas, as shown on all three time frames.  The daily and intra day time frames
have been down, and a few attempts were made from the short side, resulting in small
losses.
If price weakens against support, expect a reversal to the downside.  If price stays around
the resistance area, its ability to hold is the market’s way of telling us buys are absorbing
the sellers, and price will continue higher.  Plan accordingly.

Presidents Of Venezuela & Nicaragua Offer Edward Snowden Asylum!

Bernanke Will Eventually Go Down As The Most Reviled Fed Chairman In History

Indeed. The chief bubblemeister of Last Ponzi Game Standing reigns supreme. He’s only been wrong that rising stock prices will lift all boats. Most Americans are sinking, steadily losing ground as the 7% pulls ahead. Bernanke knows that the bigger he blows the stock market bubble, the more dangerous it becomes and the worse the middle class will fare.
Bernanke looks like the winner now in Joe Weisenthal’s eyes, but that will be temporary, just as the view that Greenspan was “The Maestro” was temporary.
As an analyst, I identify trends, and do my best to see the signs of major turning points early enough to take the appropriate action. I looks at the data and tie it together into coherent threads that reveal exactly what the trends are, and where cause and effect probably are. In that regard don’t normally make “predictions,” I’m more interested in accurately portraying the facts of what is.
With the years that I have spent at this, I feel pretty confident that I will be proven correct about this “prediction” in due time. Bernanke will eventually go down as the most reviled Fed chairman in history. As a serial bubble blower, he already should be, but he has Joe Weisenthal and the rest of the Fed apologist crowd spinning the facts and misleading the kind of people prone to believe in the tooth fairy, Santa Claus, and helicopter money. As the collapse of the Treasury bubble progresses it will reach an inflection point that will take the stock bubble, and the economy with it and Bernanke’s legacy will be sealed once and for all.
Trends like this take time to play out. Traders and pundits are impatient people. Their lack of perspective is sometimes intentional, and sometimes simply naivete and lack of experience. If there’s one thing I’ve learned after 45 years of actively observing and participating in this game, it is the virtue of patience. Trends take time and the time draws near for this one. I am quite comfortable in patiently waiting for the denouement.


Total Jobs Growth Slows, Full Time Jobs Growth Falters Badly While Fed Blows Stock Market Bubble http://wallstreetexaminer.com/2013/07/05/total-jobs-growth-slows-full-time-jobs-growth-falters-badly-while-fed-blows-stock-market-bubble/
Pin The Tail On The Number, Why Steady Jobs Growth Does Not Support The Stock Market Bubble http://wallstreetexaminer.com/2013/07/05/pin-the-tail-on-the-number-why-steady-jobs-growth-does-not-support-the-stock-market-bubble/
ART CASHIN: I Was Out With My Drinking Buddies Last Night, And We Were All In A Frenzy About This Chart
Here’s what that chart looks like via the St. Louis Fed:

St. Louis Fed
http://www.businessinsider.com/art-cashin-friends-in-a-frenzy-over-monetary-velocity-2013-7

Martin Hennecke – Fed Can’t Phase Out QE, Crisis Not Over

Rise Like Lions – Occupy Wall Street and the Seeds of Revolution

Rise Like Lions takes the people, actions, and words from the camps and streets of Occupy Wall Street and provides a radical, compelling and inspiring account of what the movement is about.

The food industry and government policies making Americans fat

The story of American agriculture is one of "unintended consequences."

The food industry and agricultural subsidies have led us down a path of obesity. There is a complete disconnect between agricultural policies and health policies.

This report from Peter Jennings is just as true today--perhaps more so--than when it was produced in 2003.

This is part 1 of 5.

For the rest of the series:
Part 2
Part 3
Part 4
Part 5

Only 47% of Adults have Full-Time Job

Breitbart – by Mike Flynn
The release of the June Jobs’ Report Friday was something of a relief for the markets. The Labor Department reported that the economy gained 195,000 jobs in June, which beat economists’ expectations. The Department also reported that the economy gained 70,000 more jobs in April and May than it originally estimated. The report, however, also provides clear evidence that the the nation is splitting into two; only 47% of Americans have a full-time job and those who don’t are finding it increasingly out of reach.   
Of the 144 million Americans employed last month, only 116 million were working full-time. Friday’s report showed that 58.7% of the civilian adult population of 245 million was working last month. Only 47% of Americans, however, had a full-time job.
The market’s positive reaction to Friday’s report is another sign of how far our economic expectations have fallen. If today the same proportion of Americans worked as just a decade ago, there would be almost 9 million more people working. Just in the last year, almost 2 million Americans have left the labor force. With a majority of the population not holding a full-time job, it isn’t surprising that economic growth has been so weak.
In June, the number of Americans who wanted to work full-time, but were forced into part-time jobs because of the economy, jumped 352,000 to over 8 million.
The Jobs’ Report is increasingly measuring only a part of the American economy. While Friday’s report was better than expected, it only measures those who are working or actively looking for work. There is a growing number of Americans slipping through the cracks of the job market.

Lifting the Veil – Barack Obama and the Failure of Capitalist Democracy

“Lifting the Veil is the long overdue film that powerfully, definitively, and finally exposes the deadly 21st century hypocrisy of U.S. internal and external policies, even as it imbues the viewer with a sense of urgency and an actualized hope to bring about real systemic change while there is yet time for humanity and this planet. See this film!” – Larry Pinkney Editorial Board Member & Columnist, The Black Commentator

BRICS preparing for silver backed money?!

The Silver Bullet Silver Shield makes it’s return with Warbird soon.
http://dont-tread-on.me/?p=30168
Today, I learned of one of the most stunning developments in the physical silver demand I have ever seen.
The physical Silver market is about to explode the paper silver market in a huge way. Like the price collapse in 2008 set up silver for a 500%+ return for the next few years, this recent price collapse is going to set up an epic return on silver like the world has never seen.

Hold the Champagne: Jobs market isn’t better yet

By Rex Nutting, MarketWatch

MarketWatch

The percentage of adults from 25 to 54 who are working hasn’t improved very much, and is still far below the norm.

WASHINGTON (MarketWatch) — The U.S. economy has been creating about 200,000 jobs a month, but there still has been no substantial improvement in the labor market that would lead the Federal Reserve to taper its aggressive purchases of bonds to stimulate the economy.

Markets are convinced that the Fed will begin to cut back on its $85 billion a month quantitative easing in September. And the better-than-expected jobs report on Friday has only solidified that opinion.

Click to Play

U.S. added 195,000 jobs last month

The June jobs report and the latest on events in Egypt.

The Fed may very well taper in September, but it won’t, because we’re already seeing “substantial improvement” in the labor market. It’s getting better but it’s still not nearly good enough.

In any jobs report, there are always numbers and trends that would justify almost any opinion about the economy. Some things are improving, and some are standing still or getting worse. Today’s jobs report is no exception.

What’s getting better: The economy created 195,000 jobs in June, while April and May’s payroll figures were revised higher. Over the past six months, payrolls have increased by an average of 202,000 per month. That’s substantially better than the 130,000 pace the Fed was looking at in September when it implemented QE3.

The unemployment rate didn’t fall in June, but it remained at 7.6% for the best of reasons: 177,000 people joined the labor force. That’s important, because the unemployment rate has been falling because people get too discouraged to look for work. The fact that the labor force increased in June is a sign that people are more confident of landing a job. They are more willing to stick their toe in the water.

The growth in the labor force meant two other important measures of the labor market also improved. The labor-force participation rate (which measures the percentage of adults who are working or looking for work) rose by a tenth to 63.5%, and the employment-population ratio (which measures the percentage of adults who are working) rose by a tenth to 58.7%.

The growth in the labor force is good news for the Fed, but it’s too early to break out the bubbly. The employment-population ratio is no better today than it was in September 2012, when QE3 began.

Most of the job growth (and the growth in the labor force) in June came from one demographic group: Women between 20 and 24. It’s very good news that young women are finding work; young people have been very badly hurt by the sluggish recovery.

MORE FROM REX NUTTING | Follow @RexNutting on Twitter
• The biggest failure of Obama’s presidency
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But the downside is that most other groups saw no improvement at all in June, or in recent months. The labor market for those in their prime working years of 25 to 54 didn’t get better in June, and has barely improved in the past year.

In the past 12 months, 1.6 million more Americans have jobs, but the number of working Americans between 25 and 55 has increased by just 350,000. Most of the job growth has benefited older Americans, who got 1.1 million of those jobs.

The economy is still failing to create jobs for all who want to work. There are about 18.4 million Americans who’d like to land a job (11.8 million counted as officially unemployed, plus 6.6 million who aren’t in the labor force but who want to work); last September, it was 18.8 million.

I don’t call that “substantial improvement” in the labor market. Keep the Champagne on ice.

Rex Nutting is a columnist and MarketWatch's international commentary editor, based in Washington. Follow him on Twitter @RexNutting.

EU to vote to suspend U.S. data sharing agreements, passenger records amid NSA spying scandal

The European Parliament on Thursday adopted a joint, cross-party resolution to begin investigations into widespread surveillance of Europeans by the U.S. National Security Agency (NSA).

In the vote, 483 voted for the resolution, 98 against, and 65 abstained on a vote that called on the U.S. to suspend and review any laws and surveillance programs that “violate the fundamental right of EU citizens to privacy and data protection,” as well as Europe’s “sovereignty and jurisdiction.”

The vote also gave backing to the suspension of data sharing deals between the two continents, should the European Commission take action against its U.S. ally.

Thursday’s plenary session highlights the strained diplomatic relationship between the EU and the U.S. over recent revelations that came to light in June.

The U.S. government faces continued criticism and pressure from its international allies following news that its intelligence agencies spied on foreign nationals under its so-called PRISM program. The U.K. government was also embroiled in the NSA spying saga, after its signals intelligence intercepting station GCHQ tapped submarine fiber optic cables under its own secret program, code named Tempora.
To read complete article click here http://www.zdnet.com/eu-to-vote-to-suspend-u-s-data-sharing-agreements-passenger-records-amid-nsa-spying-scandal-7000017635/
Republished with permission from: Global Research

Gold And Silver – It Is Silver Sending A Message.

by Michael Noonan
When the markets “speak,” we “listen.”  For all of the non-stop bullish “news” about the
unprecedented demand, more for gold than silver, and all of the talk about how useless
the COMEX paper market is, it has been the paper market that the forces of supply and
demand have been heeding.  If it were otherwise, the unprecedented demand for gold
would have the price of gold higher than the bogus paper market.  Yet, that has not been
the case.
When will this bear market in PMs turn around?  When it does, and not a moment before.
This is not some flip answer, it just happens to be the way all bear markets end: when they
do.  We have seen calls for a turnaround for several weeks now, none of which have been
even close.
If you want to make rabbit stew, first, you have to catch the rabbit.
First, lets’ see some concrete signs that a bottom is in before the regurgitation of “Gold is
going to $10,000!” starts showing up in a host of new articles pandering for attention.  It
sure did not work for the previous ones.
The best way is to decide for yourself.  Anyone can read a chart, [just not necessarily well],
so let us go to the most reliable source, the market, and see what the prices of gold and
silver  have to say about what everyone else has been saying about them.  People have been
known to exaggerate, even lie in their “opinions,” but the market never does either.  It just
is.
The issue we have with gold is a lack of an immediately identifiable support area.  There is
support, a little lower, and for that reason, we do not see a strong message coming from
gold, just yet.  On the other hand, [never take anything for granted in the markets], the
fact that price is holding above obvious support is an indication of underlying strength.  IF
that is the case, we still need to see some concrete sign of stopping activity before price can
turn around.

We show some potential support resting under current the price.  Silver, unlike gold, is
already at an area of support.  We will get to that, shortly.

The reminder about the importance of how a wide-range bar usually contains future price
activity is shown to keep it fresh in your mind when you see it again in the future.  If you
pay attention to charts, you will definitely see this pattern repeat over and over.
As we did these charts, in order as presented, after seeing the daily silver chart, you can
come back and revisit this one with a different “eye” for its content.  The difference
between gold and silver was the synergy in all the time frames in silver, not so for gold.


It is a great example of reality is always there to be seen, but sometimes we fail to see it.
The truth is often under the brightest light, while people look elsewhere for a “hidden”
message.

Here is silver on the monthly, already into an identifiable area of support.  We should be
looking closely for some form of stopping action, telling us price may stop going down.

Last week’s bar stands out as a red flag for its price and volume.   The same bar in gold was
too similar to one that had already failed, so it could not be viewed in a more important
vein as this one.  We give a more detailed analysis on smart money and high volume
activity on the daily chart, below.  Suffice it to say that what is true on the daily is also true
for the weekly.  It is just more visible and easier to explain with more bar examples.
When you understand the explanation given on the daily, come back and look at this one
again so you increase your discerning eye more when it may seem less is apparent.

Finally!  The explanations on the chart as to why silver is sending a message.  What needs
to be understood is that there is no confirmation that a bottom is in.  Before a trend can
turn, it must stop going down. 
No one can definitively say the trend has stopped going down, and even when it does, then
we must deal with how long it may take to reverse.  That can take many more months, or
a year or two.  It could turn around very quickly, but we cannot know the odds for that
event, were it to occur.  What we do, in the interim, is prepare!  If this happens, then do
that.
It never pays to buy the first rally after a bear market ends.  There is usually a form of
retesting of the lows before a market can begin to move higher.  This is the first time we
have talked about specifically preparing for a possible change in trend, at least from a
pragmatic perspective.  Sentiment for a change has been long-standing, [but of no avail.]
Keep accumulating physical gold and silver, a pragmatic stance we have advocated during
the entire market decline, but for a different purpose.  We cannot say the turnaround for
gold and silver is “rabbit stew” ready, just yet.  If the end is near, there will be many more
signs.  The market never lies.

Read more at http://investmentwatchblog.com/gold-and-silver-it-is-silver-sending-a-message/#jyWXkSbClv4JDwqX.99

Economic Bizarro World: Persistently High Unemployment And Skyrocketing Bond Yields Are Good?

Source: Economic Collapse

The mainstream media is heralding today’s “fantastic” employment numbers as evidence that the U.S. economy is steadily recovering.  But is that really true?  The number of jobs created in June was just a little bit more than what is required to keep up with population growth, and the official unemployment rate remained at 7.6 percent.  And if you look deeper in the numbers, they don’t look very good at all.  The percentage of low paying part-time jobs in the economy continues to rise, the number of full-time jobs actually decreased and the U-6 unemployment number jumped from 13.8% in May to 14.3% in June.  That is a stunning increase.  And if the labor participation rate in this country was at the level it was at prior to the last recession, the official unemployment rate would be sitting at 11.1%.  But according to the mainstream media, all of this is wonderful news.  It is like we are in some sort of economic bizarro world where bad is good and down is up.
When the jobs numbers were released on Friday, Business Insiderbreathlessly declared that it “was jobs day in America, and America crushed expectations.”
USA Today ran an article on the jobs numbers with the following headline: “First Take: As job gains grow, optimism rises“.
But should we really be celebrating?
Posted below is a chart that shows the percentage of working age Americans with a job since the beginning of the year 2000.  This chartdoes include the jobs numbers that were released on Friday…

Can you see a “recovery” in there somewhere?
Am I missing something?
Let me look again.  This time I will squint really hard.
Nope – I still can’t see a recovery.
For three and a half years we have been stuck in a range between 58 percent and 59 percent.  We are way, way below where we were before the recession.
So can we please not even begin to use the word “recovery” until we at least get above the 59 percent level?
And most of the jobs that are being created are of very poor quality.  As I mentioned above, the figures show that the number of full-time jobs actually decreased last month.  And as Zero Hedge pointed out, manufacturing employment has actually declined for four months in a row…

Even as the manufacturing jobs continue to collapse, posting their fourth consecutive monthly drop in June to 11.964 million jobs, minimum wage waiters and bartenders have never been happier. In June Restaurant and Bar employees just hit a new all time high of 10,339,800 workers, increasing by a whopping 51,700 in one month.

Things are pretty good in America right now if you want to flip burgers or wait tables.  But if you want a good job that you can support a family with, things are getting even worse.
Meanwhile, bond yields soaring into the stratosphere.
The yield on 10 year U.S. Treasuries absolutely exploded today.  It opened at 2.50% and closed at 2.71%.  When I saw what had happened I could hardly believe it.
If bond yields continue to climb like this, it is going to cause some massive problems in the financial markets.  The following is from an article by John Rubino…

A few things to look for: recalculations of the deficit in light of spiking interest costs, comparisons of US and Japanese yields and speculation about what this means for Japanese rates — followed by dire analyses of Japan’s future borrowing costs — and last but not least, a growing concern for the hundreds of trillions of dollars of interest rate derivatives that now have one counterparty deeply in the red.

Most Americans don’t think too much about bond yields, but if they keep spiking it is going to dramatically affect every man, woman and child in the entire country.
Yesterday, I described some of the consequences that rapidly rising bond yields would have…

And if interest rates on U.S. Treasury bonds start to rise to rational levels, the U.S. government is going to have to pay more to borrow money, state and local governments are going to have to pay more to borrow money, junk bonds will crash, the market for home mortgages will shrivel up and economic activity in this country will slow down substantially.
Plus, as I am fond of reminding everyone, there is a 441 trillion dollar interest rate derivatives time bomb sitting out there that rapidly rising interest rates could set off.

Never before have we had anything like the gigantic derivatives bubble that is hanging over global financial markets like a sword of Damocles.
As interest rates continue to go up, the derivatives bubble could burst at any time.  When it does, we are going to see financial carnage unlike anything we have ever seen before.
2008 was just the warm up act.  What is coming next is going to be the main event.
But in the economic bizarro world that we are living in, the mainstream media insists that skyrocketing interest rates are nothing to worry about.
Today, USA Today ran a headline that declared the following: “Investors: Don’t panic over bond yield spike“.
And Yahoo actually ran a story entitled “Why higher U.S. yields should cheer investors“.  Needless to say, the arguments in that story are not very convincing.
And in that story they even admit that record amounts of money were being pulled out of bond funds in June…

Capital is already flowing out of low-yielding bonds. PIMCO Total Return fund, the world’s largest bond fund, suffered record outflows of $9.6 billion in June, in a second straight month of withdrawals.

Mutual and exchange-traded bond funds lost a record $79.8 billion in June, according to TrimTabs Investment Research.

The rush for the exits in the bond market is threatening to become an avalanche.
I hope that this is not the beginning of a financial panic.  I hope that we have more time before the next major wave of the economic collapse strikes.
But I certainly cannot guarantee that things will remain stable.  Once fear starts to sweep through financial markets, things can change very, very quickly.

Banks pushing for repeal of credit unions' federal tax exemption

Bankers say the tax break is an unfair advantage for large credit unions. Now they see an opportunity to get rid of it as lawmakers begin work on a major overhaul of the tax code.

 

By Jim Puzzanghera

July 6, 2013

WASHINGTON — Credit unions have been snatching customers from banks amid consumer frustration over rising fees and outrage over Wall Street's role in the financial crisis.

Now banks are fighting back by trying to take away something vital to credit unions — their federal tax exemption.
With fast-growing credit unions posing more formidable competition to banks, industry trade groups are pressing the White House and Congress to end a tax break that dates to the Great Depression.
"Many tax-exempt credit unions have morphed from serving 'people of small means' to become full-service, financially sophisticated institutions," Frank Keating, president of the American Bankers Assn., wrote to President Obama last month.
"The time has come to abolish this exemption," Keating said in the letter, which was part of a blitz that included print and radio ads in the nation's capital.
Bankers long have complained the tax break is an unfair advantage for large credit unions. Now they see an opportunity to get rid of it as lawmakers begin work on a major overhaul of the tax code that is aimed at eliminating many corporate exemptions and lowering the overall tax rate.
The exemption cost $1.6 billion this year in taxes avoided and would rise to $2.2 billion annually in 2018, according to Obama's proposed 2014 budget.
In a 2010 report on tax reform, the President's Economic Recovery Advisory Board said eliminating the exemption would raise $19 billion over 10 years and remove the credit unions' "competitive advantage relative to other financial institutions" in the tax code.
Credit unions said the effort to take away their tax exemption was simply an attempt to stifle competition and remove one of the only checks on bank fees for consumers.
And it comes as some in Congress are pushing to loosen regulations on credit unions so they can expand their business further, including legislation that would lift a cap on the amount of money they can lend to businesses.
The tax exemption is crucial to credit unions, which by law can't raise capital through public stock offerings the way that banks can, said Fred R. Becker Jr., president of the National Assn. of Federal Credit Unions, a trade group with about 3,800 federally chartered members.
"They'll have to convert to banks, which is what the banks want," he said. "Then they'd have, for lack of a better term, a monopoly."
A 2012 economic study commissioned by the trade group found that removing the tax exemption would cost consumers about $10 billion a year through higher fees and interest rates on loans, as well as lower interest rates on savings.
That loss of income would end up costing the federal government $1.5 billion a year in lost tax revenue, the study said.
Under a 1934 law, Congress exempted credit unions from federal income taxes as long as they were nonprofit businesses, organized without capital stock and operated for the benefit of their members.
For decades, most credit unions were small operations, usually serving employees of individual businesses and government agencies.
The industry has grown significantly since the 2008 financial crisis, boosted by outrage over Bank of America's 2011 plan to impose a $5 monthly fee for debit card use.
Bank of America ditched the plan after protests from customers, lawmakers and the White House. But the controversy led consumer groups to launch an effort to get customers of big banks to switch to smaller institutions, such as credit unions. And the effort helped.
By the end of March, credit union membership surged to 95.7 million, an increase of 2.7 million from the start of 2012, according to SNL Financial. The growth in those five quarters was more than in the previous 11 quarters combined, the trade publication said.
Navy Federal Credit Union, the nation's largest, increased its membership 10.2% to 4.3 million in the year ended March 31. according to SNL. Such large credit unions, which have ramped up their advertising to lure new members, worry bankers.

Copyright © 2013, Los Angeles Times

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