Money, Banking and the Federal Reserve

Thomas Jefferson and Andrew Jackson understood "The Monster". But to most Americans today, Federal Reserve is just a name on the dollar bill. They have no idea of what the central bank does to the economy, or to their own economic lives; of how and why it was founded and operates; or of the sound money and banking that could end the statism, inflation, and business cycles that the Fed generates.

Dedicated to Murray N. Rothbard, steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, this extraordinary new film is the clearest, most compelling explanation ever offered of the Fed, and why curbing it must be our first priority.

Alan Greenspan is not, we're told, happy about this 42-minute blockbuster. Watch it, and you'll understand why. This is economics and history as they are meant to be: fascinating, informative, and motivating. This movie could change America.

For Interest Sake !

Chuck Jaffer at Marketwatch reckons that Certificates of deposit don't have much horsepower for today's savers. He is right. Chuck goes on to say the following:

Investing with the expectation of losing money is stupid. Locking your money into an investment that can't keep pace with inflation is the same thing. With the cost of living on the rise and interest rates on the decline, that makes bank certificates of deposit that are more than a 1.5 percentage points behind inflation a dumb idea.

For certificates of deposit, savers who locked their money in before the Fed's recent cuts, are much more likely to be ahead of inflation, and clearly should ride out the length of their term deposit. For investors with new CDs, penalties for early withdrawal could make a pull-out even more costly than simply lagging the rate of inflation.

Before I go any further, I think it is appropriate to first establish what inflation is. The popular belief these days is that inflation is the "Rise in Prices". But, something has to cause prices to rise. In his book "What You Should Know About Inflation", Henry Hazlitt sums up Inflation as follows:

No subject is so much discussed today—or so little understood—as inflation. The politicians in Washington talk of it as if it were some horrible visitation from without, over which they had no control—like a flood, a foreign invasion,or a plague. It is something they are always promising to "fight"—if Congress or the people will only give them the "weapons" or "a strong law" to do the job.

Yet the plain truth is that our political leaders have brought on inflation by their own money and fiscal policies. They are promising to fight with their right hand the conditions brought on with their left.

Inflation, always and everywhere, is primarily caused by an increase in the supply of money and credit. In fact, inflation is the increase in the supply of money and credit.

If you turn to the American College Dictionary, for example, you will find the first definition of inflation given as follows:

"Undue expansion or increase of the currency of a country, esp. by the issuing of paper money not redeemable in specie."

In recent years, however, the term has come to be used in a radically different sense. This is recognized in the second definition given by the American College Dictionary:

"A substantial rise of prices caused by an undue expansion in paper money or bank credit."

Now obviously a rise of prices caused by an expansion of the money supply is not the same thing as the expansion of the money supply itself. A cause or condition is clearly not identical with one of its consequences. The use of the word "inflation" with these two quite different meanings leads to endless confusion.

The word "inflation" originally applied solely to the quantity of money. It meant that the volume of money was inflated, blown up, overextended. It is not mere pedantry to insist that the word should be used only in its original meaning. To use it to mean "a rise in prices" is to deflect attention away from the real cause of inflation and the real cure for it.

Let us see what happens under inflation, and why it happens.

When the supply of money is increased, people have more money to offer for goods. If the supply of goods does not increase—or does not increase as much as the supply of money—then the prices of goods will go up. Each individual dollar becomes less valuable because there are more dollars.

Therefore more of them will be offered against, say, a pair of shoes or a hundred bushels of wheat than before. A "price" is an exchange ratio between a dollar and a unit of goods. When people have more dollars, they value each dollar less. Goods then rise in price, not because goods are scarcer than before, but because dollars are more abundant.

In the old days, governments inflated by clipping and debasing the coinage. Then they found they could inflate cheaper and faster simply by grinding out paper money on a printing press. This is what happened with the French assignats in 1789, and with our own currency during the Revolutionary War. Today the method is a little more indirect.

Our government sells its bonds or other IOU's to the banks. In payment, the banks create "deposits" on their books against which the government can draw. A bank in turn may sell its government IOU's to the Federal Reserve Bank, which pays for them either by creating a deposit credit or having more Federal Reserve notes printed and paying them out. This is how money is manufactured.

The greater part of the "money supply" of this country is represented not by hand-to-hand currency but by bank deposits which are drawn against by checks. Hence when most economists measure our money supply they add demand deposits (and now frequently, also, time deposits) to currency outside of banks to get the total.

The total of money and credit so measured was $63.3 billion at the end of December 1939, and $308.8 billion at the end of December 1963. This increase of 388 per cent in the supply of money is overwhelmingly the reason why wholesale prices rose 138 per cent in the same period.

This is the issue Ron Paul refers to in his speaches. If you didn't understand what he was talking about, you should understand now. This phenomenon is not exclusive to the U.S.A. Any country with a Central Bank will be exposed to this type of monetary inflation.

Furthermore, credit created by banks is another underestimated contributor to inflation. People believe that the money they borrow from a bank is the money of another depositor. That is only 10% true. The fact is that banks are ALLOWED to create money out of thin air. For every $1 deposited with a bank, they can create another $9 to lend to other people. This "legally fraudulant" practice is better known as "fractional reserve banking". It is also the reason why banks are tinkering on the brink of collapse. If you want more information, read The Economic Incompetence of Socialism.


Getting back to ol' Chuck's article, he continues to say that:

Clearly, certificates of deposit are not money losers. No matter how low the payout, they are better than stuffing money in a mattress, and they provide a safe haven -- with coverage from the Federal Deposit Insurance Corp. -- for investors who are skittish about the market.

But anyone turning away from market risk could be giving a big wet kiss to purchasing-power risk -- the chance that their money grows more slowly than the rate of inflation -- and there is little doubt that the majority of people investing in CDs now fall into that category. For proof, look no further than the numbers.

I have a problem with this statement. If you deduct the 2007 CPI value of 4.1% from whatever yield you are receiving now on your CD, you have a problem. Your answer is hovering close to zero. Your problem becomes even bigger if you believe CPI to be 4.1% as the government claims it to be. Shadow Stats estimates annual M3 (broad money supply growth) at around the 15% level. That is why you can't figure how CPI can be at 4.1% when you see the price of goods around you rising at a higher rate. I say CDs are money losers.

I also believe The Fed is well aware of this. Dropping rates will eventually discourage people to save. The Fed wants you out there spending, stimulating the economy with those worthless Dollars. It is not interested in you parking your savings in some CD account.

Still don't understand the consequence of inflation? Henry Hazlitt further says:

Inflation, to sum up, is the increase in the volume of money and bank credit in relation to the volume of goods. It is harmful because:

• It depreciates the value of the monetary unit,
• Raises everybody's cost of living,
• Imposes what is in effect a tax on the poorest (without exemptions) at as high a rate as the tax on the richest,
• Wipes out the value of past savings,
• Discourages future savings,
• Redistributes wealth and income wantonly,
• Encourages and rewards speculation and gambling at the expense of thrift and work,
• Undermines confidence in the justice of a free enterprise system,
• Corrupts public and private morals and
• Encourages malinvestment by entrepreneurs.

I don't know. Chuck leaves me with the impression that he is marketing CDs on behalf of the banks in order to help them build up reserves. :-)

My personal investment/savings strategy: Meet or beat the annual growth of M3

The Economic Incompetence of Socialism

Gordon Brown's reputation for economic competence has been dealt a severe blow as £100 billion of taxpayers' money used to shore up Northern Rock was added to the national debt.

The Treasury has broken one of its jealously guarded borrowing rules after the National Statistician ordered Alistair Darling, the Chancellor, to put the stricken bank's liabilities on the Government's books.

The ONS said it was classifying Northern Rock as a public corporation

The total amount of public money involved in rescuing Northern Rock is the equivalent of saddling every family in Britain with £3,000 of debt.

It means the national debt will rise as high as 45 per cent of gross domestic product, well above the limit set by Mr Brown in his sustainable investment rule when he was Chancellor.

The Conservatives said Labour's claim to economic competence had been "blown to pieces".

George Osborne, the shadow chancellor, said: "Gordon Brown has staked his reputation for competence on meeting his own fiscal rules. Those rules have been blown to pieces as a result of his economic incompetence. Gordon Brown has effectively saddled every taxpayer with a second mortgage as a result of his mishandling of the Northern Rock crisis."

Read the rest

FMM Comment: The following comment is also made in the article:

"However, when historians look back at the Northern Rock saga the broader question of how the Government allowed this to happen will be more important than whether one borrowing rule was broken."

How the British Government allowed this to happen is an easy answer. Any country with a Central Bank allows this to happen. It's called fractional reserve banking or the money-multiplier effect.

If you have never heard of these terms, read part 1 and 2 of how this system works.

The following is an excerpt from an article, written in MARCH 1991, by the late Murray Rothbard.

"A fascinating phenomenon appeared in these modern as well as the older bank runs: when one unsound" bank was subjected to a fatal run, this had a domino effect on all the other banks in the area, so that they were brought low and annihilated by bank runs. As a befuddled Paul Samuelson, Mr. Establisment Economics, admitted to the Wall Street Journal after this recent bout, "I didn't think I'd live to see again the day when there are actually bank runs. And when good banks have runs on them because some unlucky and bad banks fail . . . . we're back in a time warp."

A time warp indeed: just as the fall of Communism in Eastern Europe has put us back to 1945 or even 1914, banks are once again at risk.

What is the reason for this crisis? We all know that the real estate collapse is bringing down the value of bank assets. But there is no "run" on real estate. Values simply fall, which is hardly the same thing as everyone failing and going insolvent. Even if bank loans are faulty and asset values come down, there is no need on that ground for all banks in a region to fail.

Put more pointedly, why does this domino process affect only banks, and not real estate, publishing, oil, or any other industry that may get into trouble? Why are what Samuelson and other economists call "good" banks so all-fired vulnerable, and then in what sense are they really "good"?

The answer is that the "bad" banks are vulnerable to the familiar charges: they made reckless loans, or they overinvested in Brazilian bonds, or their managers were crooks. In any case, their poor loans put their assets into shaky shape or made them actually insolvent. The "good" banks committed none of these sins; their loans were sensible. And yet, they too, can fall to a run almost as readily as the bad banks. Clearly, the "good" banks are in reality only slightly less unsound than the bad ones.

There therefore must be something about all banks--commercial, savings, S&L, and credit union--which make them inherently unsound. And that something is very simple although almost never mentioned: fractional-reserve banking. All these forms of banks issue deposits that are contractually redeemable at par upon the demand of the depositor. Only if all the deposits were backed 100% by cash at all times (or, what is the equivalent nowadays, by a demand deposit of the bank at the Fed which is redeemable in cash on demand) can the banks fulfill these contractual obligations.

Instead of this sound, noninflationary policy of 100% reserves, all of these banks are both allowed and encouraged by government policy to keep reserves that are only a fraction of their deposits, ranging from 10% for commercial banks to only a couple of percent for the other banking forms. This means that commercial banks inflate the money supply tenfold over their reserves a policy that results in our system of permanent inflation, periodic boom-bust cycles, and bank runs when the public begins to realize the inherent insolvency of the entire banking system.

That is why, unlike any other industry, the continued existence of the banking system rests so heavily on "public confidence," and why the Establishment feels it has to issue statements that it would have to admit privately were bald lies. It is also why economists and financial writers from all parts of the ideological spectrum rushed to say that the FDIC "had to" bail out all the depositors of the Bank of New England, not just those who were "insured" up to $100,000 per deposit account. The FDIC had to perform this bailout, everyone said, because "otherwise the financial system would collapse." That is, everyone would find out that the entire fractional-reserve system is held together by lies and smoke and mirrors, that is, by an Establishment con."

You can read the full article here

Credit Crisis: Precursor of Great Inflation

The so-called "credit crisis" is gaining momentum. Investors increasingly question the solidity of the banking system, as evidenced by banks' tumbling stock prices and rising funding costs. With bank credit supply expected to tighten, the profit outlook for the corporate sector, which has benefited greatly from "easy credit" conditions, deteriorates, pushing firms' market valuations lower. In fact, peoples' optimism has given way to fears of job losses and recession on a global scale.

The obsession with a policy of lowering the interest rate is rooted in a deep-seated ideological aversion against the interest rate. It is a destructive ideology, in particular if the government is in charge of the money supply. Because then the government central bank will lower the interest rate to whatever is deemed appropriate from the viewpoint of the government, pressure groups, and vested interest. FULL ARTICLE

Northern Rock Nationalised?

Gordon Brown has been dealt another humiliating blow in his efforts to avoid nationalising Northern Rock after the Office for National Statistics announced it is treating the stricken bank as a 'public financial corporation'.

The Prime Minister is desperate to find a private buyer for the Rock to quickly recoup the £55billion in taxpayer-funded loans and guarantees which are currently keeping it afloat.

Nationalisation would mean saddling the taxpayer with the multi-billion pound loan arrangement for years and possibly decades, and 140,000 small shareholders would see the value of their holdings wiped out.

The last time the government was forced to take over a failing company was in 2001, when it put Railtrack into administration and faced years of legal action by shareholders.

Today the government-funded Office for National Statistics (ONS) said it had reclassified Northern Rock for statistical purposes, switching it from the private to the public sector.

Read the rest

The Real Scandal

HOW THE FEDS INVITED THE MORTGAGE MESS

PERHAPS the greatest scandal of the mort gage crisis is that it is a direct result of an intentional loosening of underwriting standards - done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults.

At the crisis' core are loans that were made with virtually nonexistent underwriting standards - no verification of income or assets; little consideration of the applicant's ability to make payments; no down payment.

Most people instinctively understand that such loans are likely to be unsound. But how did the heavily-regulated banking industry end up able to engage in such foolishness?

From the current hand-wringing, you'd think that the banks came up with the idea of looser underwriting standards on their own, with regulators just asleep on the job. In fact, it was the regulators who relaxed these standards - at the behest of community groups and "progressive" political forces.

Read the rest

Pushing on a String?

WHAT THE FED GIVETH, the banks taketh away.

Just days after the U.S. central bank completed its unprecedented 125-basis point easing in its key policy rates, its quarterly survey of bank lending officers showed they had become much more stringent in their extension of credit.

That's key because people and businesses don't borrow from the Federal Reserve, so how much credit the central bank provides, and at what price, affects the private economy only indirectly. It takes a banker or other lender to make that loan to pay for a house or a piece of capital equipment. Indeed, the Fed acknowledged as much when it slashed rates last week, noting that financial conditions had tightenened.

Even as the Fed has made the raw material for those loans cheaper, bank lending officers indicate a far warier attitude toward making new loans, especially -- surprise! -- "nontraditional mortgages." Some 85% of loan officers responding to the quarterly survey they tightened lending standards for this category, which includes subprime.

Read the Rest


FMM Comment: My post yesterday, The Big Credit Squeeze, also refers

The Big Credit Squeeze

WASHINGTON (MarketWatch) - Banks are putting a stranglehold on credit, the Federal Reserve reported Monday.

Banks are raising their credit standards for mortgages, consumer loans and commercial real estate loans at a pace never seen in the 17-year history of the Fed's quarterly survey of senior bank loan officers, the Fed said.

Plain-vanilla business loans were also much harder to obtain, the Fed said.

Banks expect more delinquencies and charge offs for most types of loans to consumers and businesses, the survey said. Banks said they were tightening their lending standards in response to weaker economy, reduced tolerance of risk, and decreased liquidity in secondary markets.

The survey backs up the Federal Open Market Committee's comments last week that credit conditions had tightened considerably, a factor that led to the FOMC to slash interest rates by an unprecedented 125 basis points in two weeks.

Read The Rest


FMM Comment: Three things are happening here.

1. Banks are hoarding cash because Bank Reserves Go Negative
2. People can't or don't want to borrow
3. Banks can't or don't want to lend

Something the Fed can NOT do is force people to borrow. It can only sweeten the deal with low rates. So, if you are struggling to either inhale or exhale, you are suffocating, like the credit markets are doing now. It is just a matter of time, unless some "miracle" happens, before the credit market will turn blue in the face and collapse. And that, is called Deflation.

Axa axes withdrawels

Life and pension firm Axa has barred redemptions from its Life Property and Pension Property funds for up to six months in a bid stop panic selling.

AXA has written to all its customers who are invested in these funds and their advisers. The decision will impact upon some 100,000 private investors.

Certain transactions will not be affected by the deferral, including regular withdrawals, death claims and payment of pension benefits on retirement.

Axa is the latest in a growing list of firms to take such action to restrict access to their assets to prevent a Northern Rock-style run on their resources. There is now around £8bn of investor cash locked up in property funds.

Read the rest

A boiled Egg is hard to beat

Reuters reports that the Web bank Egg withdraws cards from riskier customers. The Citigroup owned bank, following a risk review, will withdraw credit cards from 161,000 of their customers.

The Credit Card Time Bomb Is Ticking Away

Cash strapped consumers are increasingly turning to charge cards and home equity lines to support consumption. Some Debt Trends Are Good. This Isn’t One of Them.

American credit card debt is growing at the fastest rate in years, a fact that may signal coming trouble for the banks that issue them.

The Federal Reserve reported this week that the amount of revolving consumer credit that is outstanding hit $937.5 billion in November, seasonally adjusted, up 7.4 percent from a year earlier. The annual growth rate has now been over 7 percent for three months running, the first such stretch since 2001, when a recession was driving up borrowing by hard-pressed consumers.

Expect more than a typical recession

SEATTLE (MarketWatch) -- Call this the perfect financial storm or what you will; Wall Street has made fools of financial institutions around the world with their CMOs, CDOs, and greedy boo-boos.

At least they didn't lose as much as their customers. The stock market is in distress, bond insurers are looking for a $200 billion bailout, junk-bond markets are at risk of further losses and life-, home- and auto insurers' risk has not yet been fully assessed.

We need real ready-to-go financial leadership and we need it now. Tell the presidential candidates, Congress and economists to stay home. We need regulators with clear priorities.
Former Federal Reserve Chairman Paul Volcker, former FDIC Chairman Bill Isaacs and anyone they trust would be good choices. They beat inflation and presided over the savings and loan cleanup. Tell Ben Bernanke to go home.

As for you personally, it's every person for themselves and their family. Study the charts: This is a bear market.

READ THE REST

MBIA credit rating fear

Shares in MBIA, the world's biggest bond insurer, tumbled after reporting its largest-ever quarterly loss and admitting it's considering how to raise new capital.

Late yesterday the company reported a loss of $2.3bn for the last three months of 2007. MBIA, which together with other bond insurers guarantees $2.4 trillion of debt, is scrambling to keep hold of its top credit rating. The loss of the rating would threaten the ratings of a further $652bn of securities.

Analysts reckon that fears that MBIA and Ambac will lose their ratings contributed to the volatilty in stock markets last week.

The high-profile banking analyst who triggered the resignation of Citigroup chairman Charles "Chuck" Prince is predicting investment banks will need to take further write-downs of $40bn (£20bn) to $70bn as a result of the current crisis in the bond insurance market.

READ THE REST

Update: MBIA shares rise; bond insurer highlights liquidity

Also note the Ripple Impact of $534 Billion Debt Downgrade

Meredith Whitney fears $70bn carnage on monoliners

The high-profile banking analyst who triggered the resignation of Citigroup chairman Charles "Chuck" Prince is predicting investment banks will need to take further write-downs of $40bn (£20bn) to $70bn as a result of the current crisis in the bond insurance market.

READ THE REST

Bank Reserves Go Negative

By Mike "Mish" Shedlock

I have been watching a chart of Borrowed Bank Reserves for several weeks. The action is unprecedented.

READ THE REST

UBS, BNP Paribas reveal fresh hits from credit crisis

LONDON (MarketWatch) -- Two of Europe's largest banks revealed fresh problems stemming from the U.S. housing downturn Wednesday. Swiss banking giant UBS extended its latest write-down to $14 billion and France's BNP Paribas said its quarterly profit will slump over 40%.

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What You Should Know About Inflation

I have added "What You Should Know About Inflation" by Henry Hazlitt to the list of Educational Economic E-Books, which you can download in PDF format.

Just right-click on the link and "Save Target As..."

A quick overview of the book and what it's about:

The book's title—What You Should Know About Inflation—only hints at the extent of the issues that Hazlitt addresses. He presents the Austrian theory of money in the clearest possible terms, and contrasts it with the fallacies of government management. He takes on not only the Keynesians but also the monetarists, as well as anyone who believes that government debt accumulation and manipulation of interest rates are harmless.


So this book is about far more than inflation. He touches on a wide variety of macroeconomic topics, any area of economic policy that is related to the monetary regime, including budget and trade issues, as well has the economic history of inflation.


Neither does he neglect the moral cost of inflation:


It is not merely that inflation breeds dishonesty in a nation. Inflation is itself a dishonest act on the part of government, and sets the example for private citizens. When modern governments inflate by increasing the paper-money supply, directly or indirectly, they do in principle what kings once did when they clipped coins. Diluting the money supply with paper is the moral equivalent of diluting the milk supply with water. Notwithstanding all the pious pretenses of governments that inflation is some evil visitation from without, inflation is practically always the result of deliberate governmental policy.


Particularly interesting is the final section of the book in which Hazlitt critiques various proposals for monetary reform and then presents his view.


What is Hazlitt's own idea for monetary reform? He wants competitive monies, which he believes will be based in precious metal. He doesn't demand that governments get out of the monetary business altogether but merely that government permit everyone to choose to use any money and make any form of contract.


Hazlitt lays out a scenario that he believes will lead to a 100 percent gold standard rooted in private coinage. In effect, he argues that private markets can do for money what private services have done to a whole host of government ones: outcompete and displace them. It is a challenging thesis, particularly because it doesn't depend on any reform other than freeing the market.

• What Inflation is
• Some Qualifications
• Some Popular Fallacies
• A Twenty-Year Record
• False Remedy: Price Fixing
• The Cure for Inflation
• Inflation Has Two Faces
• What 'Monetary Management' Means
• Gold Goes With Inflation
• In Dispraise of PAper
• The Cure for Inflation
• Inflation and High Costs
• Is Inflation a Blessing?
• Why Return to Gold
• Gold Means Good Faith
• What Price for Gold?
• The Dollar-Gold Ratio
• Lessons of the Greenbacks
• The Black Market Test
• How to Return to Gold
• Some Errors of Inflationists
• Selective Credit Control
• Must We Ration Credit?
• Money and Goods
• The Great Swindle
• Easy Money = Inflation
• Cost-Push Inflation?
• Contradictory Goals
• Administered Inflation
• Easy Money has an End
• Can Inflation Merely Creep?
• How to Wipe Out Debt
• The Cost-Price Squeeze
• The Employment Act of 1946
• Inflate? Or Adjust?
• Deficits vs. Jobs
• Why Cheap Money Fails
• How to Control Credit
• Who Makes Inflation?
• Inflation as a Policy
• The Open Conspiracy
• How the Spiral Spins
• Inflation vs. Morality
• How Can You Beat Inflation?
• The ABC of Inflation

You can also purchase the paperback version here.

Enjoy!!!

The Crash of the Bank of United States

By Benjamin M. Anderson*

By the fourth quarter of 1930 the trouble with the Bank of United States gave occasion to grave concern.

The Bank of United States was a bank which ought never to have existed, and which certainly ought never to have had the name it had. One leading banker of New York went personally to Albany to protest against the giving of such a name to that bank or to any other bank, and was told that there was a political debt to pay.

In the period 1924 to 1929, with excess reserves and rapid bank expansion, it was easy for plungers and speculators to grow rapidly. There was a heavy discount on sound banking, and a high premium on reckless plunging. One watched it with apprehension, afraid not merely that bankers would lose their judgment but also that in many cases moral standards would crack. In many cases judgment went bad, and in more cases traditional practices, sound and tested, turned out to be bad practices in such an abnormal money markets as then existed. But the great majority of American bankers kept their integrity and tried to adhere to established and approved banking practices. However, it was an era in which the bold speculator and promoter could gain ground rapidly at the expense of the conservative banker, and it was a period in which departures from convention and approved banking practices would seem to be brilliant strokes of genius ― while the new era lasted.

The Bank of United States grew very rapidly down to 1929. The name itself meant, as it was designed to mean, to many of the ignorant people of Europe, that this was the national bank, the state bank, the official bank of the United States. Deposits came to it from a great many of those people and from a great many of the ignorant poor on the East Side of New York. And a great deal of business was brought to it, too, by men engaging in speculative activities who could get the desired accommodation from this bank which other banks of New York would not give.

Loans against mortgages were generally looked upon at askance by great New York banks. The first principle of commercial banking is to know “the difference between a bill of exchange and a mortgage”. Second mortgages and third mortgages were notoriously improper documents in a bank’s portfolio or as a collateral to its loans. But the Bank of United States went in heavily for these. It had an affiliate also ― the Bankus Corporation. This was engaged in many yet more questionable transactions, including manipulation of the stock of the bank and loans against the stock of the bank. In addition to the utterly unsound banking practices, there were definitely criminal acts for which the head of the bank subsequently went to prison ― not unaccompanied.

READ THE REST