Bear Stearns Deal And The OCC Section 23A, Regulation W Laws

April 5, 2008

Elaine Meinel Supkis

A reader kindly sent me a link to the lawyer's section of the Federal Reserve where we can see the various letters going to and fro within the financial community and the foxes guarding the US hen house. The transactions between the Federal Reserve and the gang of thieves and con artists who run our financial systems are hard reading but if we can tease some threads, we can see the woof and warp of the crooked tapestry of our banking systems. In this case, the nearly total exo-legality of the Bear Stearns take over is lights up a dark landscape of legal mishmash wherein we can see how things evolved badly. This is rough going and all I have is a small mental flashlight so please bear with me as I try to figure this all out.

First, let's go to the Office of the Controller of the Currency, one of the organizations the Federal Reserve and money men like Goldman Sachs are very anxious to fold INTO the Federal Reserve so they can cut out any public input in the banking/financial sector. The OCC is an important target to be shot and killed. It is the agency that charters, regulates, and supervises all national banks. It also supervises the federal branches and agencies of foreign banks.

In regulating national banks, the OCC has the power to:

Examine the banks.

Approve or deny applications for new charters, branches, capital, or other changes in corporate or banking structure.

Take supervisory actions against banks that do not comply with laws and regulations or that otherwise engage in unsound banking practices. The agency can remove officers and directors, negotiate agreements to change banking practices, and issue cease and desist orders as well as civil money penalties.

Issue rules and regulations governing bank investments, lending, and other practices.

To ensure the safety and soundness of the national banking system.

To foster competition by allowing banks to offer new products and services.

To improve the efficiency and effectiveness of OCC supervision, including reducing regulatory burden.

To ensure fair and equal access to financial services for all Americans.

The OCC was launched alongside the Civil War. Like all banking 'reforms' and systems, this is, as always, connected with funding WARS. Not commerce. Wars. Congress needed 'national banks' to issue paper dollars called 'Greenbacks.' The other day, I did an extended story about greenbacks. It pays to always keep in mind, the history of entities we discuss here. This matters a great deal.

To keep the public out of the loop, the OCC was set up to not be funded by Congress but funded by the very same banks it 'regulates'. This wasn't to save taxpayers money or pain but the exact opposite. After the Civil War, the battle over gold and silver was really a battle over who controls the greenback! Congress or the banking cartels. Here is an interesting sentence from the OCC: 'The OCC also receives revenue from its investment income, primarily from U.S. Treasury securities.'

The OCC is also the agency who runs the FDIC insurance.

Whenever I get launched into a new story about something apparently very arcane and difficult, it is like exploring a fog-bound island. First, I circle about, seeking landmarks, sounding the waters to see if there are any concealed rocks. Then I begin to feel out the lay of the land. Suddenly, odd, strange objects are encountered and I go around and around, touching it and trying to feel it out.

In the case of the Bear Stearns buy out, we are looking at a very massive rock. The actual worth of Bear Stearns is meaningless. The fact that it is being used as a TOOL to open a Pandora's box of monetary disasters---this is the real story! When I examine this business, my hairs stand up on my arms just like it does when lightning lurks nearby. My scalp itches. This dangerous thing has to be approached from a different angle than the typical news story. As always, it pays to go to the sources rather than repeat mainstream nostrums of even the analysis of smart people who are also seeking to see into the future.

As I say all the time, to understand the future, we must understand the past! When I was going about inside the innards of the Federal Reserve, I was filled with questions about nearly everything I found there. 'What on earth is THIS?' I asked over and over again. This is why it is so tedious, running in circles around the insides of these labyrinths. Here, by the way, is an Tonoho O'odham design. I grew up partially on their reservation which is where Kitt Peak Observatories were built:

The labyrinth is a good representation for the process of seeking things that are in the dark: it is a way of passing into the underworld and this is where the Gods of Death as well as Wealth, live. And the word 'laby' is Cretan for 'double axe'. This is also all about the dread 'Horns of Dilemma' which are resolved by all things coming together in the center. I harp on this theme for it is the Great Story of the history of money and what is fueling events today and this is the 'short cut' I use to get to the heart of various matters.

To understand what is going on means understanding the labyrinth of our own desires for eternal life and eternal wealth. Which end in death.

Back to the OCC, the agency set up to funnel money into a massive war that killed many humans but also was the agency of freeing many slaves, temporarily. Below is the transcript of a bulletin put out just days before the total meltdown of the entire G7 banking system when Japan's yen suddenly began to rise in value on 7/17/7:

Comptroller of the Currency
Administrator of National Banks
Subject: Regulatory Review Amendments

Description: Proposed Rule

Date: July 12, 2007

TO: Chief Executive Officers of All National Banks, Department and Division Heads, All Examining Personnel, and Other Interested Parties

The Office of the Comptroller of the Currency (OCC) is proposing to revise its rules in order to reduce unnecessary regulatory burden, to update certain rules, and to make certain technical, clarifying, and conforming changes to its regulations. This proposal results from the OCC’s most recent review of its regulations to ensure that they effectively advance its mission to promote the safety and soundness of the national banking system, to ensure that national banks can compete effectively in the financial services marketplace, and to foster fairness and integrity in national banks’ dealings with their customers without imposing regulatory burden unnecessary to the achievement of those objectives. The OCC’s review of regulations is consistent with the Economic Growth and Regulatory Paperwork Reduction Act of 1996.

Specifically, the OCC is proposing amendments to a variety of regulations that would:

(1) provide additional flexibility with respect to certain aspects of national banks’ structure and activities;

(2) streamline procedures required in connection with particular types of changes in structure and the conduct of certain activities;

(3) incorporate into OCC rules interpretive opinions that the OCC has previously published;

(4) harmonize the OCC’s rules with rules issued by other federal agencies that apply to national banks;

(5) eliminate inconsistencies in certain of OCC rules; (6) update OCC rules to reflect recent statutory changes; and

(7) make technical and conforming amendments to OCC rules to improve their clarity and consistency.

Like termites, the structure painfully built over the course of 150 years was rapidly being eaten away by an army of well-heeled termites. The OCC house still stands, barely. But the wrecking crew has now ceased with the inside destruction of the framework. They are now poised to bash the whole pre-Federal Reserve structure down. For it was manhandled into the controls of the Federal government back in 1933 when the entire banking system of the USA collapsed totally. Back then, the Federal Reserve was very new and people were very suspicious of it. It couldn't eat up the OCC and it stood aside as the crash destroyed most of the banking system. But Roosevelt had to have a tool and he took the orphan OCC and made it much stronger. And so many banking regulations were rapidly passed by Congress and they were expressed through the OCC, not the Federal Reserve!

A darker note here: we NEVER hear of the OCC in the news or in public discussions. Ever since the Fed has been working in concert with corrupt officials and Wall Street to kill the OCC, all discussions about banking and money are focused EXCLUSIVELY on the Federal Reserve! Even I fall for this ploy!

But in my sailing around in the dense fog that surrounds the Isle of the Dead, as I carefully walk through the labyrinth, I found the OCC and now focus a great deal on it. As well as other agencies of similar type. All are going to be taken out of public hands and privatized by the Federal Reserve. Which has to be the most dangerous and inept of all our quasi-ruling systems!

From the OCC letter:

Changes to conform the OCC’s regulations – at parts 5 (corporate activities), 23 (leasing), 31 (extensions of credit to insiders and transactions with affiliates), and 32 (lending limits) – to Regulation W issued by the Board of Governors of the Federal Reserve System (Federal Reserve Board)2, which governs transactions between Federal Reserve member banks and their affiliates and implements sections 23A and 23B of the Federal Reserve Act;3

Here is the clue [the word 'clue' is from the Greek myth of Theseus threading his way to the center of the labyrinth and there, he kills the Horns of Dilemma...only to fall on them, himself, when he betrays the priestess who gave him the clue in the first place!]: the business about Bear Stearns and the fake rescue that really is a looting expedition, is in Section 23A, regulation W. The letter posted at the Federal Reserve web site talks a great deal about Section 23A and regulation W.

So let's first look at this letter that was written by lawyers for the Fed as they and JP Morgan, a financial gaming house that is the heart of the foundation of the Federal Reserve system:

Dear Ms. Juhase:

This is in response to the request by JPMorgan Chase & Co. ("JPMC") for (i) an exemption from section 23A of the Federal Reserve "Act and the Board's Regulation WI t hat would permit JPMorgan Chase Bank, National Association ("JPMC Bank"), Columbus, Ohio, to extend credit to affiliates and issue guarantees on behalf o f affiliates, in connection with t he acquisition by JPMC o f The Bear Steams Companies, Inc. ("Bear Steams"), and relief from the Board's risk-based and leverage capital guidelines for bank holding companies 2 in connection with the acquisition by JPMC of Bear Stearns. On March 16, 2008, JPMC entered into an agreement to acquire Bear Stearns.

Exemption from Section 23A and Regulation W

Section 23A and Regulation W limit the aggregate amount of "covered transactions" bet ween a bank and any single affiliate t o 10 percent o f the bank' s capital stock and surplus, and limit the aggregate amount of covered transactions with all affiliates to 20 percent o f the b a n k ' s capital stock and surplus. "Covered transactions" include, among other things, the extension o f credit by a bank to an affiliate and t he issuance by a bank of a guarantee on behalf of an affiliate. In addition, the statute and rule require a bank to secure its extensions o f credit to, and guarantees on behalf of, affiliates with prescribed amounts of collateral.

Section 23A and Regulation W authorize the Board to exempt, at its discretion, a transaction or relationship from the requirements of the statute and the regulation if the Boar d finds the exemption to be in the public interest and consistent with the purposes of section 23A. JPMC has requested that the Board exempt from section 23A and Regulation W, for a period of 18 months, certain covered transactions between JPMC Bank and its affiliates, up to an aggregate of 50 percent of the bank's capital stock and surplus, to facilitate the acquisition by JPMC of Bear Steams.

The Board previously has granted other companies exemptions from section 23A and Regulation W that are similar to the exemption requested by JPMC. The Board has provided temporary exemptions to facilitate the orderly integration of merged companies, 7 has provided exemptions to facilitate internal reorganization transactions, 8 and has provided exemptions for banks that engage in securities financing transactions with their affiliates.

This last paragraph is important. Yes indeed, the Fed has given these exemptions in the past! To BANKS. But JP is a pirate organization that, bless their little hearts, is NOT a bank at all. It is speculative. It is an investment house, not a bank like Citigroup's banks, for example. This is so it won't be REGULATED. What JP wanted was not regulations, it wanted INSURANCE. It wanted to be protected like a bank! It wanted the protections of the OCC that were given to it in the depths of the Great Depression! Yet it still wants to be the entity that takes risks and has virtually no controls over its day to day financial activities!

Because we are seeing the global financial system collapsing, all the outside organizations that wanted less and less controls want to take advantage of the umbrellas the cover banks that follow the rules! This is 'having your cake and eating it too while telling everyone else to let THEM eat cake.'

The Fed legal letter to JP Morgan last week:

The Board has determined to impose several conditions that would help protect JPMC Bank in connection with the exemption request:

This sentence amused me. They are IMPOSING this blessing! Nasty things are impositions. Gifts are goodies. This letter is giving JP Morgan lots and lots of goodies. But they have to lie about this. Or else people will say, 'What the hell?' Heh.

The Fed lawyers continue:

• In the second quarter o f 2008, the exemption would be limited in the aggregate to 50 percent o f JPMC Ba n k ' s capital stock and surplus. The amount o f the exemption woul d then be reduced by one-sixth (that is, 8.33 percent o f the bank' s capital stock and surplus) in each subsequent quarter until the exemption expires after six quarters. For example, in the third quarter o f 2 0 0 8 , the exemption would be limited in the aggregate to 41.67 percent of the bank' s capital stock and surplus.

• The exemption would expire on October 1, 2009.

A year and a half of free fun! No wonder JP Morgan is skipping about, merrily. Like spring lambies in the warm sun, gamboling about with the butterflies! They no longer have to fear a melt down! The Bear Stearns 'sale' is a protection racked cooked up by the Federal Reserve! Imagine if the Fed controls all of Wall Street in addition to messing around with our dying currency! The looting potentials boggle the mind. Of course, the Fed and JP tell us that we must do all this or the whole world will collapse like Valhalla at the end of Götterdämmerung.

I looked up the laws that are about Section 23 and regulation W. It certainly is all about the OCC since the FDIC is part of the OCC:

1000 - FDIC Federal Deposit Insurance Act

SEC. 3. As used in this Act--

(a) DEFINITION OF BANK AND RELATED TERMS.--

(1) BANK.--The term "bank"--

(A) means any national bank, and State bank, and any Federal branch and insured branch; and
(B) includes any former savings association.

(2) STATE BANK.--The term "State bank" means any bank, banking association, trust company, savings bank, industrial bank (or similar depository institution which the Board of Directors finds to be operating substantially in the same manner as an industrial bank), or other banking institution which--

(A) is engaged in the business of receiving deposits, other than trust funds (as defined in this section); and
(B) is incorporated under the laws of any State or which is operating under the Code of Law for the District of Columbia (except a national bank),
including any cooperative bank or other unincorporated bank the deposits of which were insured by the Corporation on the day before the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

(3) STATE.--The term "State" means any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the Northern Mariana Islands.

(4) DISTRICT BANK.--The term "District bank" means any State bank operating under the Code of Law of the District of Columbia.

[Codified to 12 U.S.C. 1813(a)]

[Source: Section 2[3(a)] of the Act of September 21, 1950 (Pub. L. No. 797; 64 Stat. 873), effective September 21, 1950, as amended by section 3(a) of the Act of August 1, 1956 (Pub. L. No. 896; 70 Stat. 908), effective August 1, 1956; section 910(a) of title IX of the Act of December 31, 1970 (Pub. L. No. 91--609; 84 Stat. 1811), effective December 31, 1970; section 103 of title I of the Act of December 26, 1981 (Pub. L. No. 97--110; 95 Stat. 1513), effective December 26, 1981; section 703(a) of title VII of the Act of October 15, 1982 (Pub. L. No. 97--320; 96 Stat. 1538), effective October 15, 1982; and section 204(a) of title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat 190), effective August 9, 1989; section 8(a)(1)(A) of the Act of October 30, 2004 (Pub. L. No. 108-386; 118 Stat. 2231, effective October 30, 2004; section 8(a)(1) of the Act of February 15, 2006 (Pub. L. No. 109--173; 119 Stat. 3610), effective date shall take effect on the day of the merger of the Bank Insurance Fund and the Savings Association Insurance Fund pursuant to the Federal Deposit Insurance Reform Act of 2005; section 123(d) of title I of the Act of October 16, 2006 (Pub. L. No. 109--356; 120 Stat. 2029; section 725(d) of title VII of the Act of October 13, 2006 (Pub. L. No. 109--351; 120 Stat. 2002]

(e) DEFINITIONS RELATING TO NONMEMBER BANKS.--
(1) NATIONAL NONMEMBER BANK.--The term "national nonmember bank" means any national bank which--
(A) is located in any territory of the United States, Puerto Rico, Guam, American Samoa, the Virgin Islands, or the Northern Mariana Islands; and
(B) is not a member of the Federal Reserve System.
(2) STATE NONMEMBER BANK.--The term "State nonmember bank" means any State bank which is not a member of the Federal Reserve System.

[Codified to 12 U.S.C. 1813(e)]

[Source: Section 2[3(e)] of the Act of September 21, 1950 (Pub. L. No. 797; 64 Stat. 874), effective September 21, 1950, as amended by section 3(b) of the Act of August 1, 1956 (Pub. L. No. 896; 70 Stat. 908), effective August 1, 1956; section 910(c) of title IX of the Act of December 31, 1970 (Pub. L. No. 91--609; 84 Stat. 1811), effective December 31, 1970; and section 204(e) of title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat. 191), effective August 9, 1989]

Here is a book that discusses banking and the mysterious Section 23A from a book called 'Federal Bank Holding Company Laws' by Pauline B. Heller [pal of Greenspan] and Melanie L. Fein:

I couldn't find a coherent article about 23A which is no surprise. So I had to photograph this books' pages. The main gist here is, banks were LIMITED. They can't fiddle around with everything on earth. And this irritates them a great deal. When the Fed cleverly put JP Morgan under the protections that limited banks get while letting JP run riot in the financial underworld is a coup. The Fed knows perfectly well that JP Morgan is NOT part of this law universe. They are outlaws! And they wanted this...so they can create money willfully. With no constraints! I suspect they think, so many of these constraints were destroyed by the termites eating up the framework of the OCC, they don't mind being turned into a 'bank'!

This is pure hocus-pocus. This is the army of magicians waving wands I keep talking about. They have to transform JP Morgan into a chimera so it can be covered by laws made for an utterly different situation. And note how, in the last 10 years, Section 23A has been altered and Regulation W has been warped! Let's go look at how this is done:

Here are all the exceptions to the rules similar to the one given to J.P. Morgan:

October 24, 2006 (700 KB PDF)
Letter to John Buchman, General Counsel, E*TRADE Bank, Arlington, Virginia, granting exemptions from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 CFR part 223) in order that (i) the bank's parent company, E*TRADE Financial Corporation, New York, New York, may contribute all its equity interest in E*TRADE Clearing LLC ("Clearing"), also in New York, to the bank; and (ii) Clearing, after it becomes a wholly owned subsidiary of the bank, may continue to make margin loans to customers, the proceeds of which would be transferred to affiliates of the bank.

September 29, 2006 (316 KB PDF)
Letter to Courtney Allison, Wachovia Corporation, Charlotte, North Carolina, granting an exemption from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 CFR Part 223) for certain indemnities made by Wachovia Bank, National Association, on behalf of, and certain extensions of credit made by the bank to, Wachovia Capital Markets, LLC and Wachovia Securities, LLC (affiliates of the bank), in connection with the bank’s securities lending program.

September 29, 2006 (127 KB PDF)
Letter to Robert L. Tortoriello, Esq., clarifying that an investment advisory company (i) would be a principal shareholder of a banking organization for purposes of Regulation O (12 CFR part 215) if it has dispositive or voting power over more than 10 percent of any class of voting securities of the banking organization; and (ii) would control a banking organization for purposes of Regulation O if it had dispositive or voting power over 25 percent or more of any class of voting securities of the banking organization.

August 23, 2006 (27 KB PDF)
Letter to Justin McClinton, Tennessee Department of Financial Institutions, clarifying whether a single member limited liability company (SMLLCs) may maintain a NOW account under Regulation D (12 CFR Part 204).

July 28, 2006 (358 KB PDF)
To John "Buz" Gorman, Esq., reviewing the impact of certain state legislation intended to restrict interstate de novo branching by industrial loan companies on the ability of the Federal banking agencies to approve, under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, applications by out-of-state banks to establish de novo branches in those states.

June 30, 2006 (292 KB PDF)
Letter to Carl Howard, General Counsel, Citigroup Inc., New York, New York, granting an exemption from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 C.F.R. Part 223) in order that its wholly owned subsidiary, Citibank (West) FSB, San Francisco, California, may acquire all the shares of an affiliate, CitiFinancial Mortgage Company, Inc., Irving, Texas.

May 22, 2006 (136 KB PDF)
Letter to Douglas Jones, Acting General Counsel, Federal Deposit Insurance Corporation, clarifying the application of whether and under what circumstances an insider's use of a bank-owned credit card would be deemed an extension of credit by the bank to the insider for purposes of Regulation O (12 CFR part 215).

May 15, 2006 (200 KB PDF)
Letter to David Teitelbaum, Merrill Lynch Bank USA, Salt Lake City, Utah, granting an exemption from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 CFR 223) in order that the bank may acquire certain credit facilities from an affiliate.

May 1, 2006 (170 KB PDF)
Letter to Christina Gattuso, Legg Mason Trust Company, National Association, Baltimore, Maryland, granting an exemption from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 CFR 223) in order that the bank may acquire Legg Mason Investment Counsel from Legg Mason, Inc., Baltimore, Maryland.

December 21, 2007 (166 KB PDF)
Letter to Andres L. Navarette, Esq., Capital One Financial Corporation, McLean, Virginia, granting an exemption from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 C.F.R. Part 223) in order that its wholly owned subsidiary, Capital One, National Association, also in McLean, may acquire all the shares of an affiliate, Capital One Auto Finance, Inc., Plano, Texas.

October 23, 2007 (106 KB PDF)
Letter to Carl Howard, Esq., Citigroup Inc., New York, New York, granting a modification to an exemption from section 23A of the Federal Reserve Act (12 U.S.C. 371c) and Regulation W (12 CFR Part 223) that the Board granted on August 20, 2007; this modification will permit Citibank, N.A., to engage in certain securities financing transactions with its European securities affiliate, Citigroup Global Markets Ltd., London, United Kingdom.

October 12, 2007 (279 KB PDF)
Letter to Jay Levine, The Royal Bank of Scotland plc, Edinburgh, Scotland, granting an exemption from section 23A of the Federal Reserve Act (12 U.S.C. 371c) and Regulation W (12 CFR Part 223) for certain securities financing transactions between the New York, New York, and Greenwich, Connecticut, branches of The Royal Bank of Scotland plc and their U.S. securities affiliate, Greenwich Capital Markets, Inc.

October 11, 2007 (256 KB PDF)
Letter to Alan B. Kaplan, Esq., Barclays Bank PLC, London, United Kingdom, granting an exemption from section 23A of the Federal Reserve Act (12 U.S.C. 371c) and Regulation W (12 CFR Part 223) for certain securities financing transactions between the New York branch of Barclays Bank PLC and its U.S. securities affiliate, Barclays Capital Inc.

September 12, 2007 (98 KB PDF)
Letter to Michael L. Kadish, Esq., Deutsche Bank AG, Frankfurt, Germany, granting an exemption from section 23A of the Federal Reserve Act (12 U.S.C. 371c) and Regulation W (12 CFR Part 223) for certain securities financing transactions between Deutsche Bank AG’s New York branch and its U.S. securities affiliate, Deutsche Bank Securities Inc.

August 20, 2007 (3.4 MB PDF)
Letter to Kathleen A. Juhase, Esq., JPMorgan Chase & Co., New York, New York, granting an exemption from section 23A of the Federal Reserve Act (12 U.S.C. 371c) and Regulation W (12 CFR Part 223) for certain securities financing transactions between JPMorgan Chase, N.A., and its affiliate, J.P.Morgan Securities Inc. LLC.

August 20, 2007 (3.4 MB PDF)
Letter to Patrick S. Antrim, Esq., Bank of America Corporation, Charlotte, North Carolina, granting an exemption from section 23A of the Federal Reserve Act (12 U.S.C. 371c) and Regulation W (12 CFR Part 223) for certain securities financing transactions between Bank of America, N.A., and its affiliate, Banc of America Securities LLC.

August 20, 2007 (3.3 MB PDF)
Letter to Carl Howard, Esq., Citigroup Inc., New York, New York, granting an exemption from section 23A of the Federal Reserve Act (12 U.S.C. 371c) and Regulation W (12 CFR Part 223) for certain securities financing transactions between Citibank, N.A., and its affiliate, Citigroup Global Markets Inc.

June 12, 2007 (1 MB PDF)
Letter to Courtney Allison, Wachovia Corporation, Charlotte, North Carolina, granting an exemption from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 CFR Part 223) for certain covered transactions between Wachovia, National Association and the U.S. broker dealer subsidiaries of Wachovia Corporation (affiliates of the bank), in connection with the bank's securities borrowing transactions.

May 4, 2007 (230 KB PDF)
Letter to Stephen Johnson, Esq., SunTrust Banks, Inc., Atlanta, Georgia, approving acquisition by SunTrust Bank of equity securities under section 9 of the Federal Reserve Act solely for the purpose of hedging the bank's exposure from equity derivative transactions with third parties.

January 23, 2007 (491 KB PDF)
Letter to Patrick Antrim, Bank of America Corporation, Charlotte, North Carolina, granting an exemption from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 CFR Part 223) for certain covered transactions between Bank of America, N.A., and Banc of America Securities (an affiliate of the bank), in connection with the bank's securities lending program.

April 1, 2008 (2.88 MB PDF)
Letter to Kathleen A. Juhase, Esq., JPMorgan Chase & Co. (“JPMC”), New York, New York, (i) granting a temporary exemption from section 23A of the Federal Reserve Act (12 U.S.C. 371c) and the Board’s Regulation W (12 CFR Part 223) for certain covered transactions between JPMorgan Chase Bank, National Association, and its affiliates in connection with JPMC’s acquisition of The Bear Stearns Companies, Inc. (“Bear Stearns”), New York, New York; and (ii) providing JPMC with a transition period to incorporate fully the assets and exposures of Bear Stearns into JPMC for purposes of the Board’s risk-based and leverage capital guidelines for bank holding companies (12 CFR Part 225, Appendices A and D).

March 25, 2008 (3 MB PDF)
Letter to Karen Grandstrand, Esq., Minnwest Corporation, Minnetonka, Minnesota, granting an exemption from section 23A of the Federal Reserve Act and Regulation W (12 U.S.C. 371c and 12 C.F.R. Part 223) in order that (i) its wholly owned subsidiary, Minnwest Bank Metro, Rochester, Minnesota, may acquire all the shares of an affiliate, Minnwest Capital Corporation ("MCC"), also in Minnetonka, and (ii) Minnwest's wholly owned subsidiary Minnwest Bank, Redwood Falls, Minnesota, may purchase from Metro Bank certain lease participations originated by MCC immediately after the transfer of MCC to Minnwest Bank Metro.

Now, this is a long list, isn't it? All of these events were noted in the news. But seeing them one after another in this summary of all the letters churned out by the Fed in the last 2 years is an eye-opener. First, note the dates: there was a small flurry of these sorts of exemptions granted when the housing boom burst. By October, 2006, it was obvious to all sane people that the housing bubble had burst and the great decline had begun. I certainly saw that one coming. As one bank after another got into hot water over this, they needed to cease following the laws of the land. They needed the Fed to step in from the OUTSIDE and decree that Federal Laws set up by the OCC thanks to revisions from the Great Depression, be suspended.

Then there is a long pause. During this time, the Japanese carry trade went totally insane as the yen fell dramatically against the dollar. It was laughably easy to cruise to Japan and stuff bags full of super-cheap loans and then turn around and buy Treasuries and use this as a reserve upon which huge loans for buy-up schemes could be funded! Forget mere housing. They were playing a much bigger, nastier game. From October, 2006 to August, 2007, this new game caused Wall Street to climb steeply. Bonuses for the investment and banking houses poured in like crazy. Record bonuses and pay raises poured down like gold from heaven! This was a very joyous time for the financial houses! They couldn't believe how easy it was to make money. They even said, they didn't need to worry about the housing collapse. That was for chump banks, not them. And they had the 'get out of trouble free' card from the Federal Reserve, just in case!

But then look at the later dates: suddenly, after only one exemption in January, suddenly there is a host of exemptions! In May, there is a blessing for a hedge fund take over. Then, starting on June 12th, the exemption letters begin again, just one outlier exemption. But suddenly, after the Japanese carry trade began to unwind with a vengeance, beginning in mid-August, financial operators who depended on this stupid carry trade suddenly were cut off from the ability to buy endless Treasuries using cheap loans from the Bank of Japan. Now they all came howling to the Federal Reserve, asking, nay, screaming, 'There is BLOOD in the streets!' No more laws or regulations for them! They all needed to be exempt! And the 'get out of bankruptcy free' blizzard of exemptions began.

Now, it has evolved into giving such things to non-banks. And it wasn't JP Morgan that needed this, it was BEAR STEARNS. The paperwork connected with them had to be exempt so JP Morgan could eat Bear Stearns, burp and drop the bones onto the plates of the US taxpayers who get to insure all this lousy paperwork.

I looked at much earlier letters by Federal Reserve lawyers to see if these exemptions were common in the past. They were NOT.

December 19, 1996
Letter to Depository Trust Company concerning the ability under the Glass-Steagall Act of DTC to purchase 50 percent membership interest in International Depository & Clearing LLC, a limited liability company that would be jointly owned with the National Securities Clearing Corporation.

November 4, 1996
To Chase Manhattan Bank concerning the Glass-Steagall implications of a limited liability company engaged in data processing activities whose members will be a wholly-owned operating subsidiary and a software company.

July 11, 1996
To Mr. Shane Hansen concerning the Glass-Steagall implications of two proposals by Old Kent Bank: (a) to join a limited partnership formed by a group of financial institutions involved in the credit card business; and (b) to restructure its mortgage banking activities by transferring a mortgage banking subsidiary from the bank holding company to the bank. The subsidiary, Republic Mortgage Company, has interests in two joint ventures, a general partnership and a limited liability company that engage in originating residential mortgages.

July 11, 1996
To Mr. Michael Greenspan concerning the Glass-Steagall implications of a proposal by Comerica Bank to invest through a subsidiary in a limited liability company to provide credit card payment services to merchants.

Heh. These letters were about exemptions to the Glass-Steagall act! The Fed was happy to assist anyone who wanted to get around the law, to evade the law. So what is the Fed? How about enablers and law breakers? These letters were made unnecessary by the simple tool of eliminating those pesky laws. Since these banks couldn't live within the law, why have it? Isn't that interesting thinking?

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[Mikalai]

Elaine,

Thank you very much for your post. My first reaction was :"WOW". The level at which this companies are able to put themselves above the law (with help of FED) is just mind blowing. I am still trying to put my arms around what is going on and what technical details are of this deal and "hidden" intentions. Is it money, is it power...or they trying really hard to save themself from the situation they got into? Frankly, my head hurts, when I read that much legal documents. :)

Last night I found on one of the forums interesting document:

"1919 m street, nw
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Attorneys at Law
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following firm lawyers for additional
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202.775.4137
egainor@mckeenelson.com
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1919 m street, nw
suite 200
washington, dc 20036
Telephone 202.775.1880
Facsimile 202.775.8586
one battery park plaza
34th floor
new york, ny 10004
Telephone 917.777.4200
Facsimile 917.777.4299

This publication is a service to our clients
and friends. It is designed only to give
general information on the developments
actually covered. It is not a comprehensive
summary of recent developments in the law
and is not intended to treat exhaustively
the subjects covered, provide legal
advice or render a legal opinion. In some
jurisdictions, this publication may constitute
attorney advertising. Please note that past
representations are no guarantee of future
outcomes.

© 2008 McKee Nelson LLP. All rights reserved.
McKee Nelson LLP serves the complex
legal needs of financial institutions and
corporations in the areas of tax, corporate/
finance and litigation/enforcement. The firm
is widely recognized as a leading provider
of legal services to the structured finance/
securitization industry.

The Financial Accounting Standards Board
(“FASB” or the “Board”) voted Wednesday
to take steps to remove the qualifying
special-purpose entity (“QSPE”) concept
from Statement of Financial Accounting
Standards No. 140, Accounting for
Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities (“FAS
140”), and to remove the related scope
exception from FASB Interpretation No. 46,
Consolidation of Variable Interest Entities
(“FIN 46(R)”). Eliminating the QSPE concept
from FAS 140 and the scope exception under
FIN 46(R) will affect the manner in which
issuers of asset-backed securities (“ABS”)
account for securitization transactions. Any
proposed changes to FAS 140 and FIN 46(R)
will be subject to the FASB’s process for
public exposure of standards.

Under FAS 140, a securitization of financial
assets is treated as a sale rather than as
a secured borrowing if the transferor is
considered to have relinquished control over
the transferred assets, and the transferred
assets will not be consolidated on the
transferor’s financial statements if the
securitization trust qualifies as a QSPE. The
FASB voted as part of its short-term project
to address practical accounting issues under
FAS 140 and, in response to a request by
the Chief Accountant of the Securities and
Exchange Commission, to clarify the QSPE
guidance under FAS 140 in time for new
guidance to be effective no later than the
beginning of 2009. The FASB voted to remove
the QSPE concept from FAS 140 because,
members of the Board said, the FASB no
longer believes that the strict limitations on
QSPEs are practical in view of the amount
of discretion that servicers have over the
securitized assets in ABS transactions. Under
FAS 140, the activities of a QSPE must be
significantly limited, must be specified in
the documents under which the QSPE was
created, and may be materially changed only
with the consent of a majority of the nontransferor
holders of the beneficial interests
in the QSPE.

The FASB is expected to release exposure
drafts of proposed revisions to FAS 140
and FIN 46(R) for public comment by the
end of June 2008. The FASB has not yet
addressed the effective date of any proposed
amendments to FAS 140.

Removing the concept of QSPEs from
FAS 140 will eliminate the relevant scope
exception for QSPEs under FIN 46(R). The
interpretive accounting guidance in FIN
46(R) describes the conditions under which
an entity would be required to consolidate
its interest in a securitization trust onto the
entity’s financial statements. At a meeting
next week, the FASB plans to discuss
reconsidering certain aspects of FIN 46(R).
There are several issues that the FASB would
need to address regarding how the risks
and rewards associated with an interest in
securitized assets should be analyzed under
FIN 46(R).

We encourage you to consult a certified
public accountant if you have any questions
on accounting for transferred financial assets
under FAS 140. Please feel free to contact
McKee Nelson LLP if you have any questions
regarding legal aspects of securitization
transactions.

Important Note: This Securitization Alert
is not intended to provide accounting
advice or guidance and is provided for
purely informational purposes.

April 4, 2008
FASB Votes to Eliminate Qualifying Special-Purpose Entities
Securitization Alert
To Clients and Friends of the Firm "

WOW! Does it mean that we might see the end of off-balance sheet games??? I very much hope so.

Ofcourse, they could kick it around for some time, but I think it might be step in right direction.

Again, I appreciate your work and can't wait to read your next column.

Best regards,

Mikalai

[Rosco]

Elaine, to what extent do you think the court system, if any of it even gets that far, would rule against this brazen thievery?

And the Supreme Court, are they also bought off?

[DeVaul]

They are all bought off. The mass replacement of Federal judges began with Reagan and his "Morning in America". That was over 20 years ago. All judges are now partial to big business. It is how they got their jobs.

They may point out "deficiencies" in the system, but they will not send the big players to prison under any circumstances.

[Mikalai]

http://video.google.com/videoplay?docid=-3977861761825160732&hl=en

This is video made today by a man, who runs Ticker Forum (http://www.tickerforum.org)and his blog (http://market-ticker.denninger.net/), where he reveils his opinion about current fin. situation.

I encourage everyone to watch it and hopefully attempt to make a difference....

[Elaine Meinel Supkis]

Denninger is one of a number of 'realists' who has been yelling about the obvious for rather a while.

We are still outnumbered by the happy talkers and the anxious nannies who are fearful of tipping over the ten ton baby carriage.

Thanks for the head's up, Mikalai. I missed that little story, it came over the wires while I was busy snooping around the maze where the Section 23A story was hiding.

[EEngineer]

"I see plans within plans..." (from Dune) For all these guys cleverness, they seem to be operating under the assumption that our banking system is so much larger than that of he rest of the world's that it essentially functions in isolation. That may have been a valid assumption from 1945 until about 1965, but I doubt it's valid now. I have a feeling that just as the jokers think they've managed to turn us all into modern serfs/sharecroppers that they're going to get blindsided by reality.

[EEngineer]

"I see plans within plans..." (from Dune) For all these guys cleverness, they seem to be operating under the assumption that our banking system is so much larger than that of he rest of the world's that it essentially functions in isolation. That may have been a valid assumption from 1945 until about 1965, but I doubt it's valid now. I have a feeling that just as the jokers think they've managed to turn us all into modern serfs/sharecroppers that they're going to get blindsided by reality.

[Tommy Two Tone]

FIN 46R repeal is NOTt a good thing! It was finally enacted in the wake of the Enron Debacle to ensure that Special Purpose Subsidiaries would have to be consolidated onto the balance sheet of the parent if the Parent possesed a "more than nominal" economic interest in the subsidiary. The previous test was simply a % materiality test, ie. if say Dell put up less than 5% of the capital to support a new SPE, then that was considered "less than material", however it lent itself to other control related issues. Say a plant is built that only makes Dell Computers, in Singapore, (Dell puts up 5%, other investors like congressmen, movie moguls, illuminati, etc. put up 95%) for instance, and thus Dell could then use this leverage to control the profits, and keep them offshore. FIN 46R was addressing these abuses, but it looks like now it will be abolished! Oh boy, what a scam! There was an allusion to this in Jonathan Weil's Bloomberg article on April 2nd.

[Tommy Two Tone]

FIN 46R repeal is NOTt a good thing! It was finally enacted in the wake of the Enron Debacle to ensure that Special Purpose Subsidiaries would have to be consolidated onto the balance sheet of the parent if the Parent possesed a "more than nominal" economic interest in the subsidiary. The previous test was simply a % materiality test, ie. if say Dell put up less than 5% of the capital to support a new SPE, then that was considered "less than material", however it lent itself to other control related issues. Say a plant is built that only makes Dell Computers, in Singapore, (Dell puts up 5%, other investors like congressmen, movie moguls, illuminati, etc. put up 95%) for instance, and thus Dell could then use this leverage to control the profits, and keep them offshore. FIN 46R was addressing these abuses, but it looks like now it will be abolished! Oh boy, what a scam! There was an allusion to this in Jonathan Weil's Bloomberg article on April 2nd. The SIV's are QSPEs that were set up by Wall St banks with NO, that's 0.0% ownership! Yes, they did this so that they could merely trade proprietarily with the SIV. Then FINR was interpreted to say "even if you merely 'sponsor' the creation of the SIV, your at risk to having it consolidated back onto your balance sheet. THERE'S the rub! that's why there was an effort to set up the Super SIV. It wouldve taken the sponsorship issue away from the culpable parties. Think of all the proprietary profits that Wall St was able to creat by selling these SIVs full of Mortgage securities, credit cards, etc. There is the Crime, my friends!-IMHO

[Tommy Two Tone]

Here is the link to the Bloomberg Article that I referenced:
http://www.bloomberg.com/apps/news?pid=20601039&sid=avcy8xBzp8zA&refer=columnist_weil

It will be interesting to see what area of FIN 46R the FASB decides to tinker with. I'm sure that it will be a benefit to the banks who set up the SIVs. They will escape the punishment that they deserve, once again! Taxpayers will be screwed, once again!

[Tommy Two Tone]

Follow this link to see the origins of the SIV/bank fiasco:

http://thekomisarscoop.com/2001/10/22/shell-game-citibank-attacks-money-laundering-regulations/

note the date: 10/22/2001- the banks didnt want to stop the money laundering that was going on in the SIVs, and especially , they didnt want the meddling government to begin regulating them. It is interesting that Blackrock, a partially foreign owned firm, was given the nod for the Super SIV, collateral manager, and when that didnt materialize (the super SIV) they were given the nod for the Fed / JPM / Bear Sterns LLC, as the collateral and pricing advisor. It helps to pick folks you can trust!!!!!

[Elaine Meinel Supkis]

Thanks for all the information, Tommy Two Tone!

It is nearly impossible to keep up with all the funny money things going on. As the precarious system they erected collapses, they come up with new schemes or believe the solution is to destroy 50 years of banking laws.

They are outlaws and pirates.

[GK]

Hi Elaine, this website below goes one step deeper than you are proposing to posit that all current 'money' is actually 'nothing' and is a merely the artificial motivation to keep everyone enslaved on the global plantation. People are culled by war, starvation, cancer, malaria etc to keep the value of the value of the existing 'money'.

So they are not outlaws and pirates they are merely the farmers ... of humans.

As a parent I do this all the time. "hey billy, if you pick up your toys I will give you 5 star points!" Daddy, what is a star point worth? Uh, one candy bar? I can revalue star points conversion to what I have available, or cancel them all together at my will.

Once you open you mind to the practice of farming people, everything makes sense. To Muse means to Think and Amusement means to not think. Hence the importance of bread and circus in human farming.

If you click through, you will find the paradox of nuclear; the above ground nuclear testing you fought against is indeed part of the genocide, but also scares people from having unlimited nuclear energy generated locally with a reactor the size and safely of one on the Dakota nuclear submarine, with sailors living a few feet away from it. None of the concrete domed monstrosities to scare people away are needed.

"THIS FREE WEBSITE WILL PROVE CONCLUSIVELY, USING WELL RESEARCHED DOCUMENTS (MANY FROM THE FEDERAL RESERVE SYSTEM AND MEMBER BANKS) THAT YOU MOST CERTAINLY ARE NOT BEING PAID, HAVEN'T BEEN PAID, NOR ARE PAYING FOR ANYTHING SINCE JUNE 24TH, 1968 BY AN ACT OF CONGRESS."

http://www.morpix.biz/dc/

[Dutch]

A darker note here: we NEVER hear of the OCC in the news or in public discussions. Ever since the Fed has been working in concert with corrupt officials and Wall StreetWall-Street-Layoffs to kill the OCC, all discussions about banking and money are focused EXCLUSIVELY on the Federal Reserve! Even I fall for this ploy!

Yes, but the OCC is just another rubber stamp no?

Interesting note on Glass-Steagal. The other banks wanted in on the action that the exemption gave to the few! I guess it was cheaper to just get the law repealed the fight it out in the courts!

Outstanding article by the way! Thank You.

Another note on the Supreme Court, I believe it was FDR who pushed the lifetime appointments.

[Dutch]

Elaine, a note on blackwater, do we not resemble Constantinople during the Byzantine Era?

[Elaine Meinel Supkis]

Yes, politics are certainly Byzantine. And the OCC: if it were a rubber stamp, why did the Federal Reserve have to be the entity that overrides the laws?

No, this was a sneaky, slow coup.

[Ursula Bearskin]

I worked as a contract employee at Bear Stearns and was recently laid off. As you can imagine I loathe JPMorganChase with a passion. I think that JPM-Chase orchestrated the takeover (or rather "take under") with the Fed's connivance. However, the assertion that JPM-Chase would not be subject to commercial banking rules seems incorrect. The CHASE is the important part here - as a depositary institution they are subject to banking regulation. You have also omitted the murky area of the Financial Holding Company legislation of 1999.