the three little piggy’s build a house on wallstreet
In the early 90′s, in Canada, anyone could become a stock broker. You needed two things – to pass the Canadian Securities Course, and get hired by a firm. The money was good and many anybody’s did it.
Like most educations most of the lessons were learned outside the classroom in the school of experience. But there was an interesting lesson taught in the Canadian Securities Course which goes something like this…
In 1933, in America, during the great depression, the powers that be took a long hard look at the lingering losses of the 1929 stock market crash. The pain of that plummet caused a serious contemplation of the causes – which is exactly what suffering is supposed to do: teach a lesson. The lesson learned went like this: when banks, brokerage houses, and insurance companies live together in the same house one big bad wind can destroy all three with a single breath.
It wasn’t a history lesson at the time. The three little piggy’s were standing in the freshly rubbled ruins of home.
They decided then that it would be best to build separate homes in different neighborhoods – so that in the future, if ever there was one, one piggies problem would remain personal and not be populated by the entire nation. So they made a rule called The Banking Act of 1933 (the Glass / Steagle Act) -A Bank couldn’t own a Brokerage house or an Insurance company.
The three fallen fatties of the financial industry became separated with no custody or visiting rights.
Only sixty-six short years later, in 1999, the Banking Act was reversed by acting out a new act – The Gramm / Leach / Bliley Act (let’s call it the un-banking act). Ironically, it was enacted on November 12th, the day after the day of remembering.
The “un-banking act” undid the divorce, and reunited the family of finances. The flirtations began immediately. Banks began to woo, win, and marry brokerage houses from the finest backgrounds. Not surprisingly the biggest banks won the hands of the biggest brokers. It was a wonderful time for stocks and blondes.
Up north, in Canada, we looked south over the snow banks and saw that the bankers had a new and special idea brewing – and, from a profit point of view, it as an excellent thing to do. So we did it too.
Now we know that the brokers knew the reason for the original divorce of ’33 because the lesson was still being taught in the Canadian Securities Course in the 90′s, the same decade that the un-banking act reunited the silly little piggy’s under one roof. The brokers knew and presumably the bankers knew too, because, in Canada, many banks took their employees to the Canadian Securities Institute to learn about the financial markets.
Did they remember this lesson in America too? Well, in order to break the old rule, a new rule needed to be made. Is it still rule breaking if you make a new rule to break the old rule? Ah, government…
Those who reversed the old rule knew which rule to reverse and where it came from. So presumably that says something about what they knew or pretended not to know.
So that was 1999. The divorce was over. It was spring again.
The new straw house was designed by young architects with a bold new vision of the future: one that looked somewhat identical to the straw house of 1929 – in a nice neighborhood, near a fully stocked lake of fish called investors, shareholders, and depositors.
A few years ago, in 2008, a small storm blew against the house like the big bad wind of ’29. To put the new wind into perspective let’s let the numbers tell the tale – In the crash of 1929 the stock market fell 20% in two days. In the withering months of 2008 it fell 46% in 5 months.
In the 1930′s the market continued to fall and eventually hit the bottom in 1932 for a total loss of 88% from the peak of the summer of 1929.
In 2008 the little pigs were nervous but the great grand-daddy of all piggy’s had an idea – the U.S. central banking system had the power to print a pile of money. The Federal Reserve decided to make over a trillion dollars of new money. The money would be like medicine. Or magic. Or magical medicine. It would be a one thousand billion dollar band-aid on the banking system. To make money the only thing they needed was paper and ink – the printing press was a wonderful invention.
A few months after the medicine was made the stock market went up. The new money flowed like a river into banks and investments and the new house of piggies got a new coat of paint. It looked all shiny and , um … new. The cure had worked. “Abracadabra,” said grand-daddy and the problem disappeared.
The big bank had rescued everyone. A second divorce would not be necessary. The piggy’s were happy but slightly apprehensive. Maybe grand-daddy was being a bit too generous?
Some of the piggies knew something most of the investors didn’t – In 2006 the Federal Reserve Bank of St. Louis issued an interesting report titled, Is the United States Bankrupt?
To make the report easy to understand they had another writer report on that report and give his opinion on the question. “Yes,” he said. The United States is bankrupt.
If a bankrupt country prints a trillion dollars to rescue themselves from financial troubles… and the stock market goes back up, and no one gets divorced, then everything is still perfect in paradise. Right?
As far as the neighbors know there won’t be any homeless piggy’s knocking on the door.
As it turned out the political popes of policy making took a good long look at the big bad wind of 2008 and decided to un-make the un-banking act of 1999. But this was not a complete reversal. There would be no divorce in Act III like the one in Act I. Instead they said there would be wonderful new renovations like “transparency”. The people in the opaque white house living down the lane wanted to see glass walls on the house on wall street to make it safe again.
These words, written on paper, and the wonderful glass walls, had the strength of autumn leaves in a hurricane. They were impressive to read and the well dressed word-makers saw that the sounds were good – they would stop the big bad wind from hurting the little piggy’s again. The words were so wonderful Barrack Obama signed it himself.
Also, secretly, they stood around the printing press and admired that great medicine maker – the true hero who rescued the kingdom.
They seemed not to remember the reason for the divorce of ’33 but they did learn one thing: if you give Act 3 a big name you can make it sound more important than Act I. So they called it the Dodd–Frank Wall Street Reform and Consumer Protection Act.
Wall Street reform AND consumer protection. All in one act.
Who could ask for anything more. It sounds much more powerful than a divorce, doesn’t it?
Of course it does. But if it was written by Shakespeare it wouldn’t have been an act it would have been an entire play. And as we know his best work ended in tragedy.
Once upon a time some fine-looking fellows, of big smiles and warm handshakes, stood around the house of pigs and admired the good building they were building with the newest architects from around the town. It was a swell looking lodging and many dapper and dashing piggies drank beautiful beverages within it.
“I’ll huff and I’ll puff…”
“Didst thou sayst something…?” inquired the first little pig of the second little pig.
“Methinks there be a whispering draft upon our lodgings,” said pig two.
“Tis nothing but early autumn stirring,” said pig one.
So they huddled a little closer to stay warm.
End of ACT III.
“Nothing can now be believed which is seen in a newspaper. Truth itself becomes suspicious by being put into that polluted vehicle. . . . I will add, that the man who never looks into a newspaper is better informed than he who reads them; inasmuch as he who knows nothing is nearer to truth than he whose mind is filled with falsehoods & errors. He who reads nothing will still learn the great facts, and the details are all false.”
- Thomas Jefferson, June 11, 1807.
“Something isn’t right”, said a detective one day, on his day off, as he read the morning news. The strange little man read stories in newspapers then went directly to the source to confront the facts. He read the Dodd – Frank Act of 2010, and researched the history of the Federal Reserve. Why? Because he knew that everyone related to a crime scene is a suspect. The biggest suspect is the one with the biggest motive. And the biggest relative with a motive turned out to be…
As it turned out the story of the three little pigs was not the main story. It was a subplot. But the subplot had become the main plot, given by the media to the masses. Everyone talked about the medicine, and blamed the little piggies for the damage, but the predicament was actually caused by the Big Bad Wind that blew the house down. Who was he? And how did he become so powerful?
He was the main character in the play, the plot device around which all the action was activated, and yet he was able to remain anonymous, and nearly went unnoticed.
Meanwhile in the house of pigs the press had been invited in to have a look around.
Grand-pappy pig was old, and powerful, and had a deep voice. His deep voice said, “look at those three naughty little pigs they need to clean up their house.”
And everyone did look. And facts were reported.
Grand-pappy pig had been using the same words for years – and his finger always pointed in the same direction, and because of this everyone knew that the piggies were to blame. “Look at those naughty piggies they need to clean up their house”, said Grand-pappy pig once or twice a year.
The little pigs looked guilty and confused. They looked at everyone looking at them and they didn’t know what to do. Were they guilty? They seemed to be so. Their fingers were stuffed into the pot full of profit – they had been caught pink handed.
Then Grand-pappy said, “I guess I need to clean up their mess again.” And everyone saw that he was helpful, in addition to being wise.
On a comfortable couch in the corner of a his room as the detective continued to read the Dodd – Frank Act he discovered the motive. In the plot twist of the century the Big Bad Wind turned out to be Grand-pappy pig – the Central Bank we lovingly call the Federal Reserve. Grand-pappy was clever, and wise, and most of all he was motivated by um… a motive.
It turned out that Grand-pappy pig had been turning a profit on problems for nearly a hundred years. And the money was a billion times bigger than little piggy profits.
Grand-pappy pig was the maker and the inventor of most powerful profit-making machine in history – an ordinary printing press. It was shrewdly designed so that each time he used it everyone in the country would owe money to him. It was very simple and clever. It was brilliant and ingenious.
It worked like this:
He owned the printing press which printed the money. Now most printers are paid to make the product. For example: you own your wedding invitations. It would be silly if the printers stilled owned what they printed… Well, Grand-pappy’s genius was that he did the opposite. He owned the product he printed, which in this case was the money.
Then he lent the money to the government at interest. The U.S. Treasury issues bonds. The Federal Reserve buys the bonds and collects the interest from the Treasury. The Treasury department collects the money to pay the interest from the taxpayers.
Why did the printer own the money? It was his paper and his ink. Also, and this is somewhat important – he and his friends persuaded the U.S. Congress to pass a bill which gave him the power to do it. Congress voted 43 to 25 in favor of putting the control of the US currency into the hands of a corporation. 25 sensible men said “no” but on December 23, 1913 Woodrow Wilson signed the Federal Reserve Act.
Grand-pappy made the Federal Reserve Bank into a private corporation – he wasn’t part of the government. He was an independent businessman.
Today, almost all of the debt in the U.S.A. is owed to the printing press, as payment for interest, for a hundred years of printing money. The Big Bad Wind was a storm caused by 1) the size of the debt, and 2) money that has no value. The debt became so big that all income tax collected goes towards repaying it. Coincidentally the 13th amendment to the constitution, which allowed income to be taxed, was written the same year the Federal Reserve was created – 1913.
Grand-pappy created the problem, solved the problem with an illusion, blamed the pigs, and continues to turn the most prodigious profit in the history of profits. He continues to collect interest on the money that he prints.
In 1814 John Taylor wrote a paper called An inquiry into the Principals and Policy of the Government of the United States. Thomas Jefferson read the paper and wrote a letter to Taylor, “…and believing, as I do, that the mass of the citizens is the safest depository of their own rights, and especially, that the evils flowing from the duperies of the people are less injurious than those from the egoism of their agents, I am a friend to that composition of government which has in it the most of this ingredient. And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
In a single paragraph Jefferson predicted the predicament: banks and government are the two most dangerous powers within a nation.
So, for nearly 100 years, Grand-pappy printed the money which destroyed a nation. Then, in 2008, he printed the money which would rescue a nation temporarily. What did Grand-pappy want in exchange for his trillion-dollar gift? He was interested in interest of course but, more than that, he wanted, and was given, more power. In a subtle and well performed dance of distraction, the big bank blamed the little piggies, influenced the writers of the Dodd – Frank Act, and slipped in a clause which gave Grand-pappy the power to regulate the stock brokers.
Isn’t that the exact opposite of a divorce? Yes. Act III, which pretended to reverse Act II, was in fact a more permanent marriage contract. The biggest bank, Grand-pappy’s Federal Reserve, a private corporation, took control of the stock market at the highest level.
Dodd – Frank Act: Section 113:
IN GENERAL.—The Council shall provide written notice… …that a nonbank financial company shall be supervised by the Board of Governors and shall be subject to prudential standards in accordance with this title.
“Wow, that was clever,” said pig one.
“My Grand-pappy is a genius” said pig two proudly. Although his pride had been badly stung by Grand-pappy it was prudent to give praise.
Grand-pappy said he had a good reason to be given this power. The nation needed his help. “Look at those piggies,” he said, “they need to clean up their house.” He had the know-how to help the United States identify financial risks to the United States. So the United States hired the Wolf to guard the pig pen.
Section 112: COUNCIL AUTHORITY.
(a) PURPOSES AND DUTIES OF THE COUNCIL.—
(1) IN GENERAL.—The purposes of the Council are—
(A) to identify risks to the financial stability of the United States that could arise from the material financial/ distress or failure, or ongoing activities, of large, inter-connected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace;
(B) to promote market discipline, by eliminating expectations on the part of shareholders, creditors, and…
(C) to respond to emerging threats to the stability of the United States financial system.
Grand-pappy’s Federal Reserve Bank was taking control of the United States by controlling the entire financial system.
“Say, the Federal Reserve is still a private corporation, isn’t it?” Said pig two…
“…eliminate expectations on the part of shareholders…???” Said pig one, not quite understanding the meaning of it. “Profit is the only thing a shareholder expects, there is no other reason to buy stocks…” he mumbled to himself, not listening to pig two. What does this mean?
“… did the Federal Reserve get involved with insurance companies too?” asked pig two.
Funny you should ask that. The Federal Reserve Bank of New York says,
The Board of Governors of the Federal Reserve, relying on its emergency lending authority granted by Congress… authorized the New York Fed to extend a secured revolving credit facility of up to $85 billion to AIG… and the company agreed to transfer a controlling stake of 79.9 percent of company equity to a trust for the sole benefit of the United States Treasury.
On September 16, 2008, the treasury bought a controlling interest in the largest insurance company in the United States “to preserve the stability of an already fragile U.S. economy and to protect the U.S. taxpayer from the potentially devastating consequences of the company’s disorderly failure.”
“wow!” said pig one proudly, “Grand-pappy created money with a printing press then bought an insurance company with it. He must be the most smartest man in the world.”
“How much does it cost to put ink on paper?” said pig two, as he tried to calculate the profit in his head.
“At least a couple of hundred dollars,” said pig one.
Meanwhile the detective had a strange feeling in his strange little tummy. He wondered if Grand-pappy had of a history of bad behavior? No one becomes that good at deception without a lot of practice. How did he get the power to build a central bank, knock down the house of pigs, and dazzle the gentlemen in congress?
End of Act IV
Currently in production in neighborhoods everywhere…
Want more? A short history of the Federal Reserve and the current state of the United States.
Please watch your step as you exit through the freshly painted rubble, and have a nice day.
To make the report easy to understand they had another writer report on the first report and give his opinion on the question. “Yes,” he said. The United States is bankrupt.