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Let's Make The Clawback Risk REAL

• Market-Ticker.org

One of the forum members pointed out something that was obvious to me when I wrote this morning's Ticker, but might have gone over your head.

I want to make absolutely sure it doesn't go over your head because if you're wrong about this you could lose everything in your bank and investment accounts -- every single dime.

FDIC / SIPC insured or not.

Recently Bank of America transferred a bunch of derivatives into their banking arm.  "A bunch" means somewhere around $80 trillion worth.

Now pay very careful attention, because part of the bankruptcy "reform" law in 2005 placed derivative claims in front of depositors in a business failure - including a bank failure.

What JP Morgan is claiming in the MF Global case is that the derivative trade (which is exactly what a "Repo to Maturity" trade is - it's a derivative) is entitled to preference in the case of MF Global over those who had cash there for safekeeping either as a margin deposit or just as free cash as you would hold free cash in a bank.

If a major bank blows up this very same claim, supported in existing Bankruptcy Law with the changes signed by George Bush in 2005, will be used to steal the entirety of your bank account, and if you detect the impending blowup shortly before it happens -- say, 90 days before -- you're still exposed to the risk through clawback!

I have often referenced how that "reform" law in 2005 was used to screw you blind as a consumer, all under the name of the "ownership society" and "responsibility."  The truth is that this "reform" law was a raw example of financial******that was intended to and did assault you, the common consumer in America, for the explicit purpose of benefiting large financial institutions.

 

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