Full story here. From economist Henry CK Liu at Asia Times. This is part 3 of a series of articles on the bandaids being applied to the iceberg sized hole in our economy.
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“The stress test for banks in the United States in April, with the results released this month, was designed to ensure that these banks have sufficient capital to withstand worst-case scenarios in an economic contraction.
Ten months earlier, on July 16, 2008, and a full year after the global credit crunch had imploded in July 2007, the federal banking and thrift agencies (the board of governors of the Federal Reserve System; the Federal Deposit Insurance Corporation; the Office of the Comptroller of the Currency; and the Office of Thrift Supervision) had issued a final guidance outlining the supervisory review process for the banking institutions that implement the new advanced capital adequacy framework known as Basel II, which establishes an international standard for bank capital requirements.
Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision of the Bank of International Settlements (BIS). [ed. - if you really want to get hyper about this, I've seen sources that say that BIS was Hitler's bank during the war and currently exists as a soverign entity. The Swiss government has no legal jurisdiction over the bank and no government agency or authority has oversight over its operations.] Basel II, initially published in June 2004 during the global credit bubble, aims to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face in recurring financial crises. (more…)