{"id":13478,"date":"2012-04-26T20:00:35","date_gmt":"2012-04-27T00:00:35","guid":{"rendered":"http:\/\/www.ino.com\/blog\/?p=13478"},"modified":"2012-04-27T10:59:28","modified_gmt":"2012-04-27T14:59:28","slug":"u-s-financial-system-is-it-finally-stable","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2012\/04\/u-s-financial-system-is-it-finally-stable\/","title":{"rendered":"U.S. Financial System: Is It Finally Stable?"},"content":{"rendered":"

By Elliott Wave International<\/span><\/h3>\n

Four years after we brushed up against \"financial Armageddon,\" did you think you'd be reading this?<\/p>\n

Federal Reserve Chairman Ben Bernanke said...banks need to have more capital at hand in order to ensure the financial system is stable. Bernanke said regulators were taking steps to force financial institutions to hold higher capital buffers...<\/p>\n

- Reuters<\/em>, April 9<\/p><\/blockquote>\n

It appears our financial system is still<\/strong> not as stable as it needs to be. But guess who relaxed the banking system's \"capital buffers\" in the first place?<\/p>\n

The Fed increased the credit in the system in the 1990s by the de facto removal of reserve requirements for banks.<\/p>\n

- Robert Prechter, Elliott Wave Theorist<\/em>, November 2011<\/p><\/blockquote>\n

Prechter's September 2011 Theorist<\/em> provides this additional insight:<\/p>\n

In the late 1990s and mid 2000s, the loan-to-deposit ratio for U.S. banks was nearly 1.00, meaning that almost all deposits were lent out. That shortfall alone was a serious problem, because if even 5% of depositors had decided to withdraw their money, banks would have been unable to pay. Some of the banks' loans were quickly callable, but by 2006, the credit-fueled real estate boom had claimed a large percentage of outstanding loans, both inside and outside the banking system. These loans are not<\/em> quickly callable. The problem was serious in 2002 and enormous in 2006. Now it has become acute, because many loans are becoming fossilized, as the market for mortgage investing has dried up while foreclosures on the \"collateral\" have been slowed by court actions and politics.<\/p><\/blockquote>\n

The specter of a banking panic has become far darker since the collateral for bank deposits -- land and buildings -- has fallen globally in value at the steepest rate since the Great Depression. One day this shortfall in collateral value will impress itself on people's minds, and there will be an unprecedented run on banks around the globe as panicked depositors try to become the first ones out the door. Banks are designed so that the first depositors to withdraw get 100%; the losers wait in a long, slow line to split the proceeds that come from selling the deeds. Yes, I know about the FDIC, but I don't believe it will be able to fulfill its promises when most banks go bust.<\/p><\/blockquote>\n

We believe that you should plan ahead for a run on bank deposits. Let me share with you another excerpt from that Reuters<\/em> article. These are direct quotes from Bernanke (emphasis added):<\/p>\n

Additional steps to increase the resiliency of money market funds are important for the overall stability of our financial system and warrant serious consideration...<\/p>\n

The risk of runs ... remains a concern<\/strong>, particularly since some of the tools that policymakers employed to stem the runs during the crisis are no longer available...<\/p><\/blockquote>\n

Now is the time for you to get the names of the 100 \"strongest banks\" in the United States. This free list<\/strong> gives you the 2 \"strongest banks\" in each of the 50 states, based on data effective January 31, 2012.<\/p>\n

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\"\"<\/a><\/td>\nFind Out the Names of the 2 \"Strongest Banks\" in Your State Now -- FREE<\/strong> Read our free 10-page report, Discover the Top 100 Safest U.S. Banks<\/strong>, to learn:<\/p>\n