Yesterday Fed Chairman Ben Bernanke threatened to take away the massive punch bowl that’s been spiked with easy money juice.

There’s no set timetable, but maybe there is. It’s hard to interpret Fedspeak.

So maybe they’ll start paring back their $85 billion a month buying spree, or maybe they’ll jack it up, which is what Benny said only a few sessions ago.

What the heck is he doing? What are they doing? And who are “they” anyway?

Here’s the deal…

“They” are the rulers of the free world. They are the money lenders, the money changers, the carpetbaggers. They are the bankers and bosses of governments.

They lowered interest rates so untold trillions of dollars could be lent out, for interest, for fees, for the creation of products that could be sold and bought – in other words, traded.

That is what “they” do. It is the business they are in. And like a lot of businesses, they took a wrong turn. They took on too much risk and leveraged it and doubled down and lost.

Only, we all lost.

But that doesn’t matter; you see, it’s their business, not ours. We’re just pawns they move into positions where we can be used to further their business interests.

So after we were driven over the cliff, with them at the wheel, they needed a parachute. And, of course, the Fed provided it. Call it “mo’ money, mo’ money, mo’ money.”

If you haven’t figured it out, here’s how it works.

The Fed flooded the banks with money to save them from all going under and freeing us from their shackles. Long after the crisis-era alphabet soup of liquidity programs were wound down, it kept showering the banks with mo’ money, mo’ money, mo’ money.

The Fed now buys $45 billion A MONTH of Treasuries to fund the government. Because if there was no one to buy the government’s debt, interest rates would rise and our idiot government might realize they have to cut spending.

But there’s another reason the Fed is buying Treasuries. They wanted the banks to have more money, to make more money. And boy, has that worked out well… for them.

The banks buy the government’s bills, notes, and bonds, on credit, and the Fed buys the bills, notes, and bonds from the banks and issues them credits. So the banks have a ton of money to leverage their balance sheets back into the black.

The Fed buys $40 billion A MONTH of “agency” paper. (Agency means mortgage-backed securities that are essentially guaranteed by agencies of the federal government, like Fannie, Freddie, and Ginnie, and the FHA – basically the gang that bankers talked the government into creating to take the real risk of lending off their hands and shove it onto taxpayers, when the dam breaks). Where do they buy all that paper, all those packaged loans from? From the banks, stupid.

Why? To give them mo’ money, mo’ money, mo’ money, because it’s about the banks.

Oh, you didn’t realize that the banks still have hundreds of billions of dollars of mortgage-backed securities on their books? Who did you think was going to buy them?

That’s why there is a Fed – or a heaven, if you’re a banker.

Starting to get it? The Fed buys the toxic waste the banks were choking on and holds it until the housing market heals. Then the banks get it back so they can mark it up on their balance sheets. In that way, they can show they’re flush, so they can get big bonuses… same as it ever was.

What happens with a lot of that money that’s sloshing around is that it works its way into the stock market.

The markets go up, and that creates the “wealth effect.” That’s actually an articulated Fed policy, creating a wealth effect by making the markets go higher. And like the special effects in a Steven Spielberg film, this makes us all feel good, and we go out and spend, spend, spend.

And that brings me back to what Benny was saying yesterday. Just a few weeks ago he said maybe they would buy more, or maybe less. Yesterday he hinted that less may be more the way to go.

Why now, why did he come out and say the opposite of what he said a few weeks ago?

Because the markets are at all-time highs. And if his trial balloon was to pop the markets’ upward trajectory, what better time to test the waters than at the highs?

The manipulation is brilliant.

I love the Fed. I want to be the Chairman of the Federal Reserve. The power trip must be an ungodly high. Then, of course, I’d move my chair over to JPMorgan and make the big bucks.

Is the beginning of the end of the market’s rise upon us? Is the Fed done easing?

No, and no.

If there is a correction – which there could be and there should be – it could be a few hundred Dow points or it could be few thousand Dow points.

Look at what Japan did yesterday. Its stock market fell over 7%… in the blink of an eye.

It can happen here, too. The markets have been propped up, and the wealth effect is an illusion.

Continue to dance while the music is still playing, because it ain’t over til it’s over.

But two things…

Don’t forget to have your stops in place and some downside protection at the ready.

Shah

He told host Stuart Varney about the big trading move that pushed metals down today. He also explained why he would keep buying gold.

Shah also recommended a stock that pays a 10% dividend yield and says the stock will be “safe” as long as the housing market remains stable.

Hear Shah’s recommendation and his thoughts on why silver and gold prices are falling in the following video.

You’re reading it right now.

I’m calling it WII (WHY?), which stands for Washington Insights & Indictments.

Enjoy it.

It’s likely to be a single issue.

While calling out crooks and criminals on Wall Street is dangerous enough, calling out criminal behavior by the highest powers in the United States will get me: 1) audited by the IRS; 2) phone-tapped by the Justice Department; and 3) a trip to Guantanamo (if I don’t get “droned”), because obviously anybody questioning the powers-that-be is a threat to national security.

Now, don’t get me wrong. I’m not an Obama-basher. I liked him. Once upon a time…

I believed in “change” and that Obama was a good guy. I was elated when he won the first election. But I was deflated when he won a second term; deflated because my hopes and expectations for positive changes had been sucked dry.

The only real change I’ve seen in America since Obama took office is a frontal assault on the Constitution. Most politicians use the backdoor method.

Here’s why I’m really angry and afraid, for myself and you.

It came out last week that the Justice Department took it upon itself to seize phone records (and faxes) and may have tapped, listened into, and recorded thousands of phone conversations between Associated Press journalists, their editors, their sources (some of whom are definitely confidential sources), and anybody and everybody they spoke to over at least a two-month period.

The Justice Department is run by Eric Holder. Holder authorized the subpoenas to get the phone records, and if phones were tapped, he authorized it. No judge was involved.

Usually a federal judge would have to sign off on the surveillance of journalists and news media people. At least, it works that way in 40 states and should be the law of the land.

But it doesn’t work that way at the federal level if the matter involves “national security.”

And that’s what makes me so angry and what should – and maybe will – be the straw that breaks the back of this President and his administration.

Don’t get me wrong. The IRS scandal will be Obama’s Watergate. But the AP scandal will be his Waterloo.

Forget the bigger issues that are seeing the light of day here, like “separation of powers” issues. Justice stooges were tapping into conversations that took place between Congressmen and AP reporters. That means the executive branch was spying on the legislative branch.

The issue that really frightens me, because I’m a journalist, is that our First Amendment rights (abridging the freedom of speech, infringing on the freedom of the press), which should stand on their own, but are brilliantly backed-up (just in case) by the Fourth Amendment (which guards against unreasonable searches and seizures, along with requiring any warrant to be judicially sanctioned and supported by probable cause) have just both been trampled – simultaneously.

How? Because it was a matter of “national security.”

Here’s the thing. Besides being sick and horrified that “national security” is increasingly a trumped-up reason to hack the Constitution to near death, the so-called national security threat that Justice invoked was over, gone, the cat was out of the bag. There was no national security threat.

You see, AP reporters got information about a bomb threat to be carried out on the anniversary of the killing of Osama Bin Laden (May 2). They were asked not to report it until after the threat had been neutralized. They complied. There was a plot, and it was foiled.

Only the President wanted to be the one to come out and announce it before the press beat him to it. Why? He didn’t want another Benghazi timing issue to make him look stupid.

But why tap the phone lines, really?

It’s the same reason the IRS was targeting parties opposed to the President and his administration.

This Administration, under the President’s leadership, is executing a program of intimidation, harassment, and trampling of civil liberties, and they’re getting away with it.

I’m frightened, and you should be too.

If I start seeing a new order of freedom-bashing zealots parading the American flag as a banner against all national security threats, I’m going to renew my NRA membership.

Is this what we’ve become?

Shah

First, back in February, Attorney General Eric Holder christened the unofficial official doctrine of “Too Big to Jail.”

He told Congress, “The size of some of these institutions [TBTF banks] becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute – if we do bring a criminal charge – it will have a negative impact on the national economy, perhaps even the world economy.”

Of course, it was only the christening of another neat little name.

The actual doctrine has been official policy of America’s Congress, successive presidents and their administrations, and the alphabet soup of regulatory bodies for as long as anyone can remember.

But a funny thing happened on Tuesday.

Someone pushed back…

Sen. Elizabeth Warren (D-Mass.) sent a letter to the Justice Department, the Federal Reserve and the Securities and Exchange Commission.

It was a short letter (you can read it here on Mother Jones). The jist of it was, how come you guys always let banksters settle and never take them to trial?

She summed up her letter by reservedly pointing out, “If large institutions can beat the law and accumulate millions” – I’m not sure why she didn’t say billions – “in profits and, if they get caught, settle by paying out of those profits, they do not have much incentive to follow the law.”

You go, Elizabeth! Only, someone might want to tell her… too big to jail is the law.

Anyway, one day later, yesterday, the always beleaguered Eric Holder (because he’s always been out of his league) said this: “Let me be very clear, there’s no bank, there’s no institution, there’s no individual that cannot be prosecuted by the U.S. Department of Justice. We have had thousands of financially based cases over the last four years.”

In other words, completely changing his story.

You go, Eric… hopefully into retirement. Try Mexico, they like you down there.

Then there’s this IRS scandal.

Who knew the IRS was an arm of government? I thought it was an extortion arm of the mafia.

But lo and behold, the IRS acts on behalf of the government, which apparently includes terrorizing conservatives.

Today the acting IRS Commissioner, Steven Miller, stepped down amid accusations the agency was giving extra scrutiny to conservative groups who applied for federal tax exemptions.

That’s not very nice.

I’m just glad the IRS is two-sided. They impact the President’s friends and family, too. Everyone apparently gets theirs.

The President’s half-brother certainly “got his” from the IRS – in the form of a very special favor.

A few years back, the Prez’s half-brother, Abon’go “Roy” Malik Obama, also the best man at his wedding, set up the Barack H. Obama Foundation to solicit tax exempt contributions (for what, no one really knows).

Only there was little problem. Roy Boy didn’t set up a 501(c) tax-exempt entity.

In May 2011, the national Legal and Policy Center filed an official complaint against the non-entity entity.

No worries. The IRS was all over it.

One month later, on June 26, 2011, in record time (just ask any of the conservative groups waiting three years and longer for an IRS ruling on their tax-exempt status), the Foundation was granted tax-exempt status… retroactively (unheard of!) back to December 2005.

According to The Daily Caller, “In addition to running his charity, Malik Obama ran unsuccessfully to be the governor of Siaya County in Kenya. He was accused of being a wife beater and seducing the newest of his 12 wives while she was a 17-year-old school girl.” Nice guy. Sure glad they helped him out.

All I’m saying is that it’s good to be an American, or not, or a bank, or 501(c).

Have a nice day.

Shah

The Arab members of OPEC proclaimed an oil embargo to punish the U.S. for aiding Israel. This action quadrupled the price of oil, roiling commodity markets, equities, bonds, and foreign exchange markets.

Energy prices soared. Speculation in oil exploration and production became feverish.

There was money everywhere.

Oil exporters in the Arab states were depositing their windfall “petrodollars” into big U.S. banks, who were in turn lending the money out as fast as they could.

By far, the largest recipients of the flood of money looking to be lent out were Latin American and South American countries. Thus, the new tens of billions of dollars banks had to lend were showered on sovereign states with glaring credit quality blemishes.

In the meantime, banks were lending hand over fist to the energy patch. Small banks were getting into the oil lending game, too – sometimes in spectacular ways.

By 1982, tiny Penn Square Bank, located in the Penn Square Mall in Oklahoma City, Okla., had made over $1 billion dollars of energy loans and resold them to money-center bank Continental Illinois National Bank and Trust Company of Chicago.

The loans went bad, quickly.

That shouldn’t have been a problem for Continental Illinois, which had over $40 billion in “deposits.” But it was a monumental problem.

That’s because only 10% of Continental Illinois’ deposits were FDIC insured.

In 1982, depositors were insured up to $100,000; so when news got out that Penn Square had failed and the loans it had sold to Continental were defaulting, Continental depositors began to panic.

Continental had been playing the “hot money” game, very aggressively. To increase its loan portfolio, it needed more capital, or deposits. It got them by offering high-interest CDs and borrowing in the fed funds market for overnight money and in the money markets by issuing commercial paper.

Its deposits weren’t “sticky,” meaning they weren’t going to be left there by folks with savings accounts. They were hot money deposits that were now exiting the bank via electronic transfer at unheard of speeds.

The bank became insolvent in a matter of days.

Depositors who hadn’t gotten their money out would lose untold billions if the bank was shut down. The Federal Reserve, the Treasury Department, and the Federal Deposit Insurance Corporation feared a run on other banks, including all the nation’s big money-center giants.

The panic unfolded at breakneck speed, and it had to be stemmed.

So the FDIC effectively nationalized Continental, by taking an 80% ownership position, and declared all deposits insured.

In other words, not a single depositor would lose money. The FDIC with the full faith and credit of the government – better known as the American taxpayers – was backstopping the bank.

It seemed like it was over before it started. Everything calmed down; there would be no bank runs. All America’s big banks were safe, effectively christened… too big to fail.

But the hits kept on coming.

By September 1982, Mexico had stopped servicing billions in loans it had taken from big New York banks. And Brazil was on the verge of defaulting on its massive borrowings.

The big money-center banks with their billions in petrodollar deposits were now all in big trouble. But they were smart.

The big banks knew full well that they could never sell bonds on behalf of Latin and South American countries with a history of defaults (the high interest the bonds would have to pay to attract investors would be a dead giveaway). So they made syndicated loans, enticing over 700 smaller banks to join them in fueling the profligate spending habits of socialist and mostly commodity-export-driven southern sovereigns.

You see, what the banks had figured out was that their friends in government would never let them fail. They would use the International Monetary Fund as a front to help bail them out.

It worked like a charm, and it’s still working today.

The IMF was originally established to help tide over countries with short-term liquidity problems, by providing short-term loans accompanied by reform demands to fix their economies so they could pay back the IMF loans. But at that point, it would be forever transformed into a U.S. government-backed payment enforcer.

The beauty of having a seemingly multi-national enforcer such as the IMF force countries at risk of defaulting on imprudently lent loans to reform their economies to trigger growth again, was that all kick starts would require fuel in the form of IMF loans.

Thus the IMF lends to debtor countries so they can pay off the bankers who they owe and are behind to, so the banks don’t have to write off their bad loans, and foreign sovereign nations can keep borrowing in capital markets (and from the same banks) to pay off bankers and the IMF.

It’s called “extend and pretend.”

Well, it’s more formerly known as the Baker Plan, after James Baker III (Ronald Reagan’s Chief of Staff and later his Secretary of the Treasury), who originated the game to save the likes of Citibank’s then-chairman, Walter Wriston (the co-inventor of CDs and a huge lender to Latin and South America), himself chairman of Reagan’s Economic Policy Advisory Board.

Whatever it’s called, the extend and pretend game is now an institutionalized national treasure.

Of course it benefits the TBTF banks in yet another cockamamie scheme to make their lending lives eternal.

That’s how we got to TBTF and how the TBTF banks get away with piling on more and more debt to borrowers that have no way of ever paying it back.

It’s how the banks operate. It’s the business they’ve created.

Next we’ll look at how the capital markets are rigged. We’ll see how banks manipulate them for massive profits, basically to offset the tiny spreads they make on the loans they will never be repaid on.

Then you’ll start to see how the Fed feeds the banks a lifeline to keep their lending going and, as their top regulator, lets them get away with murder in the capital markets, so they can keep on making money (to lend out to consumers and American businesses, of course) to enrich the crony capitalists who suck Americans dry like filthy leeches.

Then I’ll tell you how to beat them at their own game. But first, you’ve got to understand who the players are and how the game is really played.

Welcome to your life…

Shah

Boundaries were being blurred – especially those separating “commercial banks” and “investment banks” under Depression-era Glass-Steagall parameters. The banking landscape was shifting. In fact, it was about to go volcanic.

The Truman Administration had championed the break-up of bank cartel arrangements, whereby a powerful coterie of commercial-bank bond underwriters controlled how corporations financed debt and who got to distribute bond offerings. Subsequent regulatory changes (requiring bidding for underwriting assignments) broke up the “Gentleman Bankers Code,” which had been code for cartel.

A more competitive landscape drove banks to expand. Branch banking spread through shopping malls and onto prime locations on America’s Main Streets.

The hunt for deposits was on.

And it got ugly fast…

Commercial banks needed more and more deposits to supply funds to rapidly growing corporations. And they wanted to make small business and consumer loans, wherever they could.

Intense banking competition was driving down lending profitability. At the same time, corporations were self-financing themselves through retained earnings and increasingly turning to insurance companies with whom they could directly place their bonds.

Commercial banks were losing their predominant position as providers of capital… while investment banks were growing rapidly.

The investment banks, with insignificant amounts of their own capital, were raising equity capital for corporations and trading blocks of stock accumulating in pension plans, which were mushrooming as a result of 1950s tax law changes and collective bargaining victories by labor unions.

Commercial banks had to grow rapidly to offset declining profit margins in the lending business. And they had to figure out how to compete with more aggressive and more profitable investment banks, as well as their institutional investor clients, who were rapidly becoming suppliers of capital.

So they did.

Under Glass-Steagall, commercial banks were allowed to deal and trade in U.S. Treasury securities, municipal bonds (which were considered safe by virtue of issuers’ taxing authority), and foreign exchange.

Historically, banks didn’t so much trade foreign currencies as they did manage exchanging one currency for another in the spot market and on a “forward” basis. This service, which banks had a monopoly over, facilitated borrowing clients, who were increasingly U.S. multinational corporations, overseas corporations, and foreign governments in need of currency exchange services.

They weren’t supposed to underwrite equity issues, distribute them or trade in them. But they did.

Commercial banks set up trust departments and, in some cases, controlled separate trust banks. The old Bankers Trust, backed by J.P. Morgan’s interests, was a prime example.

Trust departments were “entrusted” with safeguarding client assets. That included equity securities. As securities trading increased, for reasons about to become apparent, banks blatantly circumvented Glass-Steagall prohibitions and actively facilitated trading.

Two seminal events in the 1960s paved a one-way path from traditional banking to casino banking.

First, in 1961, George Moore and Walter Wriston of First National City bank brilliantly sidestepped regulatory prohibitions against banks paying interest to depositors. Their brainchild was the “negotiable certificate of deposit,” simply referred to as CDs.

By structuring a deposit as at least a 30-day “loan” to the bank, interest could be paid to the lender. The word “negotiable” was the magic ticket. Depositors’ CDs and the “liabilities” (deposits) they represented could be traded.

The invention spawned a world-wide hunt for deposits, as banks could raise money virtually anywhere and compete for “hot money” by offering competitive interest rates.

Excess deposits – those that banks couldn’t lend out and those that exceeded regulatory reserve requirements – were traded to other banks in the overnight federal funds (bank to bank) market.

The transition from primarily managing assets (loans) to liabilities (deposits) was almost instantaneous.

Trading floors were built and staffed to speculate on interest rate products. Those instruments, CDs, Treasuries, municipal bonds, and foreign exchange, were all interest rate-based. With the ability to aggressively attract depositor capital – to be used as trading capital – commercial banks embarked upon a hugely profitable new business…

The business of speculation.

Now here’s the second thing that changed.

Commercial banks traditionally offered mergers and acquisition advice, usually as a free service to their bond underwriting clients. But not for long.

Investment banks in the 1960s went on the offensive. To generate mergers and acquisitions fees, they actively put corporations in play. Soliciting takeovers from prospective clients was part of the new mantra of “conglomeratization.”

Putting corporations into play had become easy.

Large blocks of stock were spread among trust banks, held directly by pension plans and in the hands of institutional investors. Investment banks had access to these blocks of securities through their relationships with their institutional clients, as well as having access to stock residing at brokerage affiliates. Commercial banks had access to blocks of stock through their trust departments and brokerage operations they were setting up through the bank holding companies they manufactured to hold commercial bank businesses and separate brokerage businesses that commercial banks, on their own, weren’t allowed to operate.

Because blocks of stock were held for individuals by their pension managers, the institutional managers got to vote the shares in their safekeeping. M&A bankers used their institutional relationships to maneuver voting blocks of stock to their advantage in the new war games.

Seeing their corporate clients under attack and recognizing the pull investment banks were having over fee-paying corporate giants, commercial banks recast their M&A bankers as swashbuckling, fee-generating do-gooders.

Which, of course, they weren’t.

M&A bankers rode roughshod over and corralled thousands of American corporations in the Go-Go 60s – for increasingly larger and larger fees. More than 25,000 businesses were merged, acquired, or “vanished” in the 1960s.

Commercial M&A bankers and investment bankers had forever been transformed into commando-bankers, acting like generals on the ever-widening casino floor.

And this was only the beginning of “transactional banking.”

Events in the 1970s would act like an accelerant, igniting a fire under bankers that would further their power and lead to the implosion of a tiny shopping mall bank in Oklahoma.

That “off the radar” event, in a matter of days, led to the failure of a single money-center bank. Its losses were greater than all the failed banks in the Depression, combined.

Only, it didn’t fail. It was the bank that directly led to the American banking doctrine of too-big-to-fail.

And you know what happened next…

Cyprus.

As another domino threatened the house of cards holding up European banks, more money had to be pumped into Cypriot banks so their doors didn’t close and rapid contagion wouldn’t implode all of Europe, and then the world.

Only this time was different.

The ECB reached straight into Cypriot bank depositors’ pockets and stole about $6 billion from them. The “how” isn’t important. It’s a simple equation, as revealed in Part V. Governments are the backstoppers of central banks; that’s where their authority ultimately comes from.

Why did the ECB steal depositors’ money? So they could turn around and lend that and more to the insolvent banks to keep them alive. It’s the latest twist in the old “extend and pretend” game.

The big question is, how did banks get so big and so dangerous in the first place?

Or, how did stodgy traditional banking morph into “casino banking” on a global scale?

Here’s how it started…

It’s all based on the American model.

With the Federal Reserve set up as the “lender of last resort,” U.S. banks prospered.

The end of World War I provided banks with a huge opportunity to lend money to European countries, both American allies and to defeated Germany. It was a tidy arrangement for them, on account of de facto U.S. government backing of the loans and Germany’s forced reparations payments.

Meanwhile, back home, the Roaring Twenties were in full swing. Money was plentiful in the form of cheap margin. It took only a 10% down payment to dabble in rapidly rising stocks. Speculation and stock manipulation schemes became rampant.

The bubble burst in 1929. Then wrong-headed moves by the new Federal Reserve, who tightened credit in response to former lax conditions, were compounded by unwise government tariffs that strangled global trade.

The result was America’s Depression.

Bank reform was a huge part of President Franklin Roosevelt’s New Deal to get America back on track. It included separating deposit-taking commercial banks from securities trading investment banks and spawned the Federal Deposit Insurance Corporation to safeguard depositors.

Meanwhile in Europe, Germany couldn’t make reparations payments and resorted to printing money to make do. Massive inflation in Germany led to a collapse in standards of living and the rise of the Nazi Party.

At the same time, Japanese militarism was on the rise. So was Japan’s increasingly acute need to access oil reserves, which it didn’t have and needed to power its industries.

America’s entry into the War woke up its animal spirits and transformed the country into an industrial juggernaut.

After the Axis powers, Germany, Japan, and Italy were defeated, U.S. banks were the only banks in the world in a position to lend, and again, with the de facto backing of the U.S. government, they recapitalized industries and countries across the globe.

The 1950s in America were heady growth days. Corporations were mushrooming rapidly, helping to expand the middle class as they prospered together. Europe was rebuilding, and Japan was using U.S. aid to build factories to manufacture cheap export goods.

As we entered the Go-Go ’60s, huge and growing deposit-taking commercial banks would come face to face with their grossly undercapitalized investment banking cousins and find themselves – and their profitability – under direct attack.

What happened next changed banking forever.

Understanding exactly what happened, why, and how will change your understanding of what banks really do and how what they do affects you and your ability to make money in the landscape they dominate.

Thursday’s chapter will lay it out for you. You’ll immediately see the hidden hand you knew was always there. From there I’ll take you upstairs and show you through the cameras watching you how the casino floor is rigged to benefit the house…

And, of course, show you how to beat them at their own game.

Shah

You can.

First, please keep helping me get the word out about the crimes and lies being perpetrated by our “leaders.” Forward these emails; share my articles online. Spread the word however you can. Together, we can make our voices heard. We can make this country better for our kids and grandkids.

Second, at your request, I’m working on something big. I believe this could be the vehicle for the change you all want to see. We’re going after the “permanent political class” getting cozy in Washington in a brand-new way. And don’t think Wall Street is safe. We’re going after them, too. We’re going to shake them both up and demand reform.

I saw some brilliant comments and questions from my last two articles – about Congressional term limits and breaking up the too-big-to-fail banks. For today’s Q&A, I purposely didn’t include those. I want to address them in a different way. You’ll see what I mean.

Lots else to cover this month… so let’s get to it.

Q: I saw an article last week that I can’t find much info about. Seems Congress voted and passed by a wide margin the ability to trade in the markets again. I thought this had been stopped, members of Congress had to put their holdings in a “passive” account, they could not trade with their “inside” knowledge. What have I missed? ~ Jeff H.

A: Jeff, maybe you missed Congress’ latest change to the STOCK Act. Are you sitting down? They just, very quietly, gutted the law that was supposed to stop insider trading… seriously.

On April 11, Congress voted to eliminate the transparency provisions that would have made not just their trades, but the trades of everyone close to elected officials (staffers, aides, lobbyists) available to the general public. You know – the part that mattered. It also delayed until next year the requirement to post financial disclosure forms online. The vote was unanimous. It all went down in a matter of seconds. And Obama signed it into law on April 15.

These people are crooks. They write laws to protect their criminal activity. And so far, they are untouchable.

Q [re: "Kickbacks Are Just Distractions at an Acceptable Cost"]: What a terrible burden for the four mortgage insurers having to pay what amounts to a .002566666% fine. And even worse for them it is split about 4 ways, meaning each pays out .0006%. If my math is right. I believe we honest Americans should only pay that rate in Federal taxes. Anybody with me? ~ Rick Y.

A: Sorry, you can’t get away with that, Rick… unless you’re a corporation.

Q: If a corporation is a “person” for the purpose of political purchases, excuse me, “donations,” then why can’t that “person” do time for breaking the law like any other? ~ Lee A.

A: Because Lee, a corporation is a person until it is guilty of doing something only a person is capable of doing. Then it is a corporation, an impenetrable edifice incapable of doing something criminal… because only a person is capable of criminal acts. Corporations are kind of like Congress, only more personable.

Q: I have read several times that the Feds are planning to collect the taxes due within our 401(k)s and IRAs, then confiscate the balance and return it in the form of a new government issued paper note. They would then control the dispensing of these new government notes according to what they believe you should have. Is this true? What can we do? ~ DC

A: I’ve read stuff like that too. I can’t imagine it’s true. But, hey, I never thought I’d see banks, with their government’s blessing, reach into depositors’ accounts and steal their money to give it to a central bank, either. Yet that’s exactly what just happened in Cyprus.

So, I take it back… I can imagine it. But if it happens, there will also be revolution in the streets, and that just may work out in the long run.

Q: Thanks for the comprehensive response to my question on stops. What’s the best way to determine the support levels that the traders might test? ~ JimAtl

A: I use, because a lot of traders use, Fibonacci numbers, breakdowns through well-defined up channels, whole numbers, and areas of “congestion” where there had been a lot of sideways movement before the stock moved higher… that former area of congestion is a good area to place a stop.

Q [re: "The Next Bank Meltdown Will Be No Accident"]: What happened to the Basel III accords, which were supposed to go into effect at the first of the year? ~ Jeffrey B.

A: All things “Basel” are being juggled, delayed, and massaged until tepid tweaks can be made to meet all banks’ singular goal… of being able to circumvent them.

Part of the delay is because big banks are facing ongoing litigation expenses (including another mega-scandal… see my article in today’s Money Morning), including the potential for hundreds of billions of dollars in fines, restitution and other impactful events on their profitability. Why on earth would central banks’ sycophantic cheerleader, the Bank for International Settlements, who pens the Basel babel, impose tougher standards on their wards while they’re still covered in warts?

Q: Can you say something about how to protect our assets against this coming meltdown? ~ Marco

A: Yes. Here’s what to do… and it’s really simple. Don’t exit the market; this rally could go on for another year or two, though I don’t think it will. The point is, there’s money to be made as long as we’re in rally mode. You’ve got to be in it to win it. Just make sure you aren’t greedy. Take profits on the way up, because you’re going to want to invest them on the way down and at the bottom. Always have stops in place and raise them as prices go higher. If you get stopped out and want to get back in, do it. Just use a tighter stop so you don’t give back too much of what you previously made. At some point, a correction may take you out of some of your positions. If you want to get back in because the market starts bouncing again, do it. Just don’t forget those stops again. If you get taken out of all of your positions in a big swoon, if you’ve been raising your stops, you’ll be out with profits. Sit tight at that point. If you’re on the sidelines now, look at step one. Take some positions and use tight stops. If you are expecting a giant sell-off and it doesn’t happen, you may miss a tremendous moneymaking opportunity.

Now, about the coming meltdown.

It is coming. But I don’t have any idea of the timing. That’s why I’m heavily invested now and keep raising my stops. My two subscriber services (Capital Wave Forecast and DealBook) are pretty fully invested, and we’ve been taking profits as a few positions have hit stops we’ve raised many times.

When the flood comes, you won’t be able to swim against the deluge. With any luck, there will be warning signs, and I will be shouting from the rooftops to get out and get short. The only time I’ve EVER made a total “get out” call was in the late summer of 2008, when I was writing my Friday Night Illuminations (the email service that turned into today’s Insights & Indictments). I shouted, “SELL EVERYTHING… EVERYTHING and go to cash, not money-market cash, real hard cash.” I could see that one coming a mile away. If I see another black hole coming, you’ll be the first to hear me.

When it happens, and it could be years away, cash will be okay, hopefully, but gold will be better. It won’t hurt to start putting some aside now. And I don’t mean gold shares, I mean physical gold in a safe place you can get to… NOT IN A BANK. Speaking of which…

Q: Once you have physical possession of gold or silver and you want to sell it, what’s the best way to sell it? Will the source that sold it to you also buy it from you? ~ John

A: There are dealers around the country that buy and sell physical gold. Just make sure you do some homework on their history and credibility. Pricing should be fairly transparent. If they want to charge “fees” beyond a nominal amount, look around for another dealer. There is a bid and offer for gold, just like there is for stocks, so you sell at the bid price and buy at the ask price, which is another way of charging you a small fee for the transaction.

Q: Theoretical question: Many financial advisors have advocated buying gold stocks because the U.S. dollar is going to collapse and when it does, precious metal stocks will soar. Assuming that happens and we sold the stocks, what would we get paid off with? U.S. dollars??? ~ Stephen K.

A: Aye, there’s the rub. Yes, Stephen, you’d get paid in dollars (though you can trade gold in other currencies).

Q [re: "Bail-Ins, Magic Wands, and Con Men"]: I’ve never trusted banks and don’t have a dime in them. The same goes for Savings & Loan Associations. All too often they have been bought out and merged with other banks and you can’t keep up with the change from one to another and all the different rules and regulations. I have always used Credit Unions as I feel they are much safer. I would like to hear comments from you about them sometime! ~ Phil I.

A: Phil, I have a confession to make. I don’t know much about how credit unions operate. But I’m going to look into them and let you exactly what’s good about them and what’s bad. And you know I won’t pull any punches. Stay tuned.

Q: I think the real problem is governments who enable and order banks to do their dirty work. When things get ugly, the government gets a free pass from the media and public, while the banks get all the blame and scorn. But in return for doing the government’s dirty work, bankers get extremely rich. It’s a symbiotic relationship between banks and governments – like it is between rotting flesh and maggots. ~ Robert in Canada

A: That’s a perfect analogy, Robert. Banks couldn’t be the maggots they are if stinking, greedy legislators didn’t coddle and protect them towards their own ends and give them a safe place to fester.

Q: Place your bets now. Which crooked bank will go bust first? My money is not on JPM, as they may well have stolen their way out of their massive short position in silver during the last week. Also, their close connection to the Fed ensures that their hand remain in the till! I am thinking a major European bank – Soc Gen perhaps. ~ Peter K.

A: Peter, I’m going to run with your idea. I’d like our readers to send in their picks for which domino they think will fall first, and why. There are a lot of you out there who know more about your banks than I might. Let’s hear from you.

My wager, which I reserve the right to change, is that the next big failure won’t be a giant, but a second-tier super regional. Do I have a name in mind? Yes I do. I’d tell you, but I can’t, on account of the fact that I’m short it and I don’t want to be accused of calling “fire” in a theater where the lights are still on and people are still in their seats.

But you can tell me. What’s your pick for the next bank to go belly up? Leave it in a comment below – or send me an email at customerservice@wallstreetinsightsandindictments.com.

There’s a prize in it for the winner.

It’s the crazy notion that certain banks are so large and systematically important (which really means so threatening to financial systems) that they must be kept alive by the government, because their failure would wreak havoc on the economy.

How will they be saved from their own greed? And how will we be saved from their greed so we can kneel at their altars another day?

Central banks and governments, who are not as powerful as central banks, will backstop them with printed paper and taxpayer blood. That’s how they’ll be saved, grow bigger, and one day rule the world.

Oh, that already happened… never mind

But wait. Now there’s a new TBTF on the block. And it’s even crazier than the first.

Last week Senator David Vitter (R-LA) and Senator Sherrod Brown (D-OH) introduced their own TBTF bill; it stands for “Terminating Bailouts for Taxpayer Fairness.” I’m not kidding.

The Brown-Vitter Bill, as it’s known – I much prefer the “TBTF Act” official title – is a thing of beauty.

It’s so “in your face” (if you’re a TBTF bank) that it’s got a lot of those smirks on bankers’ faces frozen (momentarily), making them look like the Jokers they are.

Here’s what it says….

Brown and Vitter are pretty sure that the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is still mostly unwritten, is too ambitious to succeed.

Dodd-Frank is a joke because it is so unwieldy and so theoretically expansive. Not only will it never be completed, it was designed to be unwieldy so loopholes woven through all aspects of it would give banks the backdoor relief they need from it.

Brown and Vitter know this. So they’ve proposed legislation that leapfrogs the “molasses approach” to safeguarding the economy and the citizenry. Instead it attacks the very castles that are the TBTF banks.

They want to break them up. And they’ve come up with a simple way to do it.

The TBTF Act calls for banks with between $50 billion and $500 billion in assets to maintain an 8% capital ratio. Basically, that means they have to have 8% of their assets in equity, which amounts to an 8% buffer against all their assets losing 8% of their value.

Beyond that, it gets scary.

Because the too-big-to-fail banks are so much bigger and so much more of a threat on account of their size and interconnectedness, the TBTF Act calls for them (those with more than $500 billion) to maintain a 15% capital reserve ratio.

According to Goldman Sachs, who looked at the B-V bill, the big banks have raised their capital levels to $400 billion since the financial crisis, but will need an additional $1 trillion in capital if the B-V bill becomes law.

In other words, it’s such a tall order, and one they won’t be able to meet now, that they will have to sell assets and essentially break themselves up in order to comply.

Oh the humanity!

And that’s not all the TBTF Act calls for.

It calls for bank holding companies (BHCs) to separately capitalize their affiliates. (BHC entities, by the way, are a device to manipulate regulations and capital requirements…yeah, that’s what I said, because that’s what they are.) That means no more shuffling assets and liabilities to play dangerous parlor games.

The Act also calls for banks to count off-balance sheet obligations (for real) and incorporate onto their balance sheets the counterparty risks they face with the trillions of dollars of derivatives exposure they routinely want regulators and us to assume is all kosher.

And what I especially like is that BHC affiliates that are not depository institutions, which will have to have their own capital, won’t be granted any FDIC backstopping and won’t have access to the Fed’s Discount Window. Of course, they’ll have to expand those ring-fence plans so the Fed doesn’t create backdoor help by other means.

There’s more to the TBTF Act, but suffice it to say, it essentially calls the breakup of too-big-to-fail banks and simpler, more straightforward “laws” that – to my greatest hope and enthusiasm – essentially reconstitute that old, venerable humpty dumpty… Glass-Steagall.

Will the TBTF Act have a snowball’s chance in Hell?

No. Not without our support.

I look forward to hearing what you all think about the proposed bill – please leave your comments below. And I’m going to see what I can do about creating an avenue here, for us to reach out to our Congress, and everyone who needs to hear our footsteps, so we can be cause in the matter.

That includes telling them that we want TERM LIMITS.

We are watching them.

I know many of you agree. You voice your frustration to me every week.

It’s not “one” problem. There are many.

Congressional insider trading (still alive and well)… an inability to work together… fiscal irresponsibility… the ridiculous taxpayer-funded benefits and perks our leaders enjoy, while we struggle… highly politicized capital markets… and the financiers and money men our “leaders” are in bed with.

The worst problem of all – or perhaps the reason all of the above is allowed to persist – is the “permanent political class in Washington [that] is able to skirt the rules and laws that apply to the rest of us.” That’s what author Peter Schweizer of “Throw Them All Out” fame – referring to our leaders – said to me when I interviewed him for you in 2011.

So what if there was one “resolution” that, by itself, would set in motion a chain reaction that would fundamentally change how America is governed?

I’d be for it. Better yet, I am for it. It’s here. It’s on the table as of Tuesday.

The idea, introduced in Congress on April 23rd by Rep. Matt Salmon (R-Ariz.), is a proposed amendment to the Constitution to limit how long legislators, Representatives and Senators, get to represent us.

Take a look at H.J. Res. 41…

Sounds good, right?

Don’t get your hopes up too much.

According to government transparency website www.govtrack.us, there have been 28,537 bills related to “term limits” since 1973. Their prognosis, or probability that the bill will be enacted, is a sincerely disheartening 0%. (Click here to see how they calculated this probability.)

Yes, “throw them all out” may be a tired refrain and one that you’re getting sick of hearing.

But instead of defaulting to our collective cynicism (which is wholly justified) that “this” will never happen, today I want us to discuss the pros and cons of this Resolution.

Personally, I think it could work as a first step to return us to Democracy. It’s pretty simple.

If we limit the tenure of legislators, we theoretically impose on them a time limit in which they have to exercise their efforts to realize the campaign promises they make. They get a couple of tries and they’re out.

If they are successful, they get another shot. Or if there is more work to do on what they’ve started, new candidates would want to promise to finish what voters elected their predecessors to do.

Conversely, voters would replace agents of inaction, self-serving shysters, or ineffectual panderers more quickly, simply because regime change calls for it.

Now, I’m guessing here, but I imagine that this would cause the whole electorate to become more engaged in the issues, the debates, and outcomes, because they would start believing, and eventually know, that change isn’t just possible… it’s the law.

The U.S. Constitution is nothing short of magnificent, in every way. For all it lays down, it also leaves plenty of room for change. Our Founding Fathers knew that the young nation would forever experience growing pains, so instinctively, the Constitution was written to accommodate our evolution from our revolution.

Why shouldn’t our evolution include another revolution?

Let’s exercise our collective voices and march our tens of millions of pairs of boots on the ground to “demonstrate” and vociferously demand the return of the Democracy that’s been stolen from us.

This space, right here, is where I respectfully ask you, us, to start discussing whether we need a new revolution, or whether the status quo is the way to go.

Help me figure this out…

• What do you think about term limits?
• What are the pros and cons of term limits vs. the status quo system?
• Is this an “all or nothing” proposition, or should we consider allowing additional terms if high percentages of voters (popular votes not any of this Electoral College stuff) want a good person back in office?
• What are the unintended consequences we might face with term limits?

Today there are more than 250,000 of you who read Wall Street Insights & Indictments. That’s an army. Let’s mobilize and be part of the solution, part of the revolution, part of the army to save Democracy.

Be heard!

Shah