So now they're targeting our private retirement accounts

[Sassy]

http://www.augustreview.com/news_commentary/economy/dems_target_private_retirement_accounts_20081107104/

Dems Target Private Retirement Accounts      

By Karen McMahan

Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers' personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers' retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on "The Impact of the Financial Crisis on Workers' Retirement Security," blamed Wall Street for the financial crisis and said his committee will "strengthen and protect Americans' 401(k)s, pensions, and other retirement plans" and the "Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people."

Currently, 401(k) plans allow Americans to invest pretax money and their employers match up to a defined percentage, which not only increases workers' retirement savings but also reduces their annual income tax. The balances are fully inheritable, subject to income tax, meaning workers pass on their wealth to their heirs, unlike Social Security. Even when they leave an employer and go to one that doesn't offer a 401(k) or pension, workers can transfer their balances to a qualified IRA.

Mandating Equality - con't at link above

[desdawg]

What are the odds of this actually happening? How seriously is this being considered. What is the conventional wisdom here. Pull the funds and have them become subject the normal tax rate and the 10% penalty or leave them be and risk never having access. A bird in the hand is worth two in the bush. I hate reading half a story. Where is the follow up.

[peternap]

The fact that they're even considering it is the frightening part Des.

It's like a troubled teen Considering mass murder.

[Pox Eclipse]

I don't see anything in that article that attributes this idea to Democratic congressmen.  One witness does not a conspiracy make.  Morons consider all sorts of cockamamie ideas.  Life would be unbearable if I got worked up everytime somebody floated a stupid idea.  This is no more likely than seizing all our guns; just ain't gonna happen.  Chill.

[peternap]

I don't see anything in that article that attributes this idea to Democratic congressmen.  One witness does not a conspiracy make.  Morons consider all sorts of cockamamie ideas.  Life would be unbearable if I got worked up everytime somebody floated a stupid idea.  This is no more likely than seizing all our guns; just ain't gonna happen.  Chill.

Oh I don't get worked up Pox...but I do file it in the "Keep an eye on the Bastards" drawer. I do think something like that is much more likely than real anti gun legislation. We are far from the bottom of the economic problem and Obama and the Homies are gonna be busy with that for the next 4 years.

[Squirl]

I read the article.  It says a professor floated this as an idea at an education and labor hearing.  Wrong department.  That would like me walking into my employer and complaining about my taxes.  Wrong department.  The Treasury department is in charge of the IRS.  That is where the 401(k) name comes from.  It is a statute in IRS code.  This article takes the incendiary crazy comments of a person congress and puts it with a piece of bluster from a member of congress. Sells a lot of papers, gets people worked up. I do know that this current committee is working on 401(k) reform.  What they are working on is better discosures of the fees that plan adminstrators charge.  This is a way of strengthening workers in the current economic crisis.  People don't notice that on average plan administrators charge 1% of your portfolio a year weather you gain or lose.  When you are losing 5% a year it kicks that up to 6%.  When you are only gaining 3% because you want to invest in bonds that is cut to 2%.  This adds up to billions of dollars.  Much of this is spent on lavish kickbacks for executives and plan administrators.  Think AIG spa day.  Just because people come in with a bunch of crazy ideas doesn't mean congress acts.  Congress barely does anything the way it is.  This article brought to you by Fidelity.  Pay no attention to the man behind the curtain.

[glenn kangiser]

All of the above, but keep in mind that if the greedy bastards can find a way to get their sh-thooks into it they will.  Look where the financial system coup has gone.

Keep in mind that the IRS is not a legal entity and it is just a shortcut to the coffers of the "Federal Reserve" which is a private bank owned by offshore interests - the world bankers or elite.  Watch out for the direction their interests push things.

It at least bears watching as Peter mentioned. 

These people are not your friends.  It is likely not well to feel too secure if they are looking at your money. 

Congress does act.  They collectively owned a lot of AIG.  Yes, spa day is good to think about.  Fortunately AIG broker day or week got canceled due to public disgust.

[ScottA]

I think this is a real possiblity. Sounds far fetched I know but then again so did 9/11. At this point I think anything is possible as these people have no morals based in reality. In fact reality is now what they say it is.

I'll go one further and say it's not out of the question to see limits on account withdrawls in the near future.

[glenn kangiser]

The last 5 years or so on withdrawals, Scott.  Sassy is blocked from removing hers - a Federal thrift savings plan - the Fed equivalent of a 401K.

She can only sit back and watch it dwindle.

[MountainDon]

...limits on account withdrawls in the near future.

Banks have always had limits on daily withdrawals; it's lost in the fine print. Most of us don't run into them as it can be quite large. The bank may not want to actually come out and state what that limit is, but I know from recent experience that $15K was no problem, but $25K needed a business day to complete the transaction.

ATM limits are a different matter; they are lower and can vary from bank to bank, account holder to account holder. They are lower to keep the machines from being cleaned out by a few people and leaving others in a lurch.

[glenn kangiser]

Sassy's account is totally locked - - no withdrawals.  18 year accumulation amounting to about 3 years wages for a nurse.

[ScottA]

The limits I'm thinking about would be for taking out cash. What I think could happen is the banks will pay settlments like when you pay your bills or whatever. But if you have a desire to take out say a large sum of cash they'll say no. They could limit it to as little as a few hundred a week to keep people from getting their money out of the banks.

[glenn kangiser]

That could be a good one.

[Sassy]

So what is so "far fetched"?    They've bankrupted social security, they bankrupted the country, they've bankrupted major banks & corporations only to buy them back for pennies on the dollar.  They did that during the "Great depression", they are doing it again.  

If you really want the scoop on how things work, watch "The Money Masters" that Lonelytree posted yesterday, or read "The Creature from Jekyll Island" or a book I'm reading now, written in 1992 "The Coming Economic Earthquake"...  there's lots more, anything that Ron Paul has put out is good reading to really see "the man behind the curtain"...  

If people can't see what's happening now, what has been done right under our noses by the Feds & their cronies, I guess they never will.  I'm one to keep my eyes & ears open - sure, I take things with a grain of salt, consider the sources & I don't worry, I pray...  but I'd rather be "wise as a serpent" with my eyes open than be blind-sided...

[ScottA]

Sassy I read that book years ago. It's a scary prediction considering how long ago it was written.

[Sassy]

Sassy's account is totally locked - - no withdrawals.  18 year accumulation amounting to about 3 years wages for a nurse.

Yep, I've looked at the regulations several times trying to find a loophole - I used to be able to borrow almost 50% - now its about a 1/6th of the balance.  Used to be able to have 2 loans, now you can only have one...  you used to be able to take out $$ but now it is subject to me quitting my job & paying the tax & penalties or having a major catastrophe financially or medically & then they will examine everything you have with a fine toothed comb to see if you "qualify"...     so I look at the balance every few days and see another $1000 to several $1000 gone...  I'm sure the gov't has already "borrowed" that money & thus the restrictions.

Hey, the state of California took all the money nurses paid into the license fees to use for other debts, when it was supposed to be used towards expanding educational opportunities etc. 

[MountainDon]

...I look at the balance every few days and see another $1000 to several $1000 gone... 

Sassy, if it's untouchable until you meet one of the highly restricted allowed outs, why be so masochistic about it.   

[Sassy]

...I look at the balance every few days and see another $1000 to several $1000 gone... 

Sassy, if it's untouchable until you meet one of the highly restricted allowed outs, why be so masochistic about it.   

MtnDon, I just can't seem to help myself...   

[MountainDon]

I can understand.

K. was always looking at the market state more than I until several years ago when I figured it was time to get most of our money out. When I knew I wanted out at a good/best possible time I paid more attention. We just had two different ways of seeing the money world.

Try and chill on things like that. It did wonders for my BP.   

[desdawg]

it is kinda like that JD Wentworth commercial. It's my money and I want it now! i am over 59 1/2 so I guess I can take it if I want it. All except for what I put in this year. The entire system sucks.

[muldoon]

I think the odds of them attempting this is 100%.  Yes, it is just a committee talk right now; however the fact is that we are running out of foreign creditors and this is certainly on the table as the mechanism to keep the wheels on the bus.  It likely wont look exactly like a total seizure of assets, perhaps some compromise where the government steps in to "protect" retirement accounts from losses and you simply pay into the "US protected retirement plan". 

You may say the people wont go for it, but they just passed the bailout with huge opposition and no one seems that upset about it anymore. 

[muldoon]

The limits I'm thinking about would be for taking out cash. What I think could happen is the banks will pay settlments like when you pay your bills or whatever. But if you have a desire to take out say a large sum of cash they'll say no. They could limit it to as little as a few hundred a week to keep people from getting their money out of the banks.

I agree.  Here was some verbiage from the bill passed recently that would allow banks to hold zero reserves on your deposits, fail to deliver money when requested, and it not even be defined a failure or invoke fdic or anything.  This made the rounds a while back, here is a link to the Dailypaul site where it was discussed as well, if you google for it you'll find a few dozen articles around the topic.  .
http://www.dailypaul.com/node/66109

''Emergency Economic Stabilization Act of 2008'' is the following, seemingly innocent section.

SEC. 128. ACCELERATION OF EFFECTIVE DATE.
Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking ''October 1, 2011'' and inserting ''October 1, 2008''.

... and what is in that bill that got moved up 3 years? 
http://www.govtrack.us/congress/billtext.xpd?bill=s109-2856



TITLE II--MONETARY POLICY PROVISIONS
SEC. 201. AUTHORIZATION FOR THE FEDERAL RESERVE TO PAY INTEREST ON RESERVES.
(a) In General- Section 19(b) of the Federal Reserve Act (12 U.S.C. 461(b)) is amended by adding at the end the following:
`(12) EARNINGS ON BALANCES-
`(A) IN GENERAL- Balances maintained at a Federal Reserve bank by or on behalf of a depository institution may receive earnings to be paid by the Federal Reserve bank at least once each calendar quarter, at a rate or rates not to exceed the general level of short-term interest rates.
`(B) REGULATIONS RELATING TO PAYMENTS AND DISTRIBUTIONS- The Board may prescribe regulations concerning--
`(i) the payment of earnings in accordance with this paragraph;
`(ii) the distribution of such earnings to the depository institutions which maintain balances at such banks, or on whose behalf such balances are maintained; and
`(iii) the responsibilities of depository institutions, Federal Home Loan Banks, and the National Credit Union Administration Central Liquidity Facility with respect to the crediting and distribution of earnings attributable to balances maintained, in accordance with subsection (c)(1)(A), in a Federal Reserve bank by any such entity on behalf of depository institutions.
`(C) DEPOSITORY INSTITUTIONS DEFINED- For purposes of this paragraph, the term `depository institution', in addition to the institutions described in paragraph (1)(A), includes any trust company, corporation organized under section 25A or having an agreement with the Board under section 25, or any branch or agency of a foreign bank (as defined in section 1(b) of the International Banking Act of 1978).'.
(b) Conforming Amendment- Section 19 of the Federal Reserve Act (12 U.S.C. 461) is amended--
(1) in subsection (b)(4)--
(A) by striking subparagraph (C); and
(B) by redesignating subparagraphs (D) and (E) as subparagraphs (C) and (D), respectively; and
(2) in subsection (c)(1)(A), by striking `subsection (b)(4)(C)' and inserting `subsection (b)'.
SEC. 202. INCREASED FLEXIBILITY FOR THE FEDERAL RESERVE BOARD TO ESTABLISH RESERVE REQUIREMENTS.
Section 19(b)(2)(A) of the Federal Reserve Act (12 U.S.C. 461(b)(2)(A)) is amended--
(1) in clause (i), by striking `the ratio of 3 per centum' and inserting `a ratio of not greater than 3 percent (and which may be zero)'; and
(2) in clause (ii), by striking `and not less than 8 per centum,' and inserting `(and which may be zero),'.
SEC. 203. EFFECTIVE DATE.
The amendments made by this title shall take effect October 1, 2011.

Okay, so we can see here that 201 and 202 amend 12 U.S.C. 461. If we take 12 U.S.C. 461 section 19 (b) in the order of the amendments, the first is Section 19(b)(2)(A).

(2) (A) Each depository institution shall maintain reserves against its transaction accounts as the Board may prescribe by regulation solely for the purpose of implementing monetary policy—
(i) in the ratio of 3 per centum for that portion of its total transaction accounts of $25,000,000 or less, subject to subparagraph (C); and
(ii) in the ratio of 12 per centum, or in such other ratio as the Board may prescribe not greater than 14 per centum and not less than 8 per centum, for that portion of its total transaction accounts in excess of $25,000,000, subject to subparagraph (C).

this section is amended—
(1) in subsection (b)(2)(A), by striking "the ratio of 3 per centum" and inserting "a ratio of not greater than 3 percent (and which may be zero)" in clause (i) and by striking "and not less than 8 per centum," and inserting "(and which may be zero)," in clause (ii);

Notice the change from a set percentage to a percentage "not greater than" and "which may be zero". So depository institutions no longer have to maintain reserves against their transaction accounts. What is a depository institution? What is a transaction account?

(1) The following definitions and rules apply to this subsection, subsection (c) of this section, and
sections 248–1, 248a, 342, 360, and 412 of this title:
(A) The term "depository institution" means—
(i) any insured bank as defined in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813] or any bank which is eligible to make application to become an insured bank under section 5 of such Act [12 U.S.C. 1815];
(ii) any mutual savings bank as defined in section 3 of the Federal Deposit Insurance Act or any bank which is eligible to make application to become an insured bank under section 5 of such Act;
(iii) any savings bank as defined in section 3 of the Federal Deposit Insurance Act or any bank which is eligible to make application to become an insured bank under section 5 of such Act;
(iv) any insured credit union as defined in section 1752 of this title or any credit union which is eligible to make application to become an insured credit union pursuant to section 1781 of this title;
(v) any member as defined in section 1422 of this title;
(vi) any savings association (as defined in section 3 of the Federal Deposit Insurance Act
[12 U.S.C. 1813]) which is an insured depository institution (as defined in such Act [12 U.S.C. 1811 et seq.]) or is eligible to apply to become an insured depository institution under the Federal Deposit Insurance Act; and (vii) for the purpose of sections 248–1, 342 to 347, 347c, 347d, and 372 of this title any association or entity which is wholly owned by or which consists only of institutions
referred to in clauses (i) through (vi).

So pretty much any place that handles deposits, most people just call them banks.

(C) The term "transaction account" means a deposit or account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making payments or transfers to third persons or others. Such term includes demand deposits, negotiable order of withdrawal accounts, savings deposits subject to automatic transfers, and share draft accounts.

This basically means bank accounts.

So there it is, banks no longer have to keep even a small amount of peoples bank accounts available as cash. They don't have to fail, they can just say they are out of cash today. Your money is still there, FDIC does not kick in, but they just stop giving out money.

Okay, what else does the date change put into effect 3 years early?

(2) in subsection (b)(4), by striking subparagraph (C) and redesignating subparagraphs (D) and (E) as subparagraphs
(C) and (D), respectively

What was subparagraph (C)? In order to understand subparagraph (C) we need to see the whole paragraph (4).

(4) (A) The Board may, upon the affirmative vote of not less than 5 members, impose a supplemental reserve requirement on every depository institution of not more than 4 percentum of its total transaction accounts. Such supplemental reserve requirement may be imposed only if—
(i) the sole purpose of such requirement is to increase the amount of reserves maintained to a level essential for the conduct of monetary policy;
(ii) such requirement is not imposed for the purpose of reducing the cost burdens resulting from the imposition of the reserve requirements pursuant to paragraph (2);
(iii) such requirement is not imposed for the purpose of increasing the amount of balances needed for clearing purposes; and
(iv) on the date on which the supplemental reserve requirement is imposed, except as provided in paragraph (11), the total amount of reserves required pursuant to paragraph
(2) is not less than the amount of reserves that would be required if the initial ratios specified in paragraph (2) were in effect.
(B) The Board may require the supplemental reserve authorized under subparagraph (A) only after consultation with the Board of Directors of the Federal Deposit Insurance Corporation,
the Director of the Office of Thrift Supervision, and the National Credit Union Administration Board. The Board shall promptly transmit to the Congress a report with respect to any exercise
of its authority to require supplemental reserves under subparagraph (A) and such report shall state the basis for the determination to exercise such authority.
(C) The supplemental reserve authorized under subparagraph (A) shall be maintained by the Federal Reserve banks in an Earnings Participation Account. Except as provided in subsection (c)(1)(A)(ii) of this section, such Earnings Participation Account shall receive earnings to be paid by the Federal Reserve banks during each calendar quarter at a rate not more than the rate earned on the securities portfolio of the Federal Reserve System during the previous calendar quarter. The Board may prescribe rules and regulations concerning the payment of earnings on Earnings Participation Accounts by Federal Reserve banks under this paragraph.
(D) If a supplemental reserve under subparagraph (A) has been required of depository institutions for a period of one year or more, the Board shall review and determine the need for continued maintenance of supplemental reserves and shall transmit annual reports to the Congress regarding the need, if any, for continuing the supplemental reserve.
(E) Any supplemental reserve imposed under subparagraph (A) shall terminate at the close of the first 90-day period after such requirement is imposed during which the average amount of reserves required under paragraph (2) are less than the amount of reserves which would be required during such period if the initial ratios specified in paragraph (2) were in effect.

So they make every bank pay into a reserve fund. It is maintained in an Earnings Participation Account. By deleting subparagraph (C) they abolished that account. They no longer have to maintain the account or pay the earnings. They can still impose a supplemental reserve requirement, they just don't have to pay any earnings. I wonder what happened to the funds in that account. Remember, this went into effect yesterday.
Okay, what's next? Ah yes, they added a whole new paragraph 12!

"(12) Earnings on balances.—
"(A) In general.—Balances maintained at a Federal Reserve bank by or on behalf of a depository institution may receive earnings to be paid by the Federal Reserve bank at least once each calendar quarter, at a rate or rates not to exceed the general level of short-term interest rates.
"(B) Regulations relating to payments and distributions.—The Board may prescribe regulations concerning—
"(i) the payment of earnings in accordance with this paragraph;
"(ii) the distribution of such earnings to the depository institutions which maintain balances at such banks, or on whose
behalf such balances are maintained; and
"(iii) the responsibilities of depository institutions, Federal Home Loan Banks, and the National Credit Union Administration Central Liquidity Facility with respect to the crediting and distribution of earnings attributable to balances maintained, in accordance with subsection (c)(1)(A), in a Federal Reserve bank by any such entity on behalf of depository institutions.
"(C) Depository institutions defined.—For purposes of this paragraph, the term 'depository institution', in addition to
the institutions described in paragraph (1)(A), includes any trust company, corporation organized under section 25A
[12 U.S.C. 611 et seq.] or having an agreement with the Board under section 25 [12 U.S.C. 601 et seq.], or any branch
or agency of a foreign bank (as defined in section 3101 of this title).";
(4) in subsection (c)(1)(A), by striking "subsection (b)(4)(C)" and inserting "subsection (b)".

So paragraph 12 deals with earnings on balances. So basically any money the Federal Reserve bank has from other banks can make earnings and the Fed can decide how and if those earnings are paid out.

Remember the definition of depository institutions? Of course you do, but we have an additional definition just for this paragraph, everything you already know with the addition of foreign banks. So what you ask, if they deposit money in the Fed bank, shouldn't they make money. Well, maybe, but yesterday they did not.

Remember, this entire paragraph 12 was not supposed to go into effect until 2011.

Foreign banks were not in the definition of depository institutions until they changed the effective date from October1, 2011 to October 1, 2008.

If we rewrite the opening of the paragraph to use the words "foreign banks" it reads

Balances maintained at a Federal Reserve bank by or on behalf of a foreign banks may receive earnings to be paid by the Federal Reserve bank at least once each calendar quarter, at a rate or rates not to exceed the general level of short-term interest rates.

So, to summarize, by changing the effective date the following is now in effect.

Banks don't have to have cash on hand.

The Fed does not have to maintain an Earnings Protection account for the supplemental reserve fees they charge banks which means they don't have to give any of the money back to those banks.

They now include foreign banks as institutions they can pay earnings to. Let's not forget, earnings is really just more American debt. Federal Reserve Notes are really debt, but that's a topic for another monster blog entry.

Anyway, all of this from one puny and innocuous section in the ''Emergency Economic Stabilization Act of 2008''.

[glenn kangiser]

innocuous 

[harry51]

Needless to say, 3% and smaller reserve requirements is massively inflationary. Better spend it now while it will still buy something! They're trying to increase the amount of liquidity available, and increase its velocity, it appears to me.

[ScottA]

I hate being right. Kiss your money goodbye. The worlds largest bank robbery is in progress and your bankers and government are the robbers.