The Anti-Money Laundering Act would expose the owners of shell companies now sits alone on a shelf in the US Senate while the Federal Reserve shrugs its shoulders in the face of blatant manipulation by the too-big-to-fail banks.
by Raul Diego
Part 3 - Gaming the system
After the crash of 2008, the Federal Reserve instituted so-called “stress tests” on banks and other financial institutions that had then been deemed “too big to fail”. A formal list has been compiled since 2011 and they are now called by their official designation, Global Systemically Important Financial Institutions (G-SIFIs).
These banks and insurers must report their levels of exposure to the Fed, which then assesses the need for more or less control over the institution’s financial activity or penalties through the results of a stress test (simulations run on their balance sheets). An annual stress test report is published by the Fed, which includes the capital requirements of each institution. But, it has now come to light that virtually all of the G-SIFI banks – JP Morgan Chase, HSBC and Deutsche Bank among others – have been cooking the books to fool the stress test in order to reduce their capital requirements.
A “bombshell” report by the American central bank reveals that the Fed is aware of the pattern being followed by the big banks to game the stress test; which they do by magically dropping their over-the-counter derivatives exposure by Trillions of dollars every fourth quarter and just as magically having it restored by the end of the following first quarter of the next auditing period. The practice, which seems to be tolerated by the Fed “as a legitimate means of reducing its capital requirements” makes a mockery of the entire point for stress testing, which is to mitigate systemic risk.