Your Bank Can Sell Your Deposit, Did You Know This?

Yeah, it’s called a brokered deposit. Usually done on large deposits, but banks can also lump several deposits together and sell them to a broker, who in turn sells them to untraceable buyers.

Ten states concentrated in the western, midwestern, and southeastern United States—all areas where the housing market had experienced strong growth in the prior decade—experienced 10 or more commercial bank or thrift (bank) failures between 2008 and 2011. The failures of the smaller banks (those with less than $1 billion in assets) in these states were largely driven by credit losses on commercial real estate (CRE) loans. The failed banks also had often pursued aggressive growth strategies using nontraditional, riskier funding sources and exhibited weak underwriting and credit administration practices. The rapid growth of CRE portfolios led to high concentrations that increased the banks’ exposure to the sustained real estate and economic downturn that began in 2007. GAO’s econometric model revealed that CRE concentrations and the use of brokered deposits, a funding source carrying higher risk than core deposits, were associated with an increased likelihood of failure for banks across all states during the period.

http://www.gao.gov/products/GAO-13-71

 

Definition of a Brokered Deposit.

A large-denomination bank deposit that is sold by a bank to a brokerage, which then divides it into smaller pieces for sale to its customers.

http://www.investopedia.com/terms/b/brokereddeposit.asp

 

Risks of a Brokered Deposit?

Money laundering and terrorist financing risks arise because the bank may not know the ultimate beneficial owners or the source of funds. The deposit broker could represent a range of clients that may be of higher risk for money laundering and terrorist financing (e.g., nonresident or offshore customers, politically exposed persons (PEP), or foreign shell banks).

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The amount of Brokered Deposit a bank holds is a good sign of the health of the bank. The less they have in brokered deposits, the better off the bank is.

High levels of brokered deposits were a contributing factor in both the savings and loan crisis of the late 1980s and the most recent financial crisis. As a result, many investors view high levels of brokered deposits as indicating weak or overly aggressive banks.

This is not necessarily the case, however. Many large banks have chosen to access deposits through brokers as a means of reducing the internal expenses associated with direct marketing.

At Morgan Stanley (MS) almost 100% of the deposits are classified as brokered. At Goldman Sachs (GS) it’s over 50%, and at American Express (AXP) and Discover Financial Services (DFS) it’s over 40%.

http://realmoney.thestreet.com/articles/01/16/2013/understanding-brokered-deposits

The FDIC keeps a list of failed banks from the year 2000.

http://www.fdic.gov/bank/individual/failed/banklist.html

I made a chart, for those who like visual representation.

Do you see what’s happening here folks? Bigger banks, are sucking up smaller banks, thanks to the Basel III system (gnomes of Zurich), so that eventually, there will only be one bank. The NWO bank.