My “favorite troll” is back with more conspiracy theory crap. He’s been missing in action for a while, probably because he could post anonymously at the Sentinel’s online edition. But evidently the Sentinel banned anonymous posting, so he had to come back to my stomping grounds. Welcome back, Kevin, but you are still misguided and misinformed.

Just for you, Kevin, here are my responses to your comment and questions:

First CAMELS was created by banking regulators, not legislators, so it is hard to call it government speak. Your response was that of a typical wingnut: If you know nothing about the subject, make fun of it. CAMELS is a tool that allows regulators to measure the safety and soundness of a bank. It is designed to protect YOUR money. Learn about it instead of mocking it.

Kevin’s Question: Can you explain fractional reserve banking used today by all banks and how it works?

Claudette’s Answer: Banks are required to keep a percentage of their depositor’s money in reserve for purposes of liquidity. The amount of money that is kept in reserve is dictated by a formula where the riskier a bank’s portfolio of investments (loans and bonds) is, the higher the reserves. This is designed to keep your money available. Banks should be able to honor their depositors’ demands for their own money as soon as a draft of check is presented. Hence there are reserve requirements, forcing liquidity on the bank.

Without reserves, you might present a check and the bank would tell you to wait for 30 years until the mortgage loan they made with your money is paid back. As a bank depositor you should be glad there are reserve requirements.

Because every depositor does not want all of their money at the same time, there is money above and beyond the reserve requirement deposited in banks. That money is used by banks to invest in AAA-rated investments and/or U.S. Treasuries and/or loans. There is nothing sinister about making loans, which does create “money.” I’m sure you got a loan to buy that SUV you drive around town.

Kevin’s Question: Can you explain FIAT money and what or who backs it since it is no longer backed by gold or silver or anything tangible?

Claudette’s Answer: FIAT money is money that is only backed by the full faith and credit of the government issuing it. (That’s is one of the reasons it was so stupid of the Tea Party to celebrate the downgrading of U.S. debt.) We’ve been using FIAT money since we went off the gold standard, under Richard Nixon (a Republican) in 1971.

If it ain’t broke, why fix it? So long as people are willing to accept dollar bills, checks, and electronic blips to pay for goods and services, who gives a rat’s ass that there isn’t gold or silver sitting in Fort Knox in an amount equal to the money in circulation. Seems counterproductive and more like a Pirate’s treasure to require a government to hoard gold, silver, and jewels.  Get back to me about the problems with FIAT money when you can’t use the cash or credit cards in your wallet to buy something. In the meanwhile I’m going to worry about more pressing issues.

Kevin’s Question: Do you know who is really behind the Federal Reserve Cartel and who actually created it and why?

Claudette’s Answer: Your tinfoil hat is really showing here, Kevin. Federal Reserve Cartel? You’re about to be swallowed by a Ron Paul myth that the Federal Reserve Bank was created and is owned by a bunch of foreign bankers.

Let’s start with who owns the Fed. The Federal Reserve Bank is technically owned by member banks, which are required to buy stock in order to use Fed services. But this stock isn’t like any you’ve ever owned. For starters, you can’t sell it to anyone else. Fed profits, over and above a minimal amount that is paid to member banks, go into the U.S. Treasury. Member banks don’t get to vote on who sits on the Federal Reserve Bank Board of Directors.

The board was set up to be independent of both congressional interference and member bank interference. The Chairman of the Board of the Fed is appointed by the President of the United States and confirmed by congress. I’ll grant you that member banks have greater access to congress than the average depositor does, but for damn sure, the Fed is controlled Americans who are liked by American politicians, not by foreign bankers. American bankers aren’t all that fond of the regulations imposed on them by the Fed, either—they are designed to protect depositor’s money, not bank profits.

And this brings me back to the Occupy Wall Street protests, which have now expanded into several major money centers, and have attracted youth, the unemployed, the Marines, and organized labor. I think we are beginning to see the protests of the sixties all over again. Only this time they are armed with twitter and facebook. Is this the Wall Street Fall?

Homework:

Everything You've Never Wanted to Know about the Federal Reserve Cartel

Forbes Thoughts on Occupy Wall Street

Official Occupy Wall Street Website

Two stories caught my eye today, both related to our financial markets. One was about the merger of a European and US derivatives exchange that may require SEC approval. The other was a story about the Obama administration requesting additional funding for the SEC.

For a very long time, I’ve been saying that blaming the FED for the melt-down of the financial markets was silly, unless the SEC shared in the blame. The Fed is primarily charged with regulating some commercial banks in order to keep inflation in check and the financial system healthy. Their mission became a little fuzzy when investment banks and commercial banks started looking a lot alike. So, it is no surprise that journalists started simplifying their writing to use the generic term “bank” regardless of its traditional business lines. On the other hand, the SEC is charged with protecting investors and making sure that public financial markets are sound.

For years the SEC has been under staffed and underfunded. The budget submitted by President Obama yesterday proposes a 28% increase in funding for the SEC. Republicans, on the other hand, want to slash funding to the agency. The SEC was charged with implementing some of the financial reforms mandated by the last Congress in a bill sponsored by Dodd in the Senate and Frank in the House. But the increase recommended by Obama for 2011 has never passed, in part because the 2011 budget has never passed. The head of the SEC, Mary Shapiro, says that they don’t have enough money to do their job.

Shapiro estimates that it will take an additional 800 employees to implement the new regulations in the Dodd-Frank bill. The Los Angeles Times reports: Schapiro testified last summer that the SEC needed to hire 800 more employees to implement new regulations called for in the Dodd-Frank financial overhaul law. She said Friday that the lack of additional money has "hampered our ability to do what investors and capital markets deserve."

So nothing new here. The SEC is still under staffed and underfunded. But you have to wonder who the Republicans represent. It seems that they don’t support protections for consumers or protections for investors or stable financial markets. I think they’ve gone stark raving mad.

Homework

Deutsche Boerse & NYSE

Mission of Federal Reserve Bank System

Mission of SEC

Obama's Budget Increases Funding for the SEC

Mary Shapiro Talks About the SEC Budget

Summary of Dodd Frank Bill