Have you heard of it?

 This past weekend, I was at an Austrian economics event that was by far one of the best I've ever attended.  During this event, L. Carlos Lara, discussed The Dodd Frank Act.  Have you heard of it?  Most people haven't.  Do you understand it?  More than likely not, because it's a 1,000 page document written in bankruptcy law language and we all know how frustrating it can be to read a legal document.  I feel like they're just trying to confuse everyone.  Do you, as a normal everyday citizen, need to know about it?  YES!

Carlos was the perfect person to speak on this, because his career is based on helping distressed companies restructure and avoid Chapter 11 bankruptcy.  He deals with this language everyday and has for at least the last 40 years.

After the crash in 2008, Congress knew that the American people would not tolerate another bailout.  They suckered everyone once, but knew it wouldn't work again.  So in 2010, they passed the Dodd Frank Act.  Inside this document lies the Street Reform and Consumer Protection Act.  One important fact I need all of you to remember is that once you put your money on deposit with a bank, it's no longer yours.  You are now a creditor to the bank and they can loan out your deposits.  They are only required to keep 10% of the deposits as reserves.  The rest can be loaned out.  That's quite a lot of money to loan out.  

The gist of it is as follows:  In the next crisis, there will be no bailouts.  Any accounts you have with a bank that's over leveraged, will be frozen.  The banks will close until further notice and will negotiate behind closed doors as to what happens in order to save the bank.  In essence, the bank will use your deposits to save themselves.  Stockholders and you, the creditors, will be given notes for the future.  Might I add that these paper notes are equity in a failed bank!  What a nice present to you and your family!  What would happen to your business if you couldn't get to your money for 2 days, 10 days or even 15?  What would happen if you couldn't pay your bills as a family, had no cash on hand to get the groceries or your baby's formula?  Let that one sink in.  Just a few more tidbits of interesting info:

* The FDIC insures up to $250,000.00.  However, in the last crash, 1200 out of the 3500 FDIC insured banks went underwater.  If you click that link there's a list of them.  There's not very many until 2007, then it explodes.  The FDIC went $9 billion in the hole and had to go to the US treasury (taxpayers) to get a loan.

*The FDIC now has $47.2 billion in it's reserves, but the total deposits in the US is $10.1 trillion.  Do the math.

*  They can only cover 1/4 of 1% of deposits.

All of this info and the resources are in Mr. Lara's article that I've linked for you.  It's a fascinating article and one I highly encourage you read.  This scenario has already occurred in Cypress and he discusses what happened to them.  It's not a pretty outcome.  Know your options.