Re: People are Still Wondering

Posted by Thanks to OWR on December 29, 1998 at 09:53:09:

In Reply to: People are Still Wondering posted by Allen Greenspann on December 24, 1998 at 09:48:55:

This explanation was taken from another board. Maybe it will shed some light for the ignorant.

A PERSPECTIVE FOR UNDERSTANDING

As truth is a compilation of confirmed fact, the following facts relative to the Federal Reserve may be of interest.

Although the Federal Reserve System was created by an act of Congress in 1913, it is owned by stockholders of its National Banks who subscribe to the FRS. The Federal Reserve functions as the central bank for the U.S. with ownership in private, non-government hands, therefore, the Federal government of the U.S. does not own one share of its stock. The only involvement of the U.S. government is with the appointment by the President of the Federal Reserve Board and its Chairman, which must be confirmed by the U.S. Senate. Consequently, the Federal Reserve has no legal authority outside of the U.S. and acts officially in the best interest of the U.S. financial community.

The above stated structure requires an explanation regarding authority relative to the Feds influence beyond its borders. This international influence is exerted through the Bank for International Settlement (BIS), Basel Switzerland in which the Federal Reserve System is its largest shareholder along with the Bank of England, Bank of France, The Central Bank of Belgium, Central Bank of Germany, Central Bank of Japan, J.P. Morgan, The National Bank of New York, First National Bank of Chicago, the central banks of Sweden, Romania, Poland the Netherlands and Switzerland to name a few. Approximately 16% of BIS is owned by private shareholders with the BIS functioning as the central bank of all the worlds central banks. As the largest shareholder in the central bank to the worlds central banks, the Feds influence is factually evident and offers an explanation of its involvement with private placement, off-ledger trading. As with the World Bank Organization and the International Monetary Fund the Fed has no legal authority but exerts considerable influence.

The events leading to the creation of off ledger trading began in 1978 when the Federal government was effectively bankrupt and subject to control by the New York banking community in which it was indebted in excess of one-half trillion dollars. This debt required servicing at a cost of one billion dollars of additional borrowing each week to keep the government operational. This in turn created the additional problem in that the banks were starting to run out of hard currency. It was concluded that the printing of additional money through the Federal Reserve would lead to runaway inflation in the U.S. with substantial effect on the world economy. The alternative solution to tap a new source of existing dollar currency savings on a large scale was available in the Middle East as a result of the oil crisis of the 70's which we all can substantiate as a factual occurrence. At that, time the oil producing countries controlled US dollar notes in excess of one-half trillion U.S. dollars. To put this into perspective this almost represented an amount equal to the entire value of all shares issued by all corporations listed on the New York stock exchange at the end of 1978.

Adding to this dilemma was the fact that in early 1979, of the twenty largest banks in the world, only three were U.S. registered. Germany had six, Japan, five, France, four and Great Britain, two. The three U.S. banks were Citicorp, Bank of America and Chase Manhattan. Citicorp was one of the largest banks relative to world standing and the largest player in the Eurodollar (jargon for U.S. dollar currency in circulation outside of the U.S.) interbank market. Factual data supports the statement that there was $1.5 Trillion (1,500 billion) in Eurodollars in circulation outside U.S. borders during this time period.

As a result, it was further determined that a number of monetary mechanisms were necessary to attract investment and control of these dollars under contract at free market rates above normal bank rates into the system. This in turn led to the development of both the Shell Branch Bank and the Multinational Consortium Bank. A shell branch bank is not a physical bank but a device used to get around U.S. Government regulations.

Shell branches are actually run out of New York and London for the purpose of Eurodollar way stations. You may have wondered why Citibank would have a branch office in the Bahamas or why major banks around the world have opened branch offices in the Bahamas, Cayman Islands, Panama and other obscure islands where local populace deposits are not the main attraction. Other dollars are controlled and brought under the U.S. roof by Multinational bank consortiums such as the marriage of Manufacturers Hanover and N.M. Rothschild to form Manufacturers Hanover Ltd.

To attract and control eurodollar currency a facility was required to process off balance sheet underwriting commitments by banks resulting in the creation of Note Issuance Facilities (NIF's) in 1984. Under this arrangement, the banks simply act as a marketing agent for their own issue of Medium Term Notes (MTN's) which are mainly Eurodollar denominated and constitute a legally binding commitment.

MTN instruments are issued in face values of 10, 25, 50 and 100 million USD in essentially three types of guarantee as (1) ten year term with a coupon of seven and one half percent per annum, payable in arrears, (2) one year term with an eight percent annual coupon payable in arrears, and (3) zero-coupon one year instruments.

The European banks that issue the MTN's guarantees are pre-approved by the Federal Reserve and BIS and are rotated into and out of the system as the market dictates. The instruments are brought into existence as fresh cut which indicates that the instruments do not yet have an I.S.I.N. or CUSIP number and are therefore not screenable. These instruments are commonly referred and defined as collateral in the vernacular. The only authorized buyers for fresh cut paper are persons entitled master commitment holders who are granted this authority by the Federal Reserve on an annual basis. The granting and or renewal of master commitments are based on acceptable performance subject to fulfillment of an annual quota by the master commitment holder. As of 1995, there were ten master commitments issued in the United States under control of three entities. There were ten master commitments issued in Great Britain in that same year. Master Commitment Holders has the right and authority to appoint collateral commitment holders who have an exclusive right to purchase the instruments from the MCH at favorable discounted prices. Below this level are entities who are granted Fed Numbers (commonly referred to as a license) which provide them with priority rights of purchase as issued by the collateral commitment holder.
The collateral commitment or Fed number holders may sell the instruments onward as live seasoned) instruments. Once sold, the MTN instrument is assigned an I.S.I.N. or CUSIP identification number making the instrument suitable for screening on either Bloomberg or Reuters. These instruments have an active secondary market, which is dominated by institutional buyers who wish to buy and hold the instruments until maturity while collecting their annual coupon interest.

With respect to the private investor market, all participants in private placement investment programs CANNOT trade for profit only. A substantial percentage of the earnings derived from trading must be applied to project financing under this scenario. All elements of these transactions are accomplished by arm's length transaction and not directly involving the Federal Reserve, which prefers to remain as an advisor. Additionally, the minimum entry for private placement begins at $100MM dollars with all other amounts beginning at $10MM placed under syndication to make up the $100MM minimum.

A $100MM deposit supported by humanitarian project funding will gross 40.5% per day and net 30.0% per day to the account after invoicing and clearing. If this were allowed to ramp up each day (no drawdown of profit) the compounding effect over, a 10-day contract would yield a net of $6,364,676,332.00 with a transaction fee cost of $2,121,559,777. In reality, the Fed limits or caps the amount of profit allowed to be earned by the investor on any one occurrence subject to a number of factors. The above limit may be allowed in the case of project funding for a government's hydroelectric dam costing 4.0 billion dollars along with a water filtration system, hospitals, etc. You should also note that the Fed requires an accounting of those project funds such that they are released only against certified invoice by the accounting entity. The approval for a private investor to receive those levels of funds as profit would never be granted.

The need for private capital investment is justified on the basis that under BIS regulation, banks cannot sell their authorized issues to each other. Certain institutional investors such as U.S. pension funds are prohibited under ERISA from purchasing other than live MTN's or registered securities, which are screenable. A fresh cut note can only become live or seasoned after its title changes and it is registered. The only catalyst available to trigger the purchase of fresh-cut collateral is private investor funds in which the sale of fresh cut collateral at 58% of face is electronically invoiced and resold as live notes at 98.5% of face and as a function of title change.

Considering the 10MM investor whose funds are placed under a syndicated contract, if 8 other investors make up the 100MM minimum, the 30% net earnings per day would allocate a percentage for project funding and a percentage share to each investor. This would depend on the projects being funded under the program.

Assuming a 50% allocation for the project, each investor would be pro-rated and may receive an average yield of from 0.74% to 1.66% per day as a simplified example. This yield may be stated as a minimum but is usually based on a best effort basis. The investor is rewarded handsomely for participation with the majority of profits going to non-recourse project funding.



Follow Ups:


21 1419,1426,1446,1458,20> Thanks to OWR>
Re: People are Still Wondering>
December 29, 1998 at 09:53:09>


Re: People are Still Wondering size=50>



: This explanation was taken from another board. Maybe it will shed some light for the ignorant.

A PERSPECTIVE FOR UNDERSTANDING

As truth is a compilation of confirmed fact, the following facts relative to the Federal Reserve may be of interest.

Although the Federal Reserve System was created by an act of Congress in 1913, it is owned by stockholders of its National Banks who subscribe to the FRS. The Federal Reserve functions as the central bank for the U.S. with ownership in private, non-government hands, therefore, the Federal government of the U.S. does not own one share of its stock. The only involvement of the U.S. government is with the appointment by the President of the Federal Reserve Board and its Chairman, which must be confirmed by the U.S. Senate. Consequently, the Federal Reserve has no legal authority outside of the U.S. and acts officially in the best interest of the U.S. financial community.

The above stated structure requires an explanation regarding authority relative to the Feds influence beyond its borders. This international influence is exerted through the Bank for International Settlement (BIS), Basel Switzerland in which the Federal Reserve System is its largest shareholder along with the Bank of England, Bank of France, The Central Bank of Belgium, Central Bank of Germany, Central Bank of Japan, J.P. Morgan, The National Bank of New York, First National Bank of Chicago, the central banks of Sweden, Romania, Poland the Netherlands and Switzerland to name a few. Approximately 16% of BIS is owned by private shareholders with the BIS functioning as the central bank of all the worlds central banks. As the largest shareholder in the central bank to the worlds central banks, the Feds influence is factually evident and offers an explanation of its involvement with private placement, off-ledger trading. As with the World Bank Organization and the International Monetary Fund the Fed has no legal authority but exerts considerable influence.

The events leading to the creation of off ledger trading began in 1978 when the Federal government was effectively bankrupt and subject to control by the New York banking community in which it was indebted in excess of one-half trillion dollars. This debt required servicing at a cost of one billion dollars of additional borrowing each week to keep the government operational. This in turn created the additional problem in that the banks were starting to run out of hard currency. It was concluded that the printing of additional money through the Federal Reserve would lead to runaway inflation in the U.S. with substantial effect on the world economy. The alternative solution to tap a new source of existing dollar currency savings on a large scale was available in the Middle East as a result of the oil crisis of the 70's which we all can substantiate as a factual occurrence. At that, time the oil producing countries controlled US dollar notes in excess of one-half trillion U.S. dollars. To put this into perspective this almost represented an amount equal to the entire value of all shares issued by all corporations listed on the New York stock exchange at the end of 1978.

Adding to this dilemma was the fact that in early 1979, of the twenty largest banks in the world, only three were U.S. registered. Germany had six, Japan, five, France, four and Great Britain, two. The three U.S. banks were Citicorp, Bank of America and Chase Manhattan. Citicorp was one of the largest banks relative to world standing and the largest player in the Eurodollar (jargon for U.S. dollar currency in circulation outside of the U.S.) interbank market. Factual data supports the statement that there was $1.5 Trillion (1,500 billion) in Eurodollars in circulation outside U.S. borders during this time period.

As a result, it was further determined that a number of monetary mechanisms were necessary to attract investment and control of these dollars under contract at free market rates above normal bank rates into the system. This in turn led to the development of both the Shell Branch Bank and the Multinational Consortium Bank. A shell branch bank is not a physical bank but a device used to get around U.S. Government regulations.

Shell branches are actually run out of New York and London for the purpose of Eurodollar way stations. You may have wondered why Citibank would have a branch office in the Bahamas or why major banks around the world have opened branch offices in the Bahamas, Cayman Islands, Panama and other obscure islands where local populace deposits are not the main attraction. Other dollars are controlled and brought under the U.S. roof by Multinational bank consortiums such as the marriage of Manufacturers Hanover and N.M. Rothschild to form Manufacturers Hanover Ltd.

To attract and control eurodollar currency a facility was required to process off balance sheet underwriting commitments by banks resulting in the creation of Note Issuance Facilities (NIF's) in 1984. Under this arrangement, the banks simply act as a marketing agent for their own issue of Medium Term Notes (MTN's) which are mainly Eurodollar denominated and constitute a legally binding commitment.

MTN instruments are issued in face values of 10, 25, 50 and 100 million USD in essentially three types of guarantee as (1) ten year term with a coupon of seven and one half percent per annum, payable in arrears, (2) one year term with an eight percent annual coupon payable in arrears, and (3) zero-coupon one year instruments.

The European banks that issue the MTN's guarantees are pre-approved by the Federal Reserve and BIS and are rotated into and out of the system as the market dictates. The instruments are brought into existence as fresh cut which indicates that the instruments do not yet have an I.S.I.N. or CUSIP number and are therefore not screenable. These instruments are commonly referred and defined as collateral in the vernacular. The only authorized buyers for fresh cut paper are persons entitled master commitment holders who are granted this authority by the Federal Reserve on an annual basis. The granting and or renewal of master commitments are based on acceptable performance subject to fulfillment of an annual quota by the master commitment holder. As of 1995, there were ten master commitments issued in the United States under control of three entities. There were ten master commitments issued in Great Britain in that same year. Master Commitment Holders has the right and authority to appoint collateral commitment holders who have an exclusive right to purchase the instruments from the MCH at favorable discounted prices. Below this level are entities who are granted Fed Numbers (commonly referred to as a license) which provide them with priority rights of purchase as issued by the collateral commitment holder.
The collateral commitment or Fed number holders may sell the instruments onward as live seasoned) instruments. Once sold, the MTN instrument is assigned an I.S.I.N. or CUSIP identification number making the instrument suitable for screening on either Bloomberg or Reuters. These instruments have an active secondary market, which is dominated by institutional buyers who wish to buy and hold the instruments until maturity while collecting their annual coupon interest.

With respect to the private investor market, all participants in private placement investment programs CANNOT trade for profit only. A substantial percentage of the earnings derived from trading must be applied to project financing under this scenario. All elements of these transactions are accomplished by arm's length transaction and not directly involving the Federal Reserve, which prefers to remain as an advisor. Additionally, the minimum entry for private placement begins at $100MM dollars with all other amounts beginning at $10MM placed under syndication to make up the $100MM minimum.

A $100MM deposit supported by humanitarian project funding will gross 40.5% per day and net 30.0% per day to the account after invoicing and clearing. If this were allowed to ramp up each day (no drawdown of profit) the compounding effect over, a 10-day contract would yield a net of $6,364,676,332.00 with a transaction fee cost of $2,121,559,777. In reality, the Fed limits or caps the amount of profit allowed to be earned by the investor on any one occurrence subject to a number of factors. The above limit may be allowed in the case of project funding for a government's hydroelectric dam costing 4.0 billion dollars along with a water filtration system, hospitals, etc. You should also note that the Fed requires an accounting of those project funds such that they are released only against certified invoice by the accounting entity. The approval for a private investor to receive those levels of funds as profit would never be granted.

The need for private capital investment is justified on the basis that under BIS regulation, banks cannot sell their authorized issues to each other. Certain institutional investors such as U.S. pension funds are prohibited under ERISA from purchasing other than live MTN's or registered securities, which are screenable. A fresh cut note can only become live or seasoned after its title changes and it is registered. The only catalyst available to trigger the purchase of fresh-cut collateral is private investor funds in which the sale of fresh cut collateral at 58% of face is electronically invoiced and resold as live notes at 98.5% of face and as a function of title change.

Considering the 10MM investor whose funds are placed under a syndicated contract, if 8 other investors make up the 100MM minimum, the 30% net earnings per day would allocate a percentage for project funding and a percentage share to each investor. This would depend on the projects being funded under the program.

Assuming a 50% allocation for the project, each investor would be pro-rated and may receive an average yield of from 0.74% to 1.66% per day as a simplified example. This yield may be stated as a minimum but is usually based on a best effort basis. The investor is rewarded handsomely for participation with the majority of profits going to non-recourse project funding.