Surprise! Debt-ceiling deal gives Obama a blank check: Loophole will allow government to spend WITHOUT LIMIT until February

By David Martosko

It’s the ultimate sweetheart deal for a free-spending federal government: Wednesday night’s debt deal didn’t actually raise the limit on America’s credit card, but instead removed it entirely until February 7, 2014.

Whether through legislative sleight-of-hand or something less sinister, the law of the land now permits the U.S. to run up new debts for 16 weeks without consequences, and forbids the Treasury Department from enforcing the debt limit that ordinarily keeps spending from spiraling out of control.

Some observers noted on Wednesday that when Congress burned the midnight oil to debate a deal that would save the U.S. from crashing through its existing $16.7 trillion debt ceiling and risking a credit default, there was no debate over exactly how far to raise it.

House and Senate negotiators only discussed how long the agreement would last.

The result has left the Treasury free to accumulate as much debt as it needs to until the deal expires, The Daily Caller noted on Thursday.

The Bipartisan Policy Center estimated that if the government had extended its debt ceiling in this fashion through the end of 2014, as one Republican proposal suggested, the federal government’s debt would have ballooned by $1.1 trillion.

At that rate, the national debt will likely grow by at least $282.5 billion on its own by the time Feb. 7 rolls around, bringing the total close to an even $17 trillion.

But there’s no guarantee it won’t grow even faster, especially if the legislative initiatives President Obama outlined Thursday morning were to cross the finish line by year’s end, as he demanded in his first public remarks since signing the debt-limit hike law shortly after midnight.

Obama said he wants Congress to give him a new budget deal, a 5-year farm bill and a comprehensive reform of America’s immigration laws, all before New Year’s Day.

Any one of those three could be a colossal budget-buster. Under ordinary circumstances, a hard-and-fast debt limit might serve as a check against runaway spending; but with no ceiling, Democrats could raid the Treasury to give the president what he wants, without fear of practical roadblocks getting in the way.

Republicans, too, could take advantage of the spending loophole. Senate Minority Leader Mitch McConnell demonstrated on Wednesday that he’s willing to accept expensive pot-sweeteners in exchange for a tidy solution to a messy problem.

When Obama signed the debt-bailout package into law, it included more than $2 billion in new spending for a dam project in McConnell’s home state of Kentucky, answering for some the thorny question of why the Senate’s top Republican would be so eager to make Democrats look good by negotiating a deal when tea party conservatives in the House were refusing to do so.

According to the conservative Heritage Foundation, Obama and Congress have already used the trick of ‘suspending’ the debt ceiling for a fixed period of time once before – running from February to May of this year.

That deal added $300 billion to the national debt in 102 days. The deal that went into effect Thursday covers 114 days.

The only requirement for that earlier agreement was that the Democrat-led Senate produce a formal budget for the first time since President Obama took office, which it did.

‘No savings were accomplished,’ says Heritage.

‘Suspending the debt is less transparent to the American people,’ the group explains, adding that ‘a calendar date is not nearly as scary to constituents as a figure in the trillions of dollars.’

The coming battles over a year-long federal budget, including Democrats’ demands for new taxes and an expected Republican push for spending cuts, could actually reduce deficit spending; but with no credit limit holding them back, lawmakers could see a perfect storm for committing to hundreds of billions in new earmarked projects calculated to please constituents back home.

The farm bill, too, is likely to rack up record spending on programs like food stamps, which fall under the Department of Agriculture’s budget: The Obama administration has already doubled the number of Americans receiving these entitlements since January 2009.

But immigration could require the biggest blank check of all.

While Obama and congressional liberals want to put 11 million illegal aliens on a path to citizenship, conservatives have consistently argued that the nation’s borders must first be secured. That, Democrats have countered, is simply too expensive to contemplate since it would likely involve building thousands of miles of new high-tech fences and staffing the Mexican border with thousands of guards whose salaries no one has contemplated yet.

Capitol Hill sources tell MailOnline that without a fixed debt ceiling over their heads, everyone in Congress might suddenly find it workable to give both parties what they want.

‘I can’t speak for the whole Republican caucus, of course,’ said a policy staffer to a conservative GOP House member, ‘but some of us want a border fence badly enough that we’ll look the other way if it adds a few hundred billion to the national debt.’

‘And once that’s in place, the biggest impediment to a citizenship path disappears.’

Since President Obama took office, new deficit spending has added about $43,000 to the national debt for every household in America.

That reflects a 60 per cent increase in the debt from where it sat on his first Inauguration Day, at $10.3 trillion.

At current rates of growth, Obama will leave office with national debts twice the size of those accumulated by all the previous U.S. presidents combined.

Read more:

• THE HERITAGE FOUNDATION
• THE DAILY CALLER

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Americans warned bank ‘bail-ins’ coming

Experts say institutions will grab deposits without warning

28 Sep 2013

by Clark Kent

With the United States facing a $17 trillion debt and an acidic debate in Washington over raising that debt limit on top of a potential government shutdown, Congress could mimic recent European action to let banks initiate a “bail-in” to blunt future failures, experts say.

Previously the federal government has taken taxes from consumers, or borrowed the money, to hand out to troubled banks. This could be a little different, and could allow banks to reach directly into consumers’ bank accounts for their cash.

Authority to allow bank “bail-ins” would be in lieu of approving any future taxpayer bailouts of banks that would be in dire need of recapitalization in order to survive.

Some financial experts contend that banks already have the legal authority to confiscate depositors’ money without warning, and at their discretion.

Financial analyst Jim Sinclair warned that the U.S. banks most likely to be “bailed-in” by their depositors are those institutions that received government bail-out funds in 2008-2009.

Such a “bail-in” means all savings of individuals over the insured amount would be confiscated to offset such a failure.

“Bail-ins are coming to North America without any doubt, and will be remembered as the ‘Great Leveling,’ of the ‘great Flushing’ (of Lehman Brothers),” Sinclair said. “Not only can it happen here, but it will happen here.

“It stands on legal grounds by legal precedent both in the U.S., Canada and the U.K.”

Sinclair is chairman and chief executive officer of Tanzania Royalty Exploration Corp. and is the son of Bertram Seligman, whose family started Goldman Sachs, Solomon Brothers, Lehman Brothers, Bache Group and other major investment banking firms.

Some of the major banks which received federal bailout money included Bank of America, Citigroup and JPMorgan Chase.

“When major banks fail, they are going to bail them out by grabbing the money that is in your bank accounts,” according to financial expert Michael Snyder. “This is going to absolutely shatter faith in the banking system and it is actually going to make it far more likely that we will see major bank failures all over the Western world.”

Given the dire financial straits the U.S. finds itself in, these financial experts say that Congress could look at the example of the European Parliament, which recently started to consider action that would allow banks to confiscate depositors’ holdings above 100,000 euros. Generally, funds up to that level are insured.

Finance ministers of the 27-member European Union in June had approved forcing bondholders, shareholders and large depositors with more than 100,000 euros in their accounts to make the financial sacrifice before turning to the government for help with taxpayer funds.

Depositors with less than 100,000 euros would be protected. Considering protection of small depositors a top priority, the E.U. ministers took pride in saying that their action would shield them.

“The E.U. has made a big step towards putting in place the most comprehensive framework for dealing with bank crises in the world,” said Michel Barnier, E.U. commissioner for internal market and services.

The plan as approved outlines a hierarchy of rescuing struggling banks. The first will be bondholders, followed by shareholders and then large depositors.

Among large depositors, there is a hierarchy of whose money would be selected first, with small and medium-sized businesses being protected like small depositors.

“This agreement will effectively move us from ad hoc ‘bail-outs’ to structured and clearly defined ‘bail-ins,’” said Michael Noonan, Ireland’s finance minister.

The European Parliament is expected to finalize the plan by the end of the year.

The purpose of this “bail-in,” patterned after the Cyprus model, is to offset the need for continued taxpayer bailouts that have come under increasing criticism of the more economically well-off countries such as Germany.

Last March, Cyprus had agreed to tap large depositors at its two leading banks for some 10 billion euros in an effort to obtain another 10 billion European Union bailout.

While this action prevented the collapse of Cyprus’ two top banks, the Bank of Cyprus and Popular Bank of Cyprus, it greatly upset depositors with savings more than 100,000 euros.

WND recently revealed that the practice of “bail-ins” by Cyprus a year ago was beginning to spread to other nations as large depositors began to see their balances plunge literally overnight.

A “bail-in,” as opposed to a bailout that countries especially in Europe have been seeking from the International Monetary Fund and the European Union, is a recognition that such outside monetary injections won’t be forthcoming.

Sinclair said that the recent confiscation of customer deposits in Cyprus was not a “one-off, desperate idea of a few Eurozone ‘troika’ officials scrambling to salvage their balance sheets.”

“A joint paper by the U.S. federal Deposit Insurance Corporation (FDIC) and the Bank of England (BOE) dated December 10, 2012 shows, that these plans have been long in the making, that they originated with the G20 Financial Stability Board in Basel, Switzerland, and that the result will be to deliver clear title to the banks of depositor funds,” Sinclair said.

He pointed that while few depositors are aware, banks legally own the depositors’ funds as soon as they are put in the bank.

“Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay,” Sinclair said.

“But until now, the bank has been obligated to pay the money back on demand in the form of cash,” he said. “Under the FDIC-BOE plan, our IOUs will be converted into ‘bank equity.’ The bank will get the money and we will get stock in the bank.”

“With any luck,” Sinclair said, “we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.”

Such plans already are being used, or under consideration, in New Zealand, Poland, Canada and several other countries.

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