The best-kept secret on Wall Street is not how Jeffrey Epstein became filthy rich; it is that ordinary Americans do not actually own the assets in their investment and retirement accounts.
Yes, you read that correctly. In the early 1990s, as the Cold War was ending, the Uniform Commercial Code, “a comprehensive set of laws governing all commercial transactions in the United States,” was revised in a convoluted fashion that essentially stripped Americans of their property rights regarding direct ownership of their “securities accounts.”
Specifically, Article 8, which “provides a modern legal structure for the system of holding securities through intermediaries,” was altered so that “investment securities can be safely used as collateral” by large financial institutions.
In plain language, this obscure change twisted the legal definition of property ownership so that large financial institutions own the “securities accounts” whereas Americans own “security entitlements.”
Since this sounds too far-fetched to be even remotely true, I highly recommend you read The Next Big Crash, a new book that lays the whole story out in riveting detail.
“Wall Street’s biggest players rewrote the rules of asset ownership so that nearly all U.S. securities are legally owned by a single, centralized financial entity, while investors are left with only a weak contractual claim,” the authors note.
Thus, “In a major financial crisis, investors’ assets can be frozen and seized to absorb losses at failing firms—a scenario that has already happened on a smaller scale under existing rules, and could be made far easier if emergency powers are invoked.”
That might sound dystopian, but the evidence is all around us.
That single, centralized financial entity is the Depository Trust Company (DTC), “established in 1973” to “reduce costs and provide clearing and settlement efficiencies by immobilizing securities and making ‘book-entry’ changes to ownership of the securities.”
The DTC is a financial superpower; it retains “custody of more than 1.4 million active securities issues valued at US$87.1 trillion, including securities issued in the US and more than 131 countries and territories.”
The DTC is too big to even fathom failing. In the event of a market crash, it will protect large financial institutions that legally speculate with their customers’ securities accounts used as collateral.
As the authors of The Next Big Crash write, “The legal framework that will govern the next major financial crisis is already in place, and it was explicitly designed to protect large institutions alone. Americans’ savings—and the U.S. financial system as a whole—are far more vulnerable than they’ve been led to believe.”
Now, this is where things go really off the rails. In the midst of a worldwide market crash akin to what happened in 2008, there will be ample chaos, confusion, and panic.
If you thought 2008 was economic Armageddon, prepare for far more collateral damage and fallout when the next big crash arrives.
What’s at stake, potentially, is the entire financial system’s rotten plumbing: the derivatives market.
In 2002, Warren Buffett stated that “derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal. … We view them as time bombs, both for the parties that deal in them and the economic system.”
Today, the worldwide derivatives market has reached the astronomical figure of more than $1 quadrillion. For those not familiar with that number, one quadrillion = 1,000 trillion.
In the early 2000s, the total derivatives market was a fraction of what it has ballooned into today. However, even then, financial derivative instruments connected to home mortgages, like credit default swaps, posed an imminent threat to the worldwide financial system when the housing market collapsed in 2008.
If Buffet is correct, and he usually is, when the derivative time bomb detonates, we are all in for a very rude awakening.
At that point, something as wild as worldwide wealth confiscation could at least theoretically take place. It would be the ultimate crisis opportunity for those at the very top to launch a new financial world order with central bank digital currencies and other technological instruments that could be used to track and monitor people.
Some very smart people, like David Rogers Webb, have labeled this The Great Taking, and there is ample evidence to support many of the assertions and scenarios.
At this point, I think the best thing is for Americans to become aware that their property rights have been jeopardized by legal technicalities that empower large financial firms to sow the seeds for the next big crash with their customers’ securities used as collateral.
Chris Talgo (ctalgo@heartland.org) is editorial director at The Heartland Institute
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