New Book Reveals How Unprecedented Bank Deregulation Helped Ignite Credit Crisis

Author Barry J. Dyke, in the new book, "The Pirates of Manhattan" reveals how unprecedented bank deregulation helped ignite the current credit crisis. For thirty years, bank deregulation was rigorously lobbied for by bankers and Wall Street and it rewarded them with Olympian paydays. Yet bank deregulation has brought imploding hedge funds, blatant conflicts of interest, Enron, WorldCom, a dot.com meltdown, mutual fund scandals, regressive bankruptcy laws, over-leverage, over-speculation, legalized usury, millions of foreclosures, plummeting real estate values, a weakened dollar, an auction-rate securities mess and a world-wide credit crisis.

BNews Imageank deregulation left gaping holes in consumer protection yet no new rules were put in place to insulate consumers from deregulation downsides. Deregulation revealed that banks are not only inept managers of economic risk–but consistently rely on predatory lending for a majority of their profits. Yet banks inevitably get into trouble and continually rely on Congress and the U.S. taxpayer to bail them out. Some bailouts include; the Mexican and Argentine debt crisis, the Savings and Loan collapse, Bear Stearns implosion and the Federal Reserve’s opening of the discount window for investment banks to keep them solvent.

A watershed event in bank deregulation occurred in 1978 when the U.S. Supreme Court ruled in Marquette National Bank vs. First Omaha Corporation. That decision ruled that a bank could export the rate of interest from the originating state to other states. In 1979, with the Marquette decision in hand, South Dakota became the first state in the country to repeal its usury (excessive-interest) rate laws. In 1981, Citibank set up its credit card business in South Dakota and began to charge 20 percent interest on credit cards where it had been hitherto limited to charge 12 percent in New York. Since Marquette, high interest rate credit cards have become a vital and main source of profits for Citigroup, Bank of America, JPMorgan Chase, American Express and Capital One–when banks borrowed from the Federal Reserve at forty year lows.

The Depository Institutions Deregulation and Monetary Control Act of 1980 removed restrictions on banks competing for deposits. Recklessly, banks invested billions of deposits into high-priced, risky oil & gas exploration deals. Penn Square, Continental Illinois, Chase Manhattan Bank, Michigan National Bank, Seattle First National Bank and Northern Trust invested enormous amounts in these ventures–as well as billions from hundreds of smaller banks, savings & loans and credit unions. Deregulated but far from enlightened, Penn Square and Continental Illinois collapsed. Another 2900 banks failed or were merged out of existence. A $4 billion 1984 bailout of Continental was the largest bank bailout until the recent June 2008 collapse of California’s IndyMacBank.

Continental Illinois, like today’s Citigroup, was once a darling of the market, a favorite of analysts and its common stock sold at a premium over other money center banks. Citigroup has not collapsed, yet it has lost 60% of its value since 2005 in its pursuit of a deregulated universal bank model. Yet in the past decade, Citigroup has been at the forefront of virtually every banking and securities scandal in America.

The Pirates of Manhattan reveals another major banking secret–banks invest billions of their reserves–into high-cash value life insurance–not into mutual funds, hedge funds or half-baked stock deals which they are retailing to their customers. With laser accuracy, the author documents that major banks such as Wachovia, Bank of America, Wells Fargo, JPMorgan Chase, Wells Fargo, Citibank, Bank of New York-Mellon and thousands more have invested more than $120 billion of their money into high cash value life insurance for their Tier One Capital–a bank’s most important asset.

Over twenty-five years, the author, Barry J. Dyke, has acquired extensive knowledge and expertise to write such a book. He has practiced financial planning, founded a pension consulting business, a third party administration company, a health & welfare practice and a registered investment advisory firm, Castle Asset Management. A major point in the book is that due to bank deregulation, life insurance is one of the safest warehouses for people’s capital in America. A vast video library www.thepiratesofmanhattan.com/videos.htm supports research in the book.

The book is taking a novel approach selling directly off the internet to wealth advisors and consumers. The book has sold in all 50 states, England, Europe, Canada, Australia and Singapore. As of August 2008, the book is a best-seller.